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Risks to Brazil's Temer subside after bungled JBS plea bargain

By Anthony Boadle

BRASILIA, Sept 13 (Reuters) - The arrest on Sunday of
Joesley Batista, a billionaire meatpacker who implicated
President Michel Temer in a corruption scandal, has actually
improved the Brazilian leader's prospects of surviving graft
allegations and serving out his term through 2018.

But the three-month political crisis triggered by the plea
bargain allegations by Batista, formerly chairman of meatpacker
JBS SA, has consumed precious time that Temer has to
pass legislation to overhaul Brazil's costly pension system and
avoid a fiscal crisis in Latin America's largest nation.

Temer and his coalition allies in Congress are confident
they can block a second corruption charge that Brazil's top
prosecutor, Rodrigo Janot, is expected to file against the
president by the end of the week.

A Supreme Court judge on Tuesday authorized a new probe of
Temer for suspected corruption involving a decree regulating
ports, a day after a separate police probe into Temer's allies
kept pressure on the president.

Yet as long as Temer is in office, any charges against the
president must be approved by the lower house of Congress in
which he has retained enough backing to avoid trial by the
Supreme Court.

"Temer's political standing in Congress has improved a lot,
because the economy is starting to grow again and the pressure
of another corruption charge is falling," said the government's
deputy whip in the lower house, Beto Mansur.

"The prosecutor's case has been weakened and the next charge
will arrive here with little credibility," he told Reuters.

A new poll by Arko Advice consultancy, however, shows that
most lawmakers do not expect pension reform to clear Congress
until 2018, and passing the unpopular measure in the run-up to
next year's elections may be an uphill struggle.

A proposed overhaul of the pension system, the main
contributor to Brazil's record budget deficit, was headed for
approval in the lower house of Congress until accusations
against Temer in May derailed his plans.

In a bombshell plea bargain agreement in May, Batista
confessed to bribing hundreds of politicians and gave
prosecutors a taped conversation of the president.
The recording appeared to show Temer condoning hush money
payments to silence a witness in a sprawling corruption scandal.

Just two weeks ago, however, another tape inadvertently
submitted to prosecutors by Batista with other documents
appeared to show he had been helped by a close aide to Janot in
crafting the deal. The Supreme Court revoked his immunity and
ordered his arrest for concealing other crimes.

Beyond the embarrassment to Janot in his last days in office
- he steps down as top prosecutor on Sunday - the revelation has
given Temer's lawyers an opening to try to dismiss evidence
provided by Batista, while strengthening the president's hand in
Congress to fight any further charges.

The credibility of Temer's accuser was further undermined on
Wednesday by the arrest of Batista's brother Wesley, the chief
executive officer of JBS SA, for alleged insider trading to
avoid hefty losses related to the May plea bargain.

WIDER CONGRESSIONAL BACKING

Temer mustered enough support to block Janot's initial
corruption charge from putting him on trial, in a 263-227 vote
in the lower house on Aug. 2. That margin is
expected to widen if a second charge comes before the house.

"There is no motivation in Congress to remove president
Temer. Many of the politicians who will vote are being
investigated, so why would they empower the public prosecutors
at this time?" said Lucas de Aragão, a political scientist and
partner at Arko Advice.

Still, Aragão said fighting the next charge will cost Temer
more pork barrel and patronage for lawmakers and at least a
30-day delay for pension reform, leaving the Senate with little
time to pass the bill in 2017.

No less than 83 percent of lawmakers believe pension reform
will not be passed this year, according to an Arko poll of 201
Congressmen last week.

Temer has ordered his minister to restart the pension reform
debate in Congress immediately so that it can be put to the vote
in the house my mid-October.

"The country lost 90 days. The economy could be recovering
faster and growth would have been more robust if it had not been
for this artificial crisis," said a Temer aide who requested
anonymity because he was not authorized to speak publicly.

Speaker Rodrigo Maia is expected to expedite the pension
bill after Temer signed off on a bailout for his bankrupt state
of Rio de Janeiro, a source on the economic team said.
($1 = 3.12 reais)
(Reporting by Anthony Boadle; Additional reporting by Silvio
Cascione; Editing by Matthew Lewis)

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