In Brazil, arrest brings Petrobras scandal closer to President Rousseff

Reporting from SAO PAULO, Brazil —  Authorities in Brazil arrested the treasurer of President Dilma Rousseff’s Workers’ Party on Wednesday, as a corruption scandal involving the Petrobras oil company deepens and continues to contribute to political and economic problems in Latin America’s largest country.

Joao Vaccari Neto was arrested at his home in Sao Paulo on Wednesday morning, according to statements by police and the Workers’ Party. The party said later that Vaccari asked to be removed from his post. His apprehension brings the wide-ranging probe closer to the top of Rousseff’s administration, which is battling low approval ratings, opposition calls for impeachment and rebellious members of her congressional coalition.

The government has been dogged by accusations that billions of dollars were funneled from the state-owned oil company to large construction firms, which allegedly passed some of the payments to political parties.

“Dilma’s government is facing a significant crisis at the moment, which was made clear when over a million people took to the streets last month and hundreds of thousands did the same this Sunday denouncing her government and corruption,” said Jason Marczak, deputy director at the Atlantic Council’s Adrienne Arsht Latin America Center in Washington.

“She has tried to counter with a series of anti-corruption measures, but the scandal has implicated members of her multiparty congressional coalition, and it’s unlikely that she’ll be able to move forward now with this project or any other major legislation,” Marczak said. “She has very little political capital. The Petrobras scandal is dominating everything.”

Since Rousseff was narrowly reelected in October, federal police have arrested executives at major construction companies and named high-ranking members of Congress in the investigation, while the economy also has taken a hit, eroding her party’s long-standing support base among lower-income voters.

An April survey conducted by the Datafolha polling service reported that 60% of Brazilians regarded her administration as “bad” or “terrible,” while 13% categorized it as “good” and 27% said it was “regular.”

Rousseff has not been directly implicated in the scandal, but members of her large and unwieldy ruling coalition have rebelled against her authority as the scandal unfolds, electing a combative and relatively conservative congressional leader from the centrist Brazilian Democratic Movement Party. Lawmakers are moving forward with a law allowing companies to treat more employees as independent contractors, a shift the Workers’ Party opposes and unions say rolls back workers’ rights.

Last week, pro-union protesters who broadly support Rousseff’s government protested the bill in Brasilia, the capital, and the demonstration ended in bloody clashes with congressional police. On Wednesday, labor groups protested the law in 19 states, blocking highways and roads.

Until last year, Petrobras was Latin America’s largest company by market value, and the revelations of an alleged kickback scheme have contributed to a downturn in the economy. The investigation and gridlock in Congress have limited Rousseff’s ability to respond to economic problems, analysts say.

In response to Vaccari’s arrest Wednesday, the Workers’ Party leader in the lower legislative house, Siba Machado, said the act was political in nature, according to a note published on the party’s website.

Defenders of Rousseff have contended that corruption has long been practiced in Brazil, and that her party, which has controlled Brazil’s presidency since Luiz Inacio Lula da Silva took over in 2003, was the first to give investigators the independence and permission to fully bring the practices to light.

“In my opinion this is a political arrest,” Machado said. “He didn’t raise any money outside of the bounds set by Brazilian law. We trust in what was done.”

Bevins is a special correspondent.