Brazil’s powerful Palocci resigns amid scandal

By Raymond Colitt

BRASILIA (Reuters) – Brazil’s powerful chief of staff, Antonio Palocci, resigned Tuesday following a scandal over his finances, a move that could roil markets and deprive the left-leaning government of its most influential pro-business voice.

Palocci submitted his resignation out of concern the scandal could weaken President Dilma Rousseff, his office said in a statement. Rousseff accepted the resignation, a government source told Reuters.

Described by fellow ministers as the most powerful official in Rousseff’s government, Palocci had lost support in Congress following allegations that he had used his political influence to expand his net worth by a factor of 20 since 2005.

His departure could unnerve investors, largely because he is perceived to be the leading voice for fiscal restraint and pro-business policies in her administration, which took office on Jan. 1.

No criminal charges have been filed against Palocci and the chief public prosecutor shelved a formal investigation Monday. But opposition leaders and even some ruling party allies pressed for him to step aside. Some of them alleged he had made millions by influencing government decisions on behalf of clients of his economic consultancy.

Palocci denied any wrongdoing. But the scandal threatened to consume the government’s agenda, distracting from needed reforms in the tax regime and elsewhere. (Additional reporting by Jeferson Ribeiro and Brian Winter; Editing by John O’Callaghan and Sandra Maler)