Brazil's president Temer refuses to quit, as protests erupt over 'bribe tape'

Brazil's President Michel Temer is facing corruption charges

Brazil's President Michel Temer is facing corruption charges

Brazilian assets plummeted on Thursday after allegations that President Michel Temer condoned bribes to silence a key witness in a corruption probe, deflating investor optimism about the prospects for his ambitious pension and labour reform agenda.

"At no time did I authorise the paying of anyone", Mr Temer said emphatically, raising his voice and pounding his index finger against the podium.

Temer, having said on Thursday that he would support a full investigation into the allegations, concluded after hearing the tape that there was nothing in it to incriminate him and that the investigation should be shelved, a presidential aide told Reuters.

The Sao Paulo stock market reacted in panic Thursday to the specter of Brazil losing its second president in just over 12 months, with trading suspended briefly after the Bovespa index crashed more than 10 percent. This year's carry-trade gains from going long the Brazilian real and short the USA dollar are nearing zero after reaching 8.7 per cent on Tuesday.

Temer's combative reaction was followed shortly after by street demonstrations in Rio de Janeiro, Sao Paulo and the capital Brasilia demanding his resignation.

The prominent daily newspaper O Globo reported on Wednesday that a meat producer had recorded the President giving the go-ahead to bribe Cunha to "keep quiet" while he was in jail.

A plunge in Brazilian stocks reverberated across emerging markets on Thursday, providing another reminder of the high risks associated with developing countries even when their economies are on the mend.

The veteran centre-right politician, who took over previous year with a promise to restore Brazil's stability after the impeachment of leftist president Dilma Rousseff, remained defiant.

"Today's legal farce removes me from the position I was elected to by the people", Rousseff said on her personal blog after the impeachment. That witness, Eduardo Cunha, was a key player in the ouster of Rousseff - and is now in prison himself.

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The president was secretly recorded in March meeting Joesley Batista, known as the "slaughterhouse billionaire", according to O Globo.

The Supreme Court gave its green light to the investigation, the state-owned Agencia Brasil and leading newspapers reported.

To the revelation of a scheme to keep the judges from pressuring Batista, Temer asks "are you holding both of them back?", which Batista confirms before the president says the equivalent of "excellent, excellent".

He came to power previous year automatically because he was vice president when the president, Dilma Rousseff, was impeached for masking the government budget hole.

JBS representatives did not respond to emails sent by The Associated Press seeking comment. Since launching three years ago, the "Car Wash" probe into billions of dollars in kickbacks has put several top businessmen and politicians in jail.

"This climate isn't one in which to work", Rodrigo Maia, president of the lower chamber, told Globo News after adjourning legislators.

The current allegations is not new territory for Temer, who is also accused of illegally financing his campaign during the 2014 elections.

If the allegations are proven true, "President Temer is unlikely to finish his term", Eurasia wrote, adding that at the very least the matter will delay major reforms Temer is proposing.

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