Brazil official says Cardoso not tarnished by scandal

BRASILIA (Reuters) -- A scandal tormenting Brazil's government will not damage the president's ability to govern, just as the Monica Lewinsky affair did not undermine Bill Clinton's capacity to rule, a senior Brazilian official said.

"From a political perspective, there is not the tiniest hypothesis of the president resigning," President Fernando Henrique Cardoso's chief-of-staff, Aloysio Nunes Ferreira, told foreign correspondents in an interview Thursday.

Nunes Ferreira is the government's top political coordinator and has the same job as Eduardo Jorge, who has become the government's biggest liability in the scandal.

Jorge, who left the government in 1998, has come under fire for having alleged links to a fugitive judge at the center of a courthouse construction project in which up to $100 million in public funds are missing. The courthouse building, which was started in 1992, still stands unfinished.

"There were recent political episodes in the United States that were more serious from a perspective of the president's image but the president was left to govern, to govern well and he still governs," Nunes Ferreira said.

After the interview, Nunes Ferreira's spokesman said the comments about Clinton involved no criticism, but served to put the scandal into perspective.

President Clinton was shaken in 1998 by the Monica Lewinsky affair which embarrassed the president at home and abroad.

Since Brazil's scandal erupted in earnest in mid-July with reports of Jorge's involvement in the payment scheme to build the courthouse, local media have carried virtually daily reports on the scandal. But they have nearly all focused on Jorge, and not on Cardoso.

Still, financial markets have been worried that other government officials could be involved and political observers said this is the worst scandal since Cardoso came to power in 1995.

The fears are that when the judge -- who was in charge of the commission overseeing the courthouse building -- is caught or when Jorge testifies they could expose other government officials. Jorge could give evidence as soon as next week.

Nunes Ferreira said "we have no systematic corruption in the federal government."

He said the government does not want a full-fledged Congressional investigation into the case as that would only serve as a soapbox for opposition politicians ahead of October local elections.

But, the government wants full clarification of the payment scheme and to find out how it was possible to establish such a system. Nunes Ferreira said it was unimaginable that this scandal had come about without a "gang installed within the legal system to promote this kind of robbery."

The scandal has already claimed its first victim, with the impeachment in June of Senator Luiz Estevao, a prominent developer, over accusations his construction company was a beneficiary of the kickbacks.

Nunes Ferreira said that a total $20 million in extra funds approved for the courthouse project by the Cardoso administration in 1995 and 1996 was given the go-ahead because at that stage there were no suspicions about the courthouse project. Only in 1998 were irregularities with the building uncovered and the project was stopped.

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