Brazilian Official Quits Amid Tax Scandal

Accusations of tax evasion against senior finance officials claimed their first victim Wednesday with the resignation of a key figure at Brazil’s central bank.

Luiz Augusto de Oliveira Candiota said he was stepping down as the bank’s director of monetary policy, a post he has held since March 2003, to protect the agency from the rumors swirling around him. But Candiota vigorously denied recent allegations in the media that he had dodged taxes or engaged in “irregular practices in the financial arena.”

“I feel violated personally and professionally,” Candiota wrote in his resignation letter. “I confess, in all honesty, to not having any more motivation to stay in this job.”

The newsmagazine IstoE reported in its current issue that Candiota and his boss, Henrique Meirelles, the head of the Central Bank of Brazil, were under investigation for possibly evading taxes -- an extremely common practice in the country. Both officials say they are innocent of any wrongdoing, but some politicians and commentators have begun calling for them to be relieved of their duties.

The scandal comes as Brazil’s economy, Latin America’s largest, has begun to show some improvement after months of fitful growth and even a brief period of decline. The accusations of impropriety are especially embarrassing for the administration of President Luiz Inacio Lula da Silva, a former union leader. When he took office last year, he pledged to rid the government of its endemic corruption.

Educated at Harvard Business School and fluent in English and French, the 38-year-old Candiota was responsible for helping set interest rates and played a crucial role in the central bank’s drive to cut some of Brazil’s staggering load of debt. Monetary policy has been a magnet for controversy as the economy struggles to regain its footing and Lula tries to improve the lives of the poor while instituting pension and tax reforms.

IstoE reported that investigators were delving into Meirelles’ financial dealings during his residence in the U.S. as head of global banking for FleetBoston Financial Corp. Questions persist over whether Meirelles filed U.S. tax returns and what his tax obligations should have been in his native country.

Like Candiota, Meirelles attended Harvard and has been in his post as president of the central bank since the early days of Lula’s administration.

Meirelles, 58, who was elected to Brazil’s National Congress in October 2002, a few months before assuming leadership of the bank, has insisted that he will stay on as the institution’s chief and that the accusations against him are unfounded.

But some observers -- including one of Brazil’s leading political columnists, Elio Gaspari -- are demanding his resignation.

“If a citizen intends to represent the Brazilian people in the National Congress, the least one could expect is that he pay income taxes in the country where he intends to legislate on the taxes of others,” Gaspari wrote in Wednesday’s edition of the daily O Globo.