May 26, 2017 / 9:03 PM / 10 months ago

UPDATE 3-Bastos resigns as head of Brazil's BNDES as scandal heightens pressure

(Adds comments of new BNDES CEO)

By Rodrigo Viga Gaier and Alonso Soto

RIO DE JANEIRO/BRASILIA, May 26 (Reuters) - Maria Silvia Bastos resigned on Friday as head of Brazil’s development bank BNDES amid a political crisis that had increased pressure against her by credit-starved business leaders.

Bastos, who cited personal reasons for her resignation, is the first senior member of the economic team to leave the administration since corruption allegations against President Michel Temer plunged Latin America’s largest economy into even greater political chaos.

The head of the government’s statistics agency, Paulo Rabello de Castro, will take over as president of the bank, Temer’s office said in a note shortly after Bastos resigned.

In an interview with Reuters, Rabello said he will not focus on loans disbursed by past management that prosecutors now suspect may have resulted from bribes.

“BNDES will look to the future,” Rabello said.

Economists had strongly criticized the bank’s loose lending policy during the 13 years that the leftist Workers Party was in power, when it lent massive amounts to create “national champion” companies, many of which are now ensnared in the sprawling “Car Wash” political graft probe.

BNDES has been involved in recent months in a mounting political scandal over investments in JBS SA, the world’s largest meatpacker, years before Bastos took over.

Bastos had imposed tougher terms for loan disbursements and asked board members to tighten scrutiny of decisions. BNDES is the country’s largest source of long-term corporate loans.

In a meeting with Temer, JBS’s owner Joesley Batista complained of Bastos and the lack of credit and secretly recorded the conversation.

Batista gave the recording to prosecutors as part of the evidence in his plea-bargain testimony in which he also accuses Temer of receiving 15 million reais ($4.6 million) in bribes. Batista was forced from his board seat late Friday, JBS said in a securities filing.

A senior government official denied Bastos’ departure was politically motivated and said she fell from her spot because she had “lost command of the bank and employees did not accept her leadership.”

The source, who spoke on condition of anonymity as he was not authorized to discuss the matter, said BNDES employees accused her of not defending their interests.

Bastos had opened a series of investigations into multi-billion dollar loans to major companies targeted by authorities for paying bribes to scores of politicians.

In a note, Temer, who is resisting calls for his resignation, praised Bastos for taking politics out of the bank’s lending decisions.

$1 = 3.2598 reais Writing by Alonso Soto; Editing by Lisa Shumaker and Grant McCool

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