Brazil's main opposition party split on joining a future Temer government

BRASILIA (Reuters) - Brazil's largest opposition party is divided over how strongly to back a new interim government if it succeeds in having President Dilma Rousseff stripped of office, as it eyes a run at the presidency in 2018, senior members said on Monday.

The Brazilian Social Democracy Party (PSDB) will support a government led by Vice President Michel Temer from the aisles of Congress if the left-leaning Rousseff is unseated next month, but the party is split over whether to join his cabinet.

The Senate picked a committee stacked with supporters of impeachment that will report back on whether to put Rousseff on trial on charges of deliberately breaking budget laws to boost her re-election bid in 2014. Only five of the committee's 21 members have declared their support for the leftist president.

The lower house voted this month there were grounds for a trial. If the Senate agrees to put her on trial in a May 12 vote, as expected, Rousseff will immediately be suspended from office for the period of the proceedings.

She denies any wrongdoing.

Meanwhile, Temer, whose Brazilian Democratic Movement Party (PMDB) quit the government last month, is preparing to govern. Former central bank governor Henrique Meirelles is emerging as the top candidate to become finance minister, a source familiar with the talks told Reuters.

Investors are looking to Temer to restore confidence in Latin America's largest economy. Brazil was stripped of its coveted investment-grade credit rating in December amid the worst recession in decades and an acute fiscal crisis.

Business leaders are pressing the PSDB to join Temer to help restore credibility in economic policy, but many inside the party are wary of the risks in terms of future elections of failing to pull the country out of its worst recession since the 1930s.

Party leader Aecio Neves, who narrowly lost to Rousseff in 2014 and is expected to run again in 2018, said last week that he does not want party members to accept ministerial positions in a Temer cabinet.

However, Senator Jose Serra, a former health minister who has his own presidential ambitions, is keen to be a minister and the vice president wants him in, said lawmaker Bruno Araujo, leader of the PSDB in the lower house.

PRESSURE INCREASING

Araujo said the majority position within the PSDB ahead of the this month's vote in the lower house had been to support Temer, but not enter his government. Since then, pressure has increased on the PSDB from many sectors of Brazilian society to help make a Temer government succeed, he said.

"There is a growing feeling in the party that if it does not take the risk of joining the Temer cabinet, Brazilians will suspect it wanted Temer to fail," Araujo said by telephone.

The PSDB will meet on May 3 to set its position, mindful that if it stays out of the government and Temer turns the country around, it could pay the price in the 2018 elections.

Serra was interested in becoming finance minister, a position that would enhance his presidential hopes for 2018, but party insiders say Temer will offer him other portfolios, such as health.

As health minister in 2001, Serra defied the international pharmaceuticals industry and allowed generic copies of brand-name drugs to be made in Brazil without the permission of the company that owns the patent.

The PSDB's top economic thinker, hedge fund investor and former central banker Arminio Fraga has offered advice to Temer, and several party economists have been named as possible members of his economic team.

In a Temer government, the key finance job will likely be offered to Meirelles, a former president and COO of BankBoston who has strong ties to Brazil's largest business groups. Meirelles' PSD party broke from Rousseff's coalition last week.

Meirelles met with Temer on Saturday and signaled he would agree to lead the economic team if he has a say in picking its other members, such as the central bank chief, the source said.

"He has a strong party behind him and he is widely respected by the markets," said the source, who asked not to be named because he was not allowed to speak publicly. "Meirelles is an ideal candidate, but no decision has been taken."

(Additional reporting by Alonso Soto and Maria Carolina Marcello; editing by Daniel Flynn, G Crosse and Frances Kerry)