Brazil energy minister resigns over scandal

BRASILIA, May 23 (Reuters) Brazilian Energy Minister Silas Rondeau resigned as police investigate him for taking kickbacks from public works projects, a top government ally said.

''He told me he handed in his resignation, irrevocably,'' Sen.

Jose Sarney, a former president and member of Rondeau's political party, told Reuters yesterday.

Rondeau's announcement follows a broader police crackdown dubbed Operation Razor last week, in which almost 50 politicians, lobbyists and businessmen were arrested, including a senior aide to Rondeau, on suspicion of embezzling money from government contracts.

The crackdown has raised concerns over President Luiz Inacio Lula da Silva's four-year plan for about 250 billion dollar of public and private investment in roads, railways and airports, as well as controversial hydroelectric plants in the Amazon region.

Congressional leaders said yesterday they may now delay voting on several proposals.

Rondeau, who has denied any wrongdoing, would have controlled more than half of the budget earmarked for infrastructure projects designed to boost economic growth and preventing electricity shortages.

He also made policy on Brazil's leading biofuels program and sat on the board of state-controlled oil company Petrobras.

Federal police suspect he received a 100,000 reais (51,000 dollar) kickback from a construction company that won a government contract to bring electricity to poor households.

Rondeau is the first minister to resign over corruption allegations since Lula's second term began in January and his fall could disrupt a delicate political alliance.

He is a member of the centrist Brazilian Democratic Movement Party (PMDB), the largest in Lula's 11-party coalition. Lula antagonized traditional supporters when he granted the PMDB additional seats in his cabinet in order to secure its full support in Congress.

The head of Lula's Workers' Party, which lost ground to the PMDB, was among the first to withdraw support for Rondeau yesterday morning.

Scandals including bribery and vote-buying in Congress ousted the two most powerful ministers of Lula's first term, his then Chief of Staff Jose Dirceu and Finance Minister Antonio Palocci.

Lula has denied involvement in the alleged corruption schemes and insists that federal police have the independence to investigate whomever they choose.

In the past, federal police have wiretapped Lula's own political party and used evidence from security cameras at hotels and airports to investigate government officials and businesses.

Adriano Pires, head of the Brazilian Center for Infrastructure consultancy, said the government should move quickly to replace Rondeau if he is forced to quit.

''The electricity sector already has investment problems, delayed projects, infighting over environmental permits. Everyone is worried about possible power shortages,'' he said.

REUTERS KK PM0530