By Samantha Pearson and Luciana Magalhaes 

SÃO PAULO -- Brazil's Supreme Court has ordered investigations into one-third of the country's sitting ministers and scores of top politicians for alleged corruption, delivering a major blow to President Michel Temer as he struggles to revive Latin America's biggest economy.

Justice Edson Fachin, who is overseeing cases in Brazil's high court related to the country's sprawling Operation Car Wash probe, has given permission for prosecutors to open investigations into at least eight ministers, the leaders of both houses of Congress, and more than 50 senators and federal deputies, according to a document from the court released Tuesday.

The Car Wash investigation, which centers on bid-rigging at the state-controlled oil company Petróleo Brasileiro SA, or Petrobras, has led to more than 100 convictions over the past three years and implicated some of the country's most influential businessmen and politicians of all major parties.

Tuesday's announcement from the Supreme Court, the only body in Brazil allowed to open investigations into sitting lawmakers, comes at a critical moment for Mr. Temer as he struggles to push through landmark changes to the country's insolvent pension system.

Economists see Mr. Temer's proposal, which would set a minimum retirement age of 65 years, as the country's best chance of reducing its gaping budget deficit and emerging from its deepest recession on record.

"This is hitting at the heart of government, especially as these are important ministers for Temer," said Rafael Cortez, a political scientist at São Paulo-based consultancy Tendências.

"This will create even more turbulence and increase the urgency to pass economic reforms," he said, adding that the president must act quickly to save not only the economy but also his own career amid calls for his resignation.

Among the cabinet ministers to be investigated are Mr. Temer's chief of staff, Eliseu Padilha, and Secretary-General of the Presidency Wellington Moreira Franco, both of whom are key to the administration's relations with Congress. Mr. Padilha declined to comment, and Mr. Moreira Franco wasn't available to comment.

Ministers for trade, foreign affairs and agriculture also will be investigated, according to the Supreme Court document.

Eunicio Oliveira, head of Brazil's Senate, said he would defend himself against any accusations. Rodrigo Maia, who leads Brazil's lower house of Congress, couldn't be reached for comment.

"The list is enormous...it shows that the [political] environment was rotten," said Thiago de Aragão, with the political consultancy Arko Advice in Brasília. He said he believed it was the biggest investigation of politicians ever launched in the country.

"This could make approving the reforms more difficult but it won't destroy them," he said, adding that it could take months for any of the politicians to be formally charged.

Mr. Temer has previously said he would allow members of his cabinet to remain in their posts while they are being investigated, meaning that he will now face a race against time to push through the reforms before any of them could be charged.

The fact that so many investigations were authorized by the Supreme Court could also work in Mr. Temer's favor, analysts said. "The list is so wide-ranging, involving all the parties, that [Mr. Temer] is less affected than many others who are on the list," Mr. de Aragão said.

For months, Brazil's political establishment has been on tenterhooks after more than 70 current and former employees of Odebrecht, Latin America's largest construction company which admitted to paying hundreds of dollars of bribes in the scheme, agreed to give testimony, signing what has been dubbed in Brasília as the "end of the world" plea bargain.

A person familiar with Odebrecht's testimony said Tuesday that Marcelo Odebrecht, the group's former chief executive officer, told a judge this week that his company made payments to Brazil's former President Luiz Inácio Lula da Silva. The same person said payments were funneled to political campaigns and to benefit the former president.

Mr. da Silva, who has been accused by prosecutors of masterminding the Car Wash scheme, was indicted five times last year on corruption-related charges. He has denied wrongdoing.

With huge swaths of Brazil's political establishment now implicated in the Car Wash scandal, analysts said the Supreme Court's list would leave Brazilians with few options ahead of presidential elections in 2018.

"It's likely the biggest effect of the list will come in 2018 -- it is not only potential presidential candidates who are under investigation, but also potential regional leaders," said Tendências's Mr. Cortez, adding that the investigations would also increase calls for political reform in the country.

Former presidential candidate Senator Aécio Neves of the PSDB party, who some believe could try to run again for president next year, was on Tuesday's list. Mr. Neves vowed to prove his innocence.

Jeffrey T. Lewis contributed to this article.

Write to Samantha Pearson at samantha.pearson@wsj.com and Luciana Magalhaes at Luciana.Magalhaes@wsj.com

 

(END) Dow Jones Newswires

April 11, 2017 23:05 ET (03:05 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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