In 2000, Barbalho was the President of the PMDB party and Senator when a wave of corruption allegations against him took national headlines, involving embezzlement of public funds at the Superintendência de Desenvolvimento da Amazônia (SUDAM - Superintendence for Amazon's Development) development agency and the Instituto Nacional de Colonização e Reforma Agrária (INCRA - National Institute for Colonization and Agrarian Reform). Barbalho was forced to resign the office, later briefly arrested, and the SUDAM was closed. However, he was subsequently elected Federal Deputy in 2002 and 2006 and Senator in 2010.