Rousseff Leaves But Brazil’s Problems Remain

Brazilian Workers' Party leader Dilma Rousseff is interviewed in her office in Brasília, August 2
Brazilian Workers’ Party leader Dilma Rousseff is interviewed in her office in Brasília, August 2 (Roberto Stuckert Filho)

By the end of this month, not only will the 2016 Olympic Games in Rio have come and gone; it is also likely that the left-wing Dilma Rousseff will have finally been removed from the presidency.

Neither will occur without incident. Nor will they solve Brazil’s increasingly confused, complex and confrontational state of affairs, from a messy entanglement of impeachment proceedings to the possibility of fresh elections to the worst economic recession in Brazilian history. Read more

Brazil to Muddle Through After Rousseff Suspended

President Dilma Rousseff of Brazil makes a statement in Brasília, April 18
President Dilma Rousseff of Brazil makes a statement in Brasília, April 18 (Blog do Planalto/Roberto Stuckert Filho)

Brazil’s Senate voted early on Thursday to continue the impeachment proceedings against President Dilma Rousseff, forcing the left-wing leader to step down for six months in favor of her deputy, Michel Temer.

55 to 22 senators voted to suspend Rousseff, who was elected to a second term in October 2014.

The charge against her is that she fiddled the budget figures in an election year to mask a deficit.

But those allegations are almost beside the point, especially when more than half the legislators deciding Rousseff’s fate are themselves under investigation for bribery, electoral fraud or worse. The real issue is the president’s inability to stem Brazil’s slide into its worst recession since the 1930s.

Low oil prices and a sprawling corruption scandal at the state petroleum company where she used to be a board member have also cut off a source of patronage for Rousseff’s Workers’ Party. This, more than anything, may have convinced the Brazilian Democratic Movement Party (PMDB), the country’s largest, to withdraw its support from Rousseff. Read more

Rousseff’s Future Uncertain After PMDB Defection

Brazilian president Dilma Rousseff answers questions from reporters in Brasília, March 11
Brazilian president Dilma Rousseff answers questions from reporters in Brasília, March 11 (Blog do Planalto/Roberto Stuckert Filho)

The Brazilian Democratic Movement Party (PMDB) pulled out of the Latin American country’s ruling coalition this week, forcing President Dilma Rousseff to scramble for new allies ahead of an impeachment vote that could be called as early as mid-April.

The president would need 172 abstentions or votes in her favor in the lower chamber of Congress to survive an impeachment motion.

Vem Pra Rua, a civil society group, estimates that currently only 119 lawmakers are firmly on Rousseff’s side. Another 128 are undecided. Many of them are PMDB deputies.

The impeachment proceedings are the public face of what is really a political struggle to push Rousseff out. The formal case against the president rest on the allegation that she used an accounting trick to disguise a budget deficit in 2014, the year of her reelection — hardly the sort of offensive that would seem to require her ouster when there has been plenty of actual abuse of power to go around. Read more

Rousseff’s Presidency in Hands of Big-Tent Allies

President Dilma Rousseff looks on as her vice president, Michel Temer, shakes hands with state officials in Brasília, March 2
President Dilma Rousseff looks on as her vice president, Michel Temer, shakes hands with state officials in Brasília, March 2 (Marcos Corrêa)

Dilma Rousseff’s presidency hangs in the balance this weekend as police in São Paulo needed to fire tear gas and water cannon to clear mass protests and the lower house of Congress starts impeachment proceedings.

Last week, as many as three millions Brazilians took to the streets to demand Rousseff’s resignation.

Her inability to lift the country out of recession and corruption scandals that have now even tainted her popular predecessor, Lula da Silva, have weakened Rousseff’s position.

Her faith rests with the Brazilian Democratic Movement Party (PMDB), the country’s largest political force and its perennial kingmaker. Read more

Brazil’s Rousseff Threatens to Lose Key Ally

President Dilma Rousseff of Brazil answers questions from reporters in Ufa, Russia, July 9
President Dilma Rousseff of Brazil answers questions from reporters in Ufa, Russia, July 9 (Blog do Planalto)

Brazilian president Dilma Rousseff’s main coalition partner is preparing to leave the government and field a presidential candidate of its own for the first time in years, a newspaper reported on Friday.

Valor Econômico, the country’s largest financial daily, said the Brazilian Democratic Movement Party (PMDB) will depart from the ruling coalition in November when it holds its national congress.

Without the PMDB, Rousseff’s Workers’ Party would struggle to find a majority in Congress. It currently rules in coalition with an array of left-wing parties.

Although it lacks a coherent ideology and exists rather to serve the interests of regional bosses and constituencies, the PMDB is the perennial kingmaker in Brazilian politics. Rather than seek the presidency itself, it has backed Social Democratic Party leaders before switching its support to the Workers’ Party in 2002. In return, it has won control of both houses of Congress and the vice presidency.

In recent months, Vice President Michel Temer has led efforts to push austerity legislation through Congress to reduce a 6.7 percent deficit that has put Brazil’s investment grade credit rating at risk.

But his own party has stymied liberal economic reforms that would boost Brazil’s competitiveness and delayed attempts to trim workers’ benefits.

Banks are forecasting economic contraction into 2016, making this the first time Brazil’s economy would shrink in back-to-back years since the Great Depression.

The downturn owes much to Rousseff’s reluctance to liberalize the world’s seventh largest economy in the boom years when her government used the proceeds from rising commodities exports to Asia to finance social spending instead.

Now budget cuts threaten to depress consumer confidence at a time when ordinary Brazilians are also facing higher electricity taxes and rising prices. Inflation has surged to 9.5 percent, up from 6 percent last year when Rousseff was narrowly elected to a second term.

Opinion polls show two in three Brazilians want to see Rousseff impeached because of the downturn and a massive corruption scandal over political kickbacks on contracts with state-controlled enterprises.

Over 600,000 people protested in Brazil’s major cities last week, according to police. In March, 1.7 million took to the streets when graft at the state oil company Petrobras was revealed. More than thirty lawmakers, many from Rousseff’s Workers’ Party, are under investigation for their role in the scandal.

Brazil’s Chickens Are Coming Home to Roost

President Dilma Rousseff of Brazil gives a press conference in Brasília, March 16
President Dilma Rousseff of Brazil gives a press conference in Brasília, March 16 (Blog do Planalto/Roberto Stuckert Filho)

Dilma Rousseff’s failure to liberalize Brazil’s economy is finally catching up with her. After narrowly winning reelection last year, popular outrage is backing the left-wing president into a corner.

Earlier this month, more than a million protesters took to the streets of Brasília, São Paulo and other major cities, angered by revelations of embezzlement at the state oil company, Petrobras.

The inclusion of members from the Brazilian Democratic Movement Party (PMDB) in a Petrobras corruption probe caused this biggest party in Rousseff’s ruling coalition to threaten to block austerity measures, such as tightening access to pension and unemployment benefits.

The PMDB has almost as many seats in Congress as Rousseff’s Workers’ Party and a reputation for allying itself with whomever is in government in order to reap the spoils.

Fiscal consolidation is necessary because the economy is shrinking after four years of just 1.3 percent growth on average.

When she won reelection in October, the news agency Reuters reported that Rousseff had convinced voters “her party’s strong record of reducing poverty over the last twelve years was more important than a recent economic slump.”

Now the slump is deepening and voters aren’t so sure. Rousseff’s personal approval ratings have plummeted to 13 percent, a record low.

Inflation is above 7 percent and price rises are likely to continue. The country is facing water shortages after a season of drought. Given that Brazil depends for much of its energy on hydroelectricity dams, the shortages could lead to power outages as well. The government intends to hike electricity rates 30 percent this year to deter unnecessary use. Higher taxes on fuel will add to consumers’ bills. Meanwhile the real has lost 10 percent of its value against the American dollar in the past month alone, raising the cost of imported products.

This is more than an unfortunate series of events. Rather it is the outcome of bad policy choices.

The Economist points out that Brazilian incomes have risen faster than economic output in the past ten years. Public sector workers have done especially well. In other words: Brazilians have enjoyed pay rises without actually becoming more productive. That has fueled an expansion in private debt and government largesse — chickens that are now come home to roost.

Rousseff did try to slow things down in her first term. She limited pension payouts to civil servants and capped government contributions for new hires, for example. But Brazil’s pension system is still one of the most generous in the world. The average Brazilian is able to retire at the age of 54 with 70 percent of pay. Pensions take up 13 percent of gross domestic product.

By contrast, the country spends just 1.5 percent of its GDP on infrastructure, compared with a global average of 3.8 percent, even though its weak network of ports, railways and roads is a huge bottleneck to growth.

Rousseff has done little to remove structural impediments to economic expansion which include a burdensome tax regime and excessive regulation. The World Bank considers Brazil to be the worst place in the world to file one’s taxes. Payroll taxes add a staggering 58 percent to the average salary. Import tariffs remain high while customs procedures sometimes amount to outright obstructionism of foreign trade.

The Financial Times agrees that Brazil’s mess is largely of its own making.

For a counterfactual, one only has to look at the more market-orientated Pacific Rim countries of Chile, Colombia and Peru. They enjoyed similar commodity and credit booms but without the same hangovers. Their economies are still growing fast.

There is some reason for optimism. The same newspaper argued last week that “the emergence of the Petrobras scandal in March last year is itself credit to the growing independence of Brazil’s judiciary and public prosecution service.” Rousseff has also made a good effort to stamp out corruption in the executive branch but that isn’t helping Brazilians make ends meet.

Brazil Reelects Rousseff Despite Economic Slowdown

President Dilma Rousseff of Brazil, October 26, 2014
President Dilma Rousseff of Brazil, October 26, 2014 (Ichiro Guerra)

Brazil’s incumbent president, Dilma Rousseff, narrowly won reelection on Sunday. With more than 99 percent of the votes tallied, she had prevailed over her liberal challenger Aécio Neves with 51.6 percent support.

Rio de Janeiro’s O Globo newspaper pointed out that Rousseff’s margin of victory was the tightest since Brazil returned to full democracy in 1989. Four years ago, she won 56 percent support.

The news agency Reuters reported that Rousseff had convinced voters that “her party’s strong record of reducing poverty over the last twelve years was more important than a recent economic slump.”

Whereas Neves, representing the centrist Brazilian Social Democracy Party, drew support from mainly middle class and costal urban voters disillusioned with the incumbent’s inability to deliver higher growth and better public services, Rousseff successfully reminded a majority of voters her Workers’ Party had lifted more than thirty million Brazilians from poverty and reduced unemployment to record lows.

Rousseff’s camp also persuaded many voters that Neves would get rid of the immensely popular Bolsa Família social welfare program. He insisted he wouldn’t but his party is still seen as elitist and uncaring in large parts of the country.

The liberal Folha de S. Paulo newspaper listed the many economic policy challenges Rousseff will face when she starts her second term in January.

The federal budget has been in deficit for several years, leading investors to charge higher interest rates for government debt. To reverse the trend, the government could contain social spending but that might harm growth and would certainly create political tension within Rousseff’s ruling coalition. “Another option is to raise taxes which would have even more averse side-effects.”

Brazil also has a trade deficit, making it vulnerable to fluctuations in the global market. To mend this imbalance, the country needs to raise production but that is held back by some of Rousseff’s policies, including her lack of infrastructure investments and erratic meddling in the private sector.

Finally, inflation has been creeping up and the central bank has been reluctant to interfere, fearing that higher interest rates will depress consumption and raise unemployment. Rousseff would have to let the central bank operate more independently to stem inflation, now at 6.6 percent.

Rousseff has promised to tame inflation and modernize infrastructure but a list of campaign promises put together by the Zero Hora newspaper, based in Porto Alegre, shows her priorities are improving the sort of public services Brazil’s new middle class is yearning for, including better access to education and health care.