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Brazil: down for the count?

The likelihood of President Dilma Rousseff’s being impeached has risen sharply?

Over the past year Brazil has sunk into an unprecedented political crisis brought on by bribery scandals. However, over the last couple of weeks events have taken a new turn with the arrest of former President Lula, who is accused of having accepted bribes and a number of benefits-in-kind offered to him because of his position. Just a few days after Lula’s hearings, the current President, Dilma Rousseff, offered a chief-of-staff position to her mentor. Clearly, this was done to offer Lula the government immunity. However, the appointment was cancelled by a judge on the basis of wiretaps in which the two clearly stated their intentions. The likelihood that Rousseff would be impeached for fiddling with public accounts prior to the elections had receded, but has now come back to the fore. On Tuesday, most ministers affiliated with PMDB, the main coalition party, announced plans to leave the government in the coming days. Aside from the difficulty that governing without a coalition poses for the President, this has resulted in fewer MPs who would vote against continuing the impeachment procedure in the lower house in mid-April. The goal of those who oppose President Rousseff and her PT party is obviously to force her to resign. However, given the current president’s “personality” and background, she is unlikely to do so. So impeachment remains the only way to oust her. However, the impeachment process is long and will not be completed until this summer at the earliest. Meanwhile, Rousseff and her mentor Lula appear to have begun a campaign to rally their supporters and prevent an impeachment, calling it a “coup d’état”. Now it all comes down to political calculation and negotiations. The game is not yet over and Rousseff is not yet down for the count.

Even if Rousseff is impeached, Brazil won’t be out of the woods.

If the impeachment process succeeds, Vice-President Michel Temer, a PMDB member, would take over. His job won’t be easy either politically or economically. While Temer has not been formally implicated in any scandal, many members of his party have been, including Edouardo Cunha, the current speaker of the lower house. Meanwhile, the entire political class has been cast into disrepute after the official release of a list of 200 names of politicians of all stripes who have received potentially illegal donations from one of Brazil’s largest construction companies. Against this backdrop, it would be extremely difficult for the vice-president to form a national unity government, especially as the country is in the grips of a major recession (GDP shrank by almost 4% in 2015), public finances are in rapid decline (debt has expanded by 20 percentage points of GDP in less than two years, reaching almost 80% of GDP) and Brazil cannot count on external factors (low commodity prices, slowdown in China) to give it a boost.

 

 

2016-04-01_focus
HERVE Karine , Strategy and Economic Research at Amundi
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Brazil: down for the count?
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