11 April 2016

Is Dilma done for?


Today, Brazilian President Dilma Rousseff faces “the first real barometer on the prospect for impeachment”, as the commission launched to investigate charges against her prepares to make a formal recommendation to the lower house. And the country is in chaos.

On the ground, the Brazilian public is divided. In the cities, people want Rousseff and her cronies gone. The high-tax, high-welfare model of her Worker’s Party regime, and Luiz Inacio Lula da Silva’s before her, has infuriated Brazil’s rising middle class, who have watched in horror as their country’s great blessings are frittered away.

Brazil has the second-largest iron ore reserves in the world, is the second-largest producer of soybeans, and is in the top ten oil-producing countries. Today, it is in crisis, facing its biggest recession in over twenty years. The Brazilian real has lost 24 percent of its value against the dollar since 2014, inflation is at a 13-year high, and the deficit keeps growing.

Successive socialist governments have squandered Brazil’s potential. A mixture of corruption, bad management, and a fundamental misunderstanding of basic economics have turned what should have been an economic powerhouse into a basket case. So-called “developmentalist” policies such as price controls, stimulus measures, and artificially low interest rates have had a devastating impact on Brazil’s competitiveness. And as commodity prices have dropped, Rousseff’s response has been to keep spending.

Now a report has been issued accusing her of bypassing Congress and manipulating budget accounts before the 2014 election to mask Brazil’s rising deficit, while her name remains tarred by the biggest corruption scandal in Brazilian history: the probe into the state-owned oil company Petrobras, which she used to lead. Protestors have been demanding her resignation since August, with some even calling for the military to replace the democratically elected government.

So how is it that President Rousseff can still count on a degree of public support? In recent days, the percentage of poll respondents supporting her impeachment and resignation have declined to 61 percent (from 68) and 60 percent (from 65) respectively. In preparation for tonight’s vote, the capital Brasilia has ramped up security, erecting barricades to contain rival factions, who are equally passionate.

It is easy to see why protestors want the President gone, but what of the ones campaigning for her to stay? Many, of course, are direct beneficiaries of her and Lula’s generous welfare programmes, such as conditional cash transfers to encourage parents to send their children to school and vaccinate them. (One tour guide in Rio de Janeiro tells me dismissively that this programme has become a way for poor families to increase their monthly income by having as many children as possible.) Brazil’s fixed prices on goods such as electricity and fuel are also popular, despite the havoc they have caused to the domestic market.

As the successor of the beloved Lula, Dilma Rousseff is also still enjoying some of the former president’s reflected glory, though this is fading fast. Lula’s own popularity continues to plummet in the wake of the Petrobras scandal, and Rousseff’s attempt to grant him immunity by appointing him to her cabinet has been met with more protests.

But for the Brazilians who are not demonstrating on either side of the Esplanade of Ministries in Brasilia, or across Rio and São Paulo, the future looks terrifyingly uncertain. The impeachment proceedings against Rousseff are being supported most passionately by Vice President Michel Temer, leader of the Brazilian Democratic Movement Party (PMDP). Temer, who ordered the PMDP to walk out of the coalition government two weeks ago, clearly has his eye on the presidency himself, but is almost as marred by rumours of corruption as Rousseff. 58 percent of respondents in a Datafolha poll support his impeachment, while 60 percent think he too should resign.

If both Rousseff and Temer are impeached, next in line for the presidency is Eduardo Cunha, the speaker of the lower house. Cunha is an open adversary to Rousseff, and was the one to formally open proceedings against her in December by accepting the petition calling for her impeachment. But Cunha is himself embroiled in the Petrobras corruption scandal and is accused of accepting $5 million in bribes. He is the most unpopular official out of the three, with an overwhelming 77 percent of Brazilians calling for him to be removed from office.

It seems no one in the political elite is immune. Although Rousseff still hopes to weather the storm, calls for fresh elections are growing louder – 79 percent of the public are in favour if she and the Vice President are both removed. With tough decisions ahead for Brazil on issues ranging from debt to healthcare, it will be next to impossible for a new president to govern effectively without the confidence of the people.

So if the vote of the commission goes the expected way tonight, and the lower house votes for Rousseff’s impeachment next week, this summer’s Olympic Games in Rio may be overshadowed by an even more dramatic contest.

Rachel Cunliffe is Deputy Editor of CapX.