20 August 2015

Why Brazilians are demanding “Out with Dilma”


Hundreds of thousands of Brazilians were out protesting on Sunday, from Copacabana to Brasilia, calling for the resignation or impeachment of President Dilma Rousseff. What they wanted beyond that, however, is unclear.

Primarily, it is about Brazil systemic corruption, personified by a President who is mired in her own scandal concerning the state-owned oil company Petrobas.  Al Jazeera reported that: “The protesters here behind me are calling for Rousseff to leave, there are some banners in English also calling on the international community not to recognise her as the president of Brazil.” There are also more general grievances. The Guardian quoted one woman complaining: “I can’t stand being in a country where I have to pay such high taxes to get nothing whatsoever in return. In our health system, we are treated like wild animals. In terms of public safety, we are just treated as statistics.”

How are these protests different from those in March, when half a million demonstrators took the streets, or April, when they came out again? Perhaps they are not. Rousseff’s approval rating dropped to 13% earlier this year  – it now stands at 8%. Rousseff  has denied any knowledge of the corruption at Petrobas, which involved up to $22 billion worth of kickbacks and suspicious contracts, despite being head of the company at the time. While the Spring protests were unsuccessful in achieving Rousseff’s resignation, they have weakened her regime, and this unpopularity is affecting her government. The demonstrators may be hoping that keeping up the pressure will push the crisis to a tipping point.

But is the widespread public outrage really just about Rousseff’s involvement with Petrobas? She has become a symbol of Brazil’s systemic corruption and cronyism between the government and big businesses, but Brazil faces even bigger problems: its economy. Inflation is at almost 10%, while the Brazilians real has fallen nearly 25% against the dollar since December. Meanwhile, Brazil’s debt has been downgraded by credit rating agencies to one level above junk status. While this is partly related to the corruption scandal, there are other issues at play. The global falls in both oil and commodities prices have crippled Brazil – sugar is down by 34% and coffee by 25%, both of which are key exports. Brazil’s blessing of natural resources like iron ore, which fuelled its boom, has become a curse: its biggest trading partner, China, is suffering its own economic trouble, and China’s slowdown is hitting Brazil hard. In short, Brazil is in recession, and there is little hope of growth on the horizon.

So with these global forces at play, are the protesters wrong to blame Dilma Rousseff for all of Brazil’s troubles? Yes and no. Her mismanagement of the economy during her first term included (in the words of María Elena Candia) “artificial reductions of interest rates, consumption stimulus at the expense of fiscal discipline, limits on the return rate for private investments in infrastructure, and the imposition of fixed prices for gasoline and electricity below costs.” GDP promptly collapsed and investors fled. While she has since showed some signs of turning back towards the market, mostly with the appointment of pro-market finance minister Joaquim Levy, it may well be too little too late.

Of course, the sad fact is that Levy’s answer to Brazil’s problems will mean life for most Brazilians gets worse before it gets better. He has cut public spending by $22.4 billion, increased regulated prices, and is determined to eliminate the budget deficit. All this may be good for Brazil long-term, but is unlikely to do much to appease Sunday’s protesters. It is easier to call for the resignation of a hated president mired in a scandal than address the serious problems strangling the economy – problems which require deeply unpopular solutions.

Perhaps the most worrying aspect of the protests were the signs reading “Army, Navy and Air Force. Please save us once again of [sic] communism”. When a country has reached the point where military rule is more appealing to some than a democratically elected government, there may be no return.

Rachel Cunliffe is Deputy Editor of CapX.