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Brazil’s Hour Of Reckoning – Analysis

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The recent decision of Brazil’s lower house of parliament to impeach President Rousseff has once again brought attention to the country’s struggles with corruption. The crisis has already affected Brazil’s economy. Its impact on the region and on Indian businesses in the country is yet to be seen.

By Deepak Bhojwani*

On 17 April, the lower house of Brazil’s parliament voted 367-137, well over the two-thirds threshold, to impeach President Dilma Rousseff over her ‘crime of responsibility’: manipulating accounts submitted along with the annual Budget[1].

If a simple majority of the 81-member Senate affirms the impeachment and tries her, she hands over the presidency to Vice President, Michel Temer. If the trial (by the Senate, with the Supreme Court presiding) is not concluded within 180 days, she returns to her post. Impeachment by mid-May appears probable.

How did Brazil come to this?

Over the decade 2003-2013, President Luis Inacio Lula da Silva (Lula 2003-10) of the Workers Party (PT) presided over, then handed his protégé and successor Dilma Rousseff, a pulsating economy that brought 50 million Brazilians over the poverty line[2]. It was awarded the prestigious football World Cup (2014) and the Olympics (2016).

But this ended in June 2013, with massive protests all over Brazil focussed on corruption and misgovernance. The rot had set in earlier. In 2005, the ruling PT was accused of bribing legislators to vote for key bills: the mensalao (monthly payment) scandal. It was serious enough for Lula’s chief of staff and several senior leaders of the PT to go to prison for long years.

Weeks before Rousseff was re-elected in October 2014 – by the narrowest margin in modern Brazil´s history – a senior official of the national oil company, Petroleo Brasileiro – Petrobras – admitted huge bribes had been paid to politicians through Brazilian businessmen who inflated Petrobras contracts by billions of dollars. The controversy, labelled ‘Operation Carwash’, snowballed after a senior PT politician, Delcidio Amaral, turned whistle blower. An investigation was also launched into illegal funding for the presidential election campaign.

In early March, Lula himself was arrested and questioned for hours. Key Ministers in the Cabinet resigned, including the Finance Minister and the Sports Minister responsible for the Olympic Games to be inaugurated in Rio de Janeiro this August. The Chief executives of six major Brazilian companies are under arrest or trial, with fines ranging from $250,000 to $65 million.

Amidst the raging controversy,  lower house leader Eduardo Cunha moved to impeach Rousseff. The Brazilian Democratic Movement Party (PMDB) on 29 March declared it would take an “independent” stance on the vote. Most other coalition allies followed suit[3].

The impact on the economy, reeling from the shock of low oil and commodity prices, growing official debt and resurgent  inflation, is worrying. The statistics are shocking. Brazil’s gross domestic product (GDP) will contract 3.5% in 2016 and inflation will hit 6.6%, said the Brazil Central Bank on 31 March[4]. This follows a 3.6% contraction in 2015[5], marking the worst economic downturn in the past 25 years. Private sector analysts expect worse to come, although Brazilian stocks and bonds are looking more attractive to some investors hoping for a more business-friendly economic policy.

But Brazil has in its favor, powerful institutions like its courts. “Brazil is going through a crisis of representativeness and legitimacy and is fed up with cupola reforms,” said Joaquim Barbosa, former Chief Justice of Brazil’s Supreme Court who handled the 2005 mensalao affair. The central figure in the Petrobras affair is Sergio Moro, also a federal judge who relentlessly pursued investigation and prosecution to bring leading businessmen and politicians to book.

While Lula and Dilma, and their sizeable support base, have denounced judicial proceedings as a witch-hunt and the parliamentary proceedings as a coup d’état, there is no denying the power of Brazil’s institutions.

There is, however public revulsion towards the political establishment, which is deeply fragmented and incestuous. A recent poll revealed 61% in favor of Dilma’s impeachment[6], but 58% against Vice President Temer, who could take over from her. At a recent rally by protestors, leading opposition figures were booed off the stage, because the public found them also lacking.

Dilma’s impeachment will be the second in Brazil. In 1992, President Fernando Collor de Mello (1990-92), resigned when impeached on charges of corruption. But he is now a Senator. Dilma is not accused of anything as serious as are many of her opponents. Her downfall is a coincidence of the economic downturn – domestic and international – and a failure to manage Brazilian politics.

Brazil is a regional heavyweight and the impact of these events will be felt keenly. Any incoming administration will have to tackle the crisis of governance and the economic turbulence the country is going through. Regional organisations are waiting and watching before commenting on the outcome of the impeachment process. Left wing movements within Brazil and the region can be expected to organise protests but cannot influence the outcome. Only fresh elections (the next are due end 2018) will reveal the effect this crisis has had on the body politic.

Brazil is India’s leading economic and commercial partner in that region. There is a sizeable presence of Indian business with a stake in the well being of this highly creative and productive democracy. The relationship has acquired strategic dimensions. Political stability is vital and India will watch Brazil carefully as events unfold.

About the author:
*Ambassador Deepak Bhojwani
has served as India’s ambassador to Venezuela, Colombia, Cuba and other countries and is a Latin American expert.

Source:
This feature was written for Gateway House: Indian Council on Global Relations.

References:
[1] Boadle, Anthony, Lisandra Paraguassu, ‘Brazil’s Rousseff vows to fight on after impeachment defeat’, Reuters, 19 April 2016, <http://in.reuters.com/article/us-brazil-politics-idINKCN0XE05M>

[2] Mariana Ceratti, ‘How to Reduce Poverty: A New Lesson from Brazil for the World?’, The World Bank, 22 March 2014, <http://www.worldbank.org/en/news/feature/2014/03/22/mundo-sin-pobreza-leccion-brasil-mundo-bolsa-familia>

[3] Boadle, Anthony, ‘Brazil’s biggest party quits ruling coalition, Rousseff isolated’, Reuters, 30 March 2016, <http://www.reuters.com/article/us-brazil-politics-idUSKCN0WU1AC>

[4] ‘Inflation Report’, Banco Central do Brasil, March 2016, <http://www.bcb.gov.br/htms/relinf/ing/2016/03/ri201603sei.pdf>

[5] ‘Inflation Report’, Banco Central do Brasil, December 2015,<http://www.bcb.gov.br/htms/relinf/ing/2015/12/ri201512sei.pdf>

[6] Canzian, Fernando, ‘Support to Impeachment of President Rousseff Reaches 68%, Says Datafolha’, Folha de S.Paulo, 21 March 2016, <http://www1.folha.uol.com.br/internacional/en/brazil/2016/03/1752259-support-to-impeachment-of-president-rousseff-reaches-68-says-datafolha.shtml

Gateway House

Gateway House

Gateway House: Indian Council on Global Relations is a foreign policy think-tank established in 2009, to engage India’s leading corporations and individuals in debate and scholarship on India’s foreign policy and its role in global affairs. Gateway House’s studies programme will be at the heart of the institute’s scholarship, with original research by global and local scholars in Geo-economics, Geopolitics, Foreign Policy analysis, Bilateral relations, Democracy and nation-building, National security, ethnic conflict and terrorism, Science, technology and innovation, and Energy and Environment.

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