Brazil: A New Dawn for Political Reforms?

Global Centre Stage

Eventually, the economic crisis will be dealt with. But its scars will remain for some time, especially because, five years ago, Brazil expected to become a global power and now Brazilians are living in a recession that will probably result in another 'lost decade'.

At first glance, for the uninitiated bystander, Brazil is experiencing an economic recession that prompted the political crisis. Behind the political upheaval seen by President Rousseff, there is one of the most complex crises that the Brazilian society has experimented in its recent history. However, a more careful observation would add to this scenario at least two other ‘elements’ that are intertwined with the previous two namely, a representation crisis and a deep division in the society.

The whole process of impeachment is a by-product of those four elements and their impact on each other. Therefore, to better explain the impeachment process, it would be useful to breakdown and explain each element and their respective impact on the matter at hand.

Probably the oldest crisis is the about the representation. The political class as a whole has a dismal rate of approval from the Brazilian society and they have been struggling to reconnect with the general public. A recent poll which is systematically organised by the Datafolha (prestigious Brazilian survey company) identified that, in July 2015, the least trustworthy institutions in Brazil were: the Presidency and its Ministries (78% do not trust and 19% trust); the Congress (82% do not trust and 15% trust); and the Political Parties (91% do not trust and 7% trust).

The 2013 protests were a landmark regarding the expression of the discontent with the political establishment and quality of the public services. Two features can be highlighted from the 2013 demonstrations: first, the protesters reacted to any attempt of appropriation of the protest from the political parties. Second, there was no clear demand, the frustration was so widespread that you could spot signs demanding anything from investment in education, healthcare, public transportation, to more transparency in politics and in government spending, more ethics in politics, just to name a few.

The second crisis is social in character. Every society has its divisions and in Brazil the history is not that different. However, in Brazil, those divisions are not usually so widespread and aggressive. Although, the current division was being fed for quite some time, it was on the 2014 elections that it got exacerbated. From one side there are the government followers, who are generally identified by the left-leaning supporters. On the other side, there are the government detractors, which are often associated with the rich, the right and the conservative. It is noteworthy that this simple characterisation also reflects the simplistic approach given by both groups to the current political debate. In other words, both groups are far more complex in its composition, but the depth and the aggressiveness of the division has prevented a healthy debate.

This sharp division is unprecedented and the way it has been fostered by key leaders (and even from the government) from both sides is worrisome. The hateful rhetoric on speeches has inflated tensions and has occasionally resulted in violent confrontations. The key issue here is that this situation is still an upward tendency, meaning that whatever the outcome from the political crisis, it is possible that we will still have to deal with the backlash from the losing side.

The third is the economic crisis, is quite complex and has too many nuances to be fully commented in a few lines. Therefore, I will concentrate on some of the central issues that are considered the main causes for the current situation:

Impact of the International Economic Crisis: It was caused mainly by the end of the commodities super cycle and the sharp decrease of the Brazilian exports and foreign direct investments in the country. This was the mantra defended by President Rousseff to explain Brazil´s poor performance.

Public Spending and the Fiscal issue: As an example, between 2003 and 2013 the federal government increased the number of public servants by 28 percent, from roughly 450 thousand to 600 thousand. In the same period, the Presidency Office increased its budget by 143 percent. The spending spree tendency was also followed by the federal states, which are currently operating under heavy deficits.

Micromanagement of the macro economy: The government increased its presence in many different sectors and processes impacting the market and creating too many distortions. The reflex of those distortions is now clearer as the government has lost its ability to carry out its policies.

Persistence in the New Economic Matrix: President Rousseff’s model was the centre piece from the anti-cyclical economic policy, implemented by Mr Lula da Silva, in the aftermath of the 2008 financial crisis. It was characterised by fiscal expansion, credit expansion, subsidised interest rate and controlled exchange rate. At first, it was supposed to be the ‘life boat’, but the model started to give signs of exhaustion during the Rousseff government, hurting the economy even further.

Lack of regulatory stability: As part of the New Economic Matrix, the government artificially held the prices of oil, electricity among other goods and services in order to alleviate the inflation, but the pricing constraints added to the erratic manner that those policies were applied, made it difficult for investors.

Creative accounting: This topic is of crucial importance, because here lies the main argument for the impeachment process. Among other fiscal trickeries, the government delayed payments to three different public banks for several years in order to keep the payment of some iconic social programs and at the same time, hide the federal budget deficit. In other words, the public banks were responsible for operating the payments of several social programs and loans from public policies, but those resources should come from the government through those banks – when the government chooses to, systematically, not repay the banks and forbid them to reduce the size of the social programs, the government incurs in ‘crime of fiscal responsibility’.

The fourth crisis is the political one. Broadly speaking, the political crisis spawns from the three previous crises. In a context, where the society is increasingly frustrated with the government and the political class as a whole; where the economy is in deep recession; and where critics of the government are harshly condemned by the government and its supporters - the political realm gets severely strained.

In more concrete terms, it is possible to say that the political crisis results from three vectors: First, demonstrations against President Rousseff started in less than 100 days after she started the second term – they generally claimed that she lied during the campaign when she started to implement austerity measures, that she said, in the campaign, were not necessary (those austerity measures also alienated part of her political base, such as her own party).

The second was the election of Congressman Eduardo Cunha as the Chairman of the Lower House in the Congress in 2014. Despite the fact that Cunha belongs to the PMDB (Brazil´s biggest party), he pursued an agenda of complete opposition to the government. He was so aggressive that he was called, by the BBC, the President Rousseff´s ‘nemesis’ and ‘tormentor-in-chief’. He also was one of the main players in the impeachment process. With Cunha as Chairman, the government not only started to lose battles in the Congress, but also started to bleed support among the political parties.

The third reason is the ‘Operação Lava-Jato’. In simple terms, this is an investigation carried out by the Brazilian Federal Police, that initially thought that they were investigating a money laundering scheme, but, soon after, they saw themselves amidst a scandal involving billions that would connect the Brazilian Oil Giant, Petrobras, to several construction companies, civil servants and nearly 50 politicians in an unprecedented bribery scheme fuelled by fraudulent contracts with Petrobras.

The investigation is important not only by its magnitude, but also because it unveils a ‘modus operandi’ of doing politics. From a ‘simple’ money-laundering scheme, it was possible to discover not only the Petrobras scandal, but also a larger system of bribery and frauds that have been channelling illicit money to electoral campaigns, in which even President Rousseff´s campaign is under investigation. In one of those ‘accidental discoveries’, the Federal Police found evidence that might indicate that one construction company financed (probably illicitly) the campaign for more than 200 politicians from 24 different political parties.

The never-ending stream of scandal discoveries and the economic recession has created a perfect storm in the Brazilian Political Scenario. The increasing frustration from society had been pressing the political class as a whole. And, within this context, the ‘impeachment v/s coup’ act gained momentum.

The Impeachment Process

In parallel with the corruption scandals, more consistent inquiries about some of the creative accounting policies (called pedaladas in Brazil) began to emerge. At some point, the Federal Court of Accounts (TCU in Portuguese) issued a report indicating that the systematically delaying of payments to public banks was considered as loans, which, in turn, is considered ‘crime of fiscal responsibility’ – and that could be the basis to initiate an impeachment process.

With the TCU report, the claim for impeachment gained momentum. Even a prominent founder of the Worker Party (PT) had presented an impeachment request to the Congress. Along with this one, over 30 impeachment requests have been presented.

During the first phase of the process, in which the Lower House of the Congress decided whether it would open the case, President Rousseff suffered some heavy blows – two of those worth mentioning. The first was the implication of the former President Lula da Silva in four different investigations. Mr. Lula da Silva was President Rousseff´s mentor, a leading figure of the PT and was considered prime contender for the 2018 presidential elections. Those implications had a dual impact on the government: first, it increased the already-high tone of the criticism towards the government and the PT; second, it showed that the former President was not as powerful as believed. Indeed, at some point, the possibility of Mr. Lula being arrested was so clear that President Rousseff rushed to appoint him as her Chief of Staff (although the justice blocked the attempt), under the argument that she needed him to help her rally support on the Congress against the impeachment – but the other side effect of the appointment would be that Mr. Lula would gain special rights and could only be judged by the Supreme Court (which was supposed to be sympathetic towards Mr. Lula, since out of the 11 judges, 8 were appointed by Mr. Lula and President Rousseff).

The second heavy blow was the dissolution of the government´s coalition. President Rousseff is not considered a gifted negotiator, especially when it comes to the Congress. The fragility of the government and the PT; the weak economic results; the heat from the streets; the fierce opposition from the Chairman Eduardo Cunha; and the President´s inability to negotiate resulted in a continuous movement of defection from her supporters during the weeks that followed the impeachment process. The highlight of this process was the defection of the PMDB from the government´s base. The PMDB is a key player, not only because it is the larger party on both the Lower and the Higher House of the Congress, but also because it is the party from the Vice President and the Chairmen from both Houses of the Congress – the three next in the succession line after President Rousseff.

Impeachment or Coup d'Etat

Behind this political crisis there are two opposing narratives – each of them carried out by one side of the currently divided society.

From the government side, the process of impeachment is in fact a coup d’Etat, fostered by the wealthiest sectors of the society and the traditional right wing and conservative politicians. The rationale that supports the coup narrative works with the idea that the rich do not accept the past achievements by the poorest sectors of the society. Therefore, to cope with that issue, the rich allied themselves with the right and the conservatives to overthrow the PT government, to halt the social policies and put in place a government that would be more sympathetic to the interest of the ‘capital’. A second set of arguments went in the direction that it was impossible to impeach a President that is not implicated in corruption cases, especially in a context where the majority of the politicians, in both Houses of the Congress, are implicated in wrongdoings – according to the International Transparency, 303 out 513 Congressmen and Congresswomen are being currently investigated; in the Senate there are 49 out of 81 in the same situation.

Notwithstanding, this narrative fails to acknowledge that: first the process of impeachment was not prosecuting President Rousseff for corruption, but for crime of fiscal responsibility; second, this narrative does not mention that it was the economic mismanagement from this government that resulted in one of the deepest crises in Brazilian History; third, it did not recognise the participation of the PT and its supporters in many of the corruption scandals from the last ten years. Some argue that the objective of this narrative was not to save President Rousseff´s mandate, but to convince the PT´s large support base that they have been unjustly removed from government. The acceptance of this narrative would constrain pressures for renovation of the leadership of the Party once they were ousted from the government.

The second narrative, supported by government critics, identifies the government and the PT as the main source of all problems. From the economic perspective, the mismanagement and the ideological orientation of the economic policies had not only resulted in deep recession, but it was also the responsible for Brazil´s ‘lost opportunity’ from the favourable winds of the last 15 years, when it would have been easier to foster reforms that could consolidate the social gains. This line of criticism also states that the social policies implemented by the PT governments were not the problem, but the way that they were carried out – allegedly, without a clear exit strategy, without economic sustainability and with the ill management that fostered widespread fraud (around 39% of the beneficiaries from the Bolsa Familia Program are in an irregular situation).

This narrative also states that the PT has an agenda that aims to perpetuate its power in the government. For that to happen, it has crowded the public institution with their allies (frequently dislocating technical personal to accommodate political affiliates) and it has drastically increased the level of corruption in the federal bureaucracy, also with the objective to fund their power play and ‘buying out’ allies.

Naturally, the second narrative also has large holes in it. Here, the PT and Rousseff Government were clearly the scapegoats. Their social policies had indeed managed to improve the lives of millions of Brazilians, and that gave them a strong political capital. This narrative places the PT almost as the sole culprit from the existing corruption schemes, when in fact it is possible to find implicated politicians all across the board – the fact that the PT is the incumbent only put it in the spotlight. This narrative also fails to admit that the ‘saviours’ are as crooked as the ‘bad guys’, since the whole succession line from the presidency is implicated in malpractices, crimes or both.

Conclusion

This is one of the most complex crises that the Brazilian society has experienced in its recent history and its solution seems out of reach irrespective the outcome of the impeachment process of President Rousseff.

Eventually, the economic crisis will be dealt with. But its scars will remain for some time, especially because, five years ago, Brazil expected to become a global power and now Brazilians are living in a recession that will probably result in another ‘lost decade’.

Now that she has been impeached, democratic progress and the future of the people hang in the balance. With Olympics just months away, the Brazilians face political crisis and economy uncertainty at a tense moment.

Nevertheless, it is fair to say that the impeachment process is far from straightforward. It has being ‘tainted’ by newly released taped conversations between top personalities from the PMDB party (party from the acting president). Those tapes involving a former Minister (which endured less than 15 days in office), the former president Sarney and the Chairman of the Upper House, shows that one of the main goals to support President Rousseff was to block the current investigations, which had potential to implicate nearly everyone (by that they mean literally everyone in the political establishment) from the opposition to the situation).

The new developments left a bitter taste for those that supported and still support the impeachment process. So far the general feeling is of pause, as when you hold your breath waiting for something to happen. Those that support President Rousseff are waiting for more ammunition to criticise the process. The other half is waiting for some good news that might put solidify the ‘crime of fiscal responsibility’ on the President Rousseff (such as the announcement of the ‘newly discovered’ fiscal deficit of R$ 170 billons of reais, instead of the R$20 billion reais of surplus that President Rousseff had indicated before she was suspended) and allow them to save face.

The alternative solution to President Rousseff is far from perfect. The acting government is constituted by the old political establishment. Unfortunately, in general, they are implicated in it as much corruption as the people surrounding President Rousseff. The new government’s main capital is the misguided policies from the earlier government that generated the economic crises. In that sense, expecting that removing President Rousseff from office will solve the problem is an illusion. If the Senate understands that the President is guilty and, therefore, remove her from office, the Brazilian society should try to, undividedly, keep the pressure on the new government to foster greater political changes.

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Author

Leonardo Paz Neves

Leonardo Paz Neves:

The writer is a Political Scientist, Study and Debate Coordinator at the Brazilian Center for International Relations (CEBRI) and a Professor in the Department of International Relations at IBMEC. He has worked with the civil affairs section of the Joint Center for Peace Operations in Brazil (CCOPAB) and he was Executive Coordinator of International Conflict Prevention Analysis Group (GAPCon / UCAM).

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