World, Politics

Brazil: Waxing, Waning and, now, Impeaching

By J Brooks Spector 13 April 2016

Brazil’s current political and social turmoil captures J. BROOKS SPECTOR, who wonders if there is a lesson in that for South Africa.

More than five centuries ago, the first Western explorers who encountered the Brazilian coast wrote of a wondrously fecund land of jungles, forests, and beautiful beaches, populated by guileless locals who decorated themselves with bright pigments and who very clearly were not getting too dressed up as they went about their day-to-day activities. And, not surprisingly, very quickly after the first explorers and settlers arrived there, Brazil’s famously mestizo society was already on its way.

More than four centuries later, one of Brazil’s most famous immigrants, the author Stefan Zweig, migrated to Brazil after initial exiles from Nazi Germany to Britain and the US proved less than satisfactory for him. In the first half of the 20th century, Zweig’s writing had made him one of the world’s most read authors, although he went out of fashion after World War II. Most recently, his memoirs and stories became the source material for Wes Anderson’s recent film, Grand Budapest Hotel.

After Zweig had spent some time in Brazil, he wrote his paean of praise to the country, Brazil: Land of the Future, in which he wrote that Brazil “was destined to become one of the most important factors in the development of our world”. He added, “Here lies immeasurable wealth of soil that has never been plowed or cultivated… and beneath it are ores, minerals and natural resources that have not in the least been used up nor even extensively explored.” While he left out much discussion of the famous Carnival, Ipanema, Brazil’s popular music, and capoeira, he nevertheless fell in love with the country.

Zweig might well have come to a rather different conclusion if he had lived until now so as to have been able to move to Brazil in the past couple of years. Sadly, wags have had some bitter fun with his book’s title in recent years, turning its exuberantly hopeful tone into “Brazil: land of the future – and always will be”.

By the looks of things now, even the present, let alone the future, doesn’t look very promising. The country’s current president, Dilma Rousseff, is facing a bitter vote on her impeachment on Sunday, as the country is in the depths of its worst recession in decades, and a gigantic bribery scandal has engulfed the state-owned oil company, Petrobras. In addition to all this, the country is just about to host the next Olympic Games with serious questions over planned infrastructure and health issues for the yachting events as well as the outbreak of the Zika virus.

Amazingly, Rousseff’s travails, aside from her being a much less sympathetic figure to many Brazilians than her predecessor, Lula, actually stem from yet another, entirely different problem than the major economic and corruption crises seizing the land. As the AP explained it recently, “Rousseff is accused of breaking fiscal laws by shifting around government funds ahead of her 2014 re-election campaign. Opposition parties say sleight-of-hand accounting allowed her to boost public spending to shore up votes. Rousseff denies any wrongdoing, saying she didn’t do anything that was not common practice in all prior administrations. She further argues that she isn’t being accused of a crime, which should be the basis for any impeachment.”

Robert J. Samuelson, an economics columnist for The Washington Post, explaining the roots of her current problems, wrote, “To bolster the re-election of President Dilma Rousseff in 2014 — the allegation goes — credit was kept cheap, and government spending and deficits expanded. Now those policies have been reversed to check the adverse side effects. The budget deficit, which had been running 2 percent to 3 percent of GDP, ballooned to 10 percent in 2015. Inflation reached nearly 11 percent last year, says the rating agency Moody’s. Interest rates have been raised and spending squeezed.

The accusation against Rousseff — the grounds for impeachment — is that she hid the run-up of the budget deficit through various gimmicks. She denies it. A ‘yes’ vote in Congress’ lower house would trigger a Senate trial, unless she resigns. Compounding public outrage is a vast scandal involving Petrobras, the national oil company. It has estimated the cost of bribes and rigged construction bids at $3-billion. Dozens of executives and public officials have been implicated. In March, 3-million or more Brazilians demonstrated to protest the Petrobras scandal and Rousseff.” Humph! Three-million people.

Despite her vigorous defence of her policies, the public mood and that in the Brazilian national legislature has become sufficiently antagonistic and sour that none of her defences or explanations may matter very much. And while this has been going on, she has now lost the support of her main parliamentary coalition partner party – and its leader, Rousseff’s own vice-president, would take over from her once her impeachment actually went to trial in the upper house of Brazil’s parliament.

Just the other day, a special committee of the country’s Chamber of Deputies (the parliament’s lower house) actually delivered an impeachment recommendation to its parent body, and so now the issue has moved on to the full Chamber of Deputies, possibly as early as this Sunday. One irony of this particular vote is that 37 of the 65 members of that committee were themselves facing a roster of charges over a variety of alleged crimes, some having to do with the Petrobras bribery scandal.

No matter about that little detail. This train seems to have left the station, regardless, and it is now steaming ahead to a denouement that will probably not be to Rousseff’s liking at all. If the full Chamber of Deputies votes as expected, her case would then move forward to the Senate, the upper chamber. As a first step in that upper chamber, if a simple majority of its 81 members agrees, Rousseff would then have to stand aside temporarily in favour of her deputy, Michel Temer, so that he could become acting president, until the full Senate took a vote. Then, if 54 of those 81 members agree, Rousseff would be history as far as spending time in the presidential residence and Temer would become the country’s new leader until the end of the current presidential term, on the last day of 2018.

Meanwhile, Rousseff’s dwindling band of supporters continue to insist this whole effort is just a nasty, slow-moving parliamentary coup, and is really rooted in the fact that the country’s traditional elites have had their collective noses put out of joint by her and her predecessor’s administrations, under the umbrella of the Brazilian Workers’ Party and its populist social reform agenda. Rousseff was, herself, a committed revolutionary and even torture victim at the hand of the most recent round of authoritarian dictatorship in Brazil – and her natural political inclinations should have helped her keep hold of the loyalties of the nation.

But such reasoning has failed to take into account the scandals and the economic collapse afflicting the country. In response to her protestations about a parliamentary coup, her opponents argue that her administration’s shenanigans with the government’s finances were both illegal and an attempt to cover up the country’s fiscal problems – and they were also a means to shift funds to support benefits used to encourage voting her way in 2014. (Now who could imagine a thing like that taking place in a BRICS nation, for goodness sakes.)

Rousseff’s leading antagonist in all this is Speaker of the Chamber of Deputies Eduardo Cunha. Naturally, he too has been accused of being a beneficiary of bribes in that other modest little scandal, the Petrobras one. Nevertheless, representatives from 10 political parties have already associated themselves with this move for her impeachment.

Right about now, attentive readers are probably asking themselves how Rousseff’s predecessor – the wildly popular, internationally lauded Luiz Inacio Lula da Silva – has managed to get himself tangled up in this nasty mess. Well, Rousseff recently asked “Lula” (his usual familiar “street name”) to become her chief of state and to serve as her negotiator to help fight off impeachment. In return, her opponents argued that this was just an effort to side-track any prosecution of Lula who has been questioned by law enforcement officials over the Petrobras mess, although he has not been charged with anything yet. Brazilian law says cabinet officials can’t be investigated formally without the permission of the Supreme Court. Lula’s appointment has yet to be formalised, however, so who knows, precisely, where all that stands in the looming fighting over her impeachment. Meanwhile, Rousseff’s even more immediate problem will be what happens in the Chamber of Deputies on – increasingly likely – this Sunday.

But all of this is happening with the country’s deep economic malaise as background – and probably foreground as well – since some monster demonstrations have occurred in recent weeks in Brazil over the economic shambles. This economic mess represents a dramatic turnaround from where things stood just a decade ago. Back then, Brazil was the model for the globe’s go-go emerging market economies, with the kind of growth that would, soon enough, turn them into wealthy nations. And, indeed, between 2004-08, the country’s economy grew at about 5 percent a year. Brazil, as a charter member of the BRICS grouping, was on the move, what with its vast exports of coffee, iron ore, petroleum, timber, soya beans and, increasingly, manufactured items. There was that wonderful complementarity between the economies of Brazil and China, with the latter’s insatiable demand for the very products Brazil offered and Brazil’s ability to churn them out in immense amounts.

But the super commodity cycle is gone, global growth is now in low gear, and the Brazilian economy has gone into reverse instead. Robert Samuelson noted, “Economist Rafael Amiel of IHS, a consulting company, reports that the economy has been shrinking since 2014 and that he expects cumulative decline of gross domestic product — total output — to be 8.5 percent. That’s roughly twice the GDP drop (4.2 percent) the United States suffered in the Great Recession. Brazil’s national unemployment rate has risen from 6.7 percent in mid-2014 to 9.5 percent at the end of 2015. It will probably go higher.”

While a significant portion of the collapse is that drop in commodity prices and trading, Samuelson cites Monica de Bolle, a Brazilian economist now at the Peterson Institute for International Economics in Washington, who also argues that “the bigger part of the story is macroeconomic mismanagement”.

At this point at least, no one has a precise sense of where this maelstrom of economic disaster and political disillusionment is headed – or how it will end. Perhaps, as some congenital optimists argue, the mess will lessen the laissez-faire attitude Brazilians have often had with regard to issues of graft. Paulo Sotero, a Brazilian journalist who leads the Brazilian Institute in Washington, has cited recent polling in his nation where nine out of 10 Brazilians want the Petrobras prosecutions to continue, even if they harm the economy. As Sotero wrote, “A change of attitude toward corruption (may be) under way. The passivity that was once expected of law enforcement officials … is a thing of the past.” Maybe, maybe not.

Meanwhile, a toxic partnership of political and economic dysfunction seem to be feeding on each other, further undermining business confidence. As Rafael Amiel explained, political turmoil saps confidence, which weakens the economy, and that deepens the political discontent even further. Now, “Businesses are delaying investment, even of replacing worn-out equipment,” he added.

Stepping back a bit from the specifics of the Brazilian stew, these events may be just one more example of the illusion that the BRICS group along with other emerging market nations could almost effortlessly leapfrog decades of slower development, despite overall global trends and circumstances. Instead of being a new engine of global growth, at least for the near future, Brazil may more likely come to be seen as yet another bit of wreckage on the tracks. And the lesson that political turmoil and uncertainty can have a deep effect on economic possibilities should also be taken on board by another one of those BRICS partners yet closer to home. DM

Photo: President of Brazil, Dilma Rousseff (L) embraces her predecessor, Former President of Brazil, Luiz Inacio Lula da Silva (R), as she swears him in as the new Chief of Staff Minister, in a ceremony held an Planalto Palace in Brasilia, Brazil, 17 March 2016. EPA/FERNANDO BIZERRA JR

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