The End Is Near For Brazil’s Ultra-Corrupt Government by George Greenwood, Foundation For Economic Education

The Writing Is On the Wall for President Rousseff’s Administration

Brazil has faced a sharp change in its economic fortunes. Graft, mismanagement of growth dividends and protectionism has put dreams of a seat at the top table on hold.

At the heart of this regression has been the beleaguered president Dilma Rousseff.

Last Wednesday, her main coalition partner, the Brazilian Democratic Movement Party, left government. Its ministers resigned their posts and party members left over 600 positions in government.

An official in the Brazilian government explained the significance of the move.

“It’s going to be a big blow. The last blow that brings down the government or the last straw before the impeachment process begins.”

The current constitutional crisis has been the product of a number of interlocking problems besetting the Brazilian government.

The Brazilian economy shrank four percent this year, and looks set to lose another four percent in the next.

Rousseff reneged on commitments to liberalization, and instead tried to protect the industries that her core electoral support occupied. But this has spectacularly backfired, with government money wasted on subsidies, trade hit by tariffs and growth sharply slowing.

“We could lose a decade of economic growth in three or four years,” the official explained.

“In other words, a decade of growth would be lost during Dilma’s mandate if she continues on as president.”

This recession, and concurrent high inflation, has been magnified by the biggest scandal in political memory.

Petrobras, Brazil’s oil giant and the largest company in Latin America, was found to have been engaged in corruption, including illegal political campaign funding, to the tune of 30 to 40 billion dollars.

While the scandal has embroiled all political parties, it has hit those in power the hardest.

Lula de Silva, the wildly popular former president considered Brazil’s most important political figure, has been being found to be at the heart of it.

“Companies that worked for Petrobras were cross financing Lula, buying apartments for him, a ranch for him. They paid him 200,000 dollars a lecture. He earned 40 to 50 million dollars in just 2 or 3 years,” the official explained.

Beyond personal buy offs Petrobras construction subsidiaries had deals to complete construction projects at inflated prices. The illegal proceeds of these deals were used to finance the People’s Party and its leaders among other parties.

While blackening the names of many, the investigation has also made some unlikely public champions.

“Judge Sergio Moro has been conducting the whole investigation. Many consider him a hero for breaking down this corruption,” the official said.

Among the Brazilian political elite, the scandal has been compared to Italy’s “Mani Pulite” programme, a huge judicial investigation that swept a generation of corrupt politicians out of office for their illegal dealings in the 1990’s.

For Dilma Rousseff, the allegations are not direct. There is no “money in her pocket”.

But, the public is keenly aware that she benefited from these networks of corruption. They provided the funds to elect her and her party. Her net negatives in opinion polling are approaching the 90 per cent mark. Her attempts to protect Lula from prosecution with a ministerial position have only worsened this opposition, before they were struck down by the courts.

“It is considered common sense now that she will be impeached. Only a miracle can save her. All the factors are pushing that way,” the official explained.

Vice President Michel Temer has certainly not missed this fact. Having ordered his PMDP party to leave government, he is now working hard to impeach her, and to assume the presidency himself. However, even the blatant way in which he has acted has not put the Brazilian public off a change of face.

“I think people want to see Rousseff impeached.

“I think we should really have a new general election. It wouldn’t be ideal to have a new vice president entering office though the impeachment process.

“People don’t think the vice president is honest person, not at all. He’s seen as a savvy political operator, but people just don’t want Dilma anymore. They just want her to leave, to have a fresh start. No matter with whom. People want a symbol, they might want something more,” the official concluded.

While Temer’s assumption of the presidency would be constitutional, its legitimacy would be on more rocky ground because of his own party’s role in the scandal.

Practically, however, impeachment seems just over the horizon. Rousseff has barely enough leverage to limp on in office, and this is draining by the hour.

A Brazilian president needs only a third of votes in either house of congress to block an impeachment. They could block an impeachment’s admission in the lower house, or by winning the “trial” in the upper house, with this level of support.

As such, the public is just not buying the complaints from her supporters of foul play.

“If a serving president cannot find the support of a third of these two bodies, it is quite reasonable to say she does not have any support,” the official said.

That said impeachment is unlikely to be a long term solution.

“I don’t think it will bring political stability to Brazil. The opposition is going to make it hard for the Vice President even if he does take over.”

However the official did not think that Brazil risked a radical lurch in response to public outcry over the scandal.

“I doubt it.  Brazil, is pretty centrist. We do have some right wing parties in pushing for impeachment as well. Jair Bolsonaro for example, is a very radical guy, who has advocated military take overs, is against abortion and is very homophobic. While he hasn’t been touched by the political scandal, I don’t think he’d have a chance in an election. He’s no Brazilian Trump.

Brazil clearly wants new blood in government, and the writing appears to be on the wall for Dilma Rousseff and the People’s Party.

Whether she makes it a swift clean end to allow a fresh start is another matter.

This article first appeared at CapX.co.

The End Is Near For Brazil's Ultra-Corrupt Government

Brazil’s President Dilma Rousseff