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Tuesday
Apr052016

Brazilian Politics, Players, Panama and Perpetual Motion

There is no simplifying Brazil’s political or economic situation. Anyone “certain” about the outcome is sure to get smacked in its crossfires sooner or later. Corruption might be bi-partisan in the United States, legalized in many cases, but in Brazil, it’s the full multi-party monty. Eduardo Cunha, the Lower House speaker gunning for President (and political rival) Dilma Rousseff’s impeachment,  has just been fingered by the Panama Papers for stashing millions in Switzerland.

He was also under Carwash corruption investigations. No one so tainted, should risk throwing stones so blithely at a sitting, elected president. Brazil’s new Attorney General, Jose Eduardo Cardozo, said as much, yesterday, on the grounds there are no legal reasons to impeach her, and that doing so would be to “rip up the constitution.”

The domestic and international implications associated with Brazil’s internal turmoil transcend the walls of the Planalto Palace in Brasilia, a planned city that belies its far less organized and cohesive government.

The majority of national and foreign press outlets have considered the impeachment of Dilma Rouseff a foregone conclusion, a question of when, not if. Last week’s defection of the PMDB party, led by wannabe President, Michel Temer, the current Vice President hand-picked by PT (Worker’s Party) leader, Dilma Rouseff was deemed another sign of her pending removal. Waiting in the wings of power, Temer had written a letter on December 7, 2015, that went viral and became the butte of many jokes in Brazil. He complained that Dilma didn't trust him enough to give him real latitude in her government. She was right. Score one for female intuition at least.

But that impeachment conclusion is based on a lattice of shaky alliances whose loyalties, like Temer’s and the party he represents that historically sides with power not policy, can not be fully trusted.  And even so, Temer isn’t on solid ground.

Individual PMDB deputies don’t have to vote with their party’s leader, in the case of impeachment proceeding, or on anything for that matter. Brazil’s major newspapers lean pro-impeachment and thus, tend to overplay that stance publicly, skewing popular opinion and downplaying the horse-trading strategies of Dilma’s supporters. Brazilian newspaper, O Estado de São Paulo (Estadão), released their own math on April 2 regarding the impeachment situation in the House of Representatives.

According to their research, which only applies to 442 out of 513 deputies, 261 deputies are pro impeachment, 117 are against it, and 44 are undecided or waiting for more party direction. Even if one takes what politicians say in secret to a right-leaning paper for granted, these figures are actually better for the government than the opposition. Moving forward on impeachment requires 342 votes - which aren’t there.  The real situation can be recapped as follows:

1) There are 261 votes pro-impeachment (the core of the right-wing opposition plus some new deputies from the PMDB and some smaller party deputies);

2) There are 117 votes against impeachment (the core of left-wing parties plus loyal PMDB and small parties deputies);

3) There are 135 votes to be disputed (considering 55 undecided, 71 not localized and 9 that didn’t answer). So, by this report, the opposition needs 60% of the votes in dispute to secure impeachment.  Obviously, this is possible, but it is not certain.

On the other hand, Lula is building deals with small parties, and therefore:

1) It is possible that the Worker’s Party (PT) will support the Brazilian Republican Party (PRB) in the Rio de Janeiro mayor election. By doing this, it is possible to turn most of those 12 and 5 votes that are pro-impeachment and undecided (maybe more in other parties because the PRB deputy is a popular evangelical church leader and owner of the second most important TV open channel in Brazil – Record TV);

2) The government is taking advantage of wobbly PMDB positions to negotiate with PP, PSD and PR deputies on the fence (examining the undecided votes of these three parties, gives 22 votes, and pro-impeachment votes could also change).

Separately, there’s Supreme Court Judge Marco Aurelio de Mello’s latest declaration. He just announced that Dilma could appeal to the Supreme Court in case of an impeachment, and that if this impeachment is made without proof of crime, she could win the appeal. He has opposed the overzealous nature of prosecutor, Sérgio Moro’s Carwash investigations.  Moro has the media fawning over him - he’s thin, attractive and clean-shaven (as compared to hefty, scruffier, former President “Lula”) But, he’s only an ambitious b-level judge (despite acting as a prosecutor), multiple slots below Marco Aurelio de Mello. Another wrinkle? If Dilma is found guilty of corruption, so would Temer be, as he’s been in her government since 2011.

Dilma denies any wrong-doing. It’s also not clear which law she ostensibly broke, and if breaking that particular law is an impeachable offense. Her oft-cited “pedaladas fiscais” actions (moving money into the public till from public banks) would be illegal under the Fiscal Responsibility Law. But, only if the monies remained there at the end of the fiscal year. They didn’t. She moved them back beforehand. This is sketchy, but common, and not necessarily illegal. However, her moves would not be illegal with respect to Public Budget Law, the operating law regarding responsibility crime and, consequently, impeachment.  

With all the scrutiny, no offical charges of corruption (that could describe deputies across the political spectrum) have yet been levied against Dilma. This is why many anti-impeachment demonstrators are calling the entire escapade a coup or “gulpe” as well as an anti-democracy, purely politically-motivated act.

None of that makes Dilma a great president, something many people on the left and right agree upon – for different reasons. She also had to contend with battered commodity prices and lower demand from China, which compromised Brazil’s economy. But it makes removing her more akin to a political coup (without the military involvement of the 1964 coup) than a measure of national justice. 

Still, the main conversation in Brazil’s streets revolves around speculation over Dilma’s survival or demise. Betting against Dilma is also a pro-market, investor-friendly sport. The market rallies when her prospects worsen. It has been tha way since she ran for her second presidential term in 2014. She won by a narrow margin, hence the anger in Brasilia. The environment, as esteemed economist, and former Finance Minister Luiz Carlos Bresser-Pereira, told me during a private meeting at his São Paulo home, “shows more hate than I have witnessed at any other time during my career.”

The idea of removing a left-wing government with a growing public debt to GDP ratio is embraced by the upper, business and new middle class (or upper middle class.) Current levels of social spending are seen as unnecessary even if they had helped tame inequality and provided services that all Brazilians enjoy.  Public debt to GDP stands at 66% up from 54% last year, and is predicted to grow to 70% (which would be about 34% lower than the 104% debt to GDP ratio of the United States.)

Right now, universities are free in Brazil. Engineers, economists, lawyers, and doctors can earn a top notch education without incurring the kind of crippling debt that similar students in the US face (and that Bernie Sanders is campaigning to remove.) With Dilma gone, Tuition subsidies would be cut. That’s one problem that students, regardless of their political ideologies would be hard-pressed to embrace. Health care, which is universal in Brazil , though the wealthier use private care as in many European countries, would be cut. Subsidies to the poor would be chopped as well.

Brazil’s inequality would grow, So would unrest, demonstrations and unemployment.  Even if Dilma is impeached and Temer remains somehow distant from being painted with the same brush of corruption being used against her, and embarks upon his austerity path – or ‘bridge to the future’ - economic conditions would still falter. That would make his position shakier with respect to the population (only a smattering of whom ever voted for him) and to interally hostile Machiavellian environment that characterize Brazil’s government. 

The alluring idea to those that want Dilma out, is the prospect of smooth sailing to a less left, more financially liberalized Brazil that would welcome foreign capital with even more open arms. But without her, waters could get much rougher. The anger of Brazilians could galvanize as the economy weakens.

This ramification may not be in the minds of most Brazilians, though strong opinions about her abound. The students in Porto Alegre, Brazil’s southern most important city, with whom I participated in a pro-democracy demonstration last Thursday (that drew the largest crowds yet, including people old and young, plus new additions to that cause) admit her many weaknesses (lying to them, being an ineffective negotiator, lacking the charisma of Lula, etc.). But they are equally skeptical of the politicians on ‘the other side’ and fearful of the future of the economy under their policies.  That said, one of my taxi drivers called her ‘that bitch.’ 

As more demonstrations are planned, and the numbers of pro-democracy citizens rise on the realization that any shifting in government leaders means the same corruption (or more), just different faces, deputies could think twice about their votes.  Dilma could keep her job by a sliver.

Because it’s Brazil though, every bit of this is in flux.  House of Cards isn’t popular here for no reason.  Meanwhile, the only thing that remains certain is uncertainty.

 

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