Brazil’s political and economic crisis
Standing by their man
The accusations against a former president make a tense situation even more fraught
THE Speaker of Congress’s lower house indicted for corruption; the country’s most revered politician detained by the police and then charged; a billionaire sentenced to two decades behind bars.
All this happened in Brazil this month. In 2014, when investigators made the first arrests linked to a bribery scandal at Petrobras, the state-controlled energy giant, few imagined that courts and the police would reach so deeply into the country’s elites. The fearlessness of law-enforcers cheers Brazilians, who are fed up with high-level impunity. But their recent successes deepen the country’s political paralysis and do nothing to alleviate its economic crisis.
The giant-killing began on March 3rd, when the supreme court voted to charge Eduardo Cunha, Speaker of the federal Chamber of Deputies, with accepting bribes linked to the award by Petrobras of contracts for building two oil-drilling ships. The chief prosecutor accuses him of managing the Petrobras “bribe pipeline”, which channelled billions of reais from construction firms to executives and politicians in the ruling coalition in exchange for padded contracts. Mr Cunha denies wrongdoing. On March 8th a federal court sentenced Marcelo Odebrecht, the former boss of Brazil’s largest construction conglomerate, which bears his family name, to more than 19 years in prison for corruption and money-laundering.
The biggest shock was the brief detention for questioning by police on March 4th of Luiz Inácio Lula da Silva, Brazil’s former president and the mentor of its current one, Dilma Rousseff (pictured with him above). The bribery scheme appears to have started while Lula, as he is universally known, was in office from 2003 to 2010. Prosecutors say they have evidence that Lula, members of his family and the Lula Institute, an NGO he heads, received “undue advantages” worth 30m reais ($8m) after he left office from building firms embroiled in the affair. Lula was “one of the principal beneficiaries of the crimes” committed at the oil company, prosecutors allege. He denies any wrongdoing. After being released without charge, he fulminated against “persecution” and intimated that he would run for president again in 2018. On March 9th, in a separate investigation, São Paulo state prosecutors charged him with failing to declare ownership of a sea-side property. He says he is not the owner.
Where this leaves the country is uncertain. The real interrupted its recent slide, and São Paulo’s stockmarket surged by 18%, following Lula’s detention. The markets are hoping that, as the Petrobras investigations progress, Ms Rousseff will eventually be forced out of office and a new government will take charge of the economy, which is in the midst of the worst recession in decades. But uglier scenarios seem at least as likely.
Feelings are likely to rise still higher on March 13th, when anti-government groups plan to hold demonstrations across the country to renew their demands for Ms Rousseff’s impeachment.
The organisers, a hotchpotch of social movements ranging in ideology from centrist to loonily right-wing, hope to bring out more than the record 1m people, disproportionately from the middle class, who protested a year ago. The government’s supporters plan counter-demonstrations on the same day.
The threats to Ms Rousseff are growing. One motion to impeach her, on the grounds that she used accounting trickery to hide the true size of the budget deficit in 2015, is being debated in the lower house of Congress. To that charge her foes want to add fresh allegations that she tried to interfere with the Petrobras probes, which she denies. Brazil’s electoral tribunal is investigating whether Petrobras money helped finance her re-election campaign in 2014; its mastermind, João Santana, was arrested last month. If the tribunal concludes that the campaign was tainted, it could annul the election and call a new one.
The president’s survival strategy relies on mobilising her left-wing base. That is one reason she has failed to tackle the budget deficit, which widened to 10.8% of GDP in January. This has sapped confidence in the economy, which contracted by 3.8% in 2015 and is expected to shrink by as much this year. The PT’s opposition to austerity is likely to harden after the detention of Lula, who is still lionised by the left for his pro-poor policies.
But Ms Rousseff’s embrace of the PT risks alienating her centrist allies, whom she also needs. It is hard to impeach a president: both houses of Congress must vote in favour by two-thirds majorities. But that hurdle is not insurmountable. Just 100 left-wing deputies in the 513-seat lower house would never vote for impeachment, reckons João Castro Neves of Eurasia Group, a consultancy. In addition, Ms Rousseff needs 70-odd centrists to avoid the threat.
As the economy worsens and the president’s approval ratings remain barely above 10%, some are likely to waver. Members of the Party of the Brazilian Democratic Movement (PMDB), the centrist party of the vice-president, Michel Temer, are likely to call for a break with the government at a convention on March 12th. The indictment of Mr Cunha, also a member of the PMDB, may weaken the president still further. He was a leading champion of impeachment and a big obstacle to Ms Rousseff’s (half-hearted) efforts to rein in the budget deficit. But the threat of a Petrobras-related indictment limited his effectiveness. Anti-government forces may now find a less encumbered leader.
Ms Rousseff may yet survive until the end of her term in 2018. The demonstrations against her take place on Sundays, which limits their impact. The electoral authority will not annul her election without clear proof of wrongdoing, which has yet to surface. The PMDB may stick to its tactic of supporting Ms Rousseff in exchange for patronage. The party may not want to burden Mr Temer, who would succeed her if she is impeached, with responsibility for dealing with political paralysis and a stricken economy. But this month’s turbulence leaves the president weaker, Brazil less governable and policy adrift.