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Crisis in Brazil

Last Sunday, Brazil’s House of Representatives voted by more than a two-thirds majority to proceed with the impeachment of President Dilma Rousseff. She was found to have acted illegally by the official tribunal supervising budgetary controls for breaching laws that regulate the government’s budget. It found Rousseff guilty of hiding an expansion of government expenditure shortly before her re-election in 2014 by borrowing from state banks without the transactions showing on the official balance sheet. If the Senate approves the motion by a simple majority on 17th May, Rousseff will be temporarily suspended for 180 days to face formal proceedings.

Whilst some might not consider an accounting sleight of hand an impeachable offence, this scandal comes at a time of deep economic and political crisis for Brazil. The economy is going through a serious depression after shrinking 3.8 per cent in 2015 with an 11 per cent budget deficit. This year, Brazil’s economy is expected to contract a further 3 per cent and despite high interests rates at 12.75 per cent, inflation is running high at an annual rate of 9.39 per cent. Moreover the political class is mired in a corruption scandal linking the state-owned Brazilian oil company, Petrobras, with prominent politicians such as former President Lula da Silva as well as the Speaker of the lower chamber. A political protégé of Lula’s, President Rousseff attempts to protect him from prosecution for corruption charges by appointing him to her cabinet have only served to involve Rousseff further in the scandal.

Having been elected on a solid reputation as an economist and technocrat, Rousseff’s popularity is now rock bottom with a majority of voters in favour of impeachment. The budgetary irregularities have given the opposition and her erstwhile allies in congress a reason to force her out of office. A veteran of left-wing militias who suffered torture at the hands of the military dictatorship, Rousseff has vowed to fight on.

The political crisis in Brazil matters both for the region and for the world economy. Brazil remains one of the largest emerging world economies and highlights the dangers posed by weak institutions and a political system that is too vulnerable to corruption and smear. In Argentina too, the outgoing president spent only a few months out of office before having to appear in court. The success of British and European exports depend son continued growth in the developing world. But sustained progress will only be achieved when voters and markets can rely on respect for the rule of law and strong democratic institutions.

 

Jocky McLean

Jocky McLean was Assistant Director of Politeia between 2014 and 2016.

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