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Once heralded as one of the strongest emerging economies, Brazil has seen its economic fortunes wane over the past year as a result of corruption scandals, fiscal management, and bureaucratic incompetence. The nation is in the midst of a recession – the longest downturn since the 1930s – and unemployment is nearing double digits. As if this was not bad enough, Brazil’s Congress is moving to remove President Dilma Rousseff on charges that she violated Brazil’s fiscal management laws by manipulating government finances to aid her re-election campaign last year. Congress may also move to look into whether Rousseff played any part in a scandal at the state-owned oil company Petrobras, as she was Brazil’s energy minister in former President Luiz Ignacio Lula da Silva’s government. While some investors have welcomed the move to impeach Rousseff – viewing her as an obstacle to sound economic management – other analysts worry that the impeachment controversy will be an unwelcome distraction as Brazil attempts to correct its present economic trajectory. Rousseff’s defenders argue that her prosecution is politically motivated and that Speaker Eduardo Cunha only initiated the proceedings after Rousseff’s Worker’s Party (PT) moved to oust him on charges of bribery and money-laundering.
This topic brief will briefly discuss the current impeachment process, explain the political dynamics behind it, and then describe some scenarios that could occur in the coming months with regards to Rousseff’s potential impeachment.
Readers are also encouraged to use the links below and in the related R&D to bolster their files about this topic.
The Impeachment Process
The current allegations against Rousseff stem from the 2014 Brazilian presidential election where Rousseff narrowly defeated Senator Aecio Neves of the Brazilian Social Democracy Party (PSDB) in the closest race in the nation’s history. The election was largely decided on economic issues, with Rousseff claiming that she would fight corruption, fix Brazil’s ailing economy, and maintain the nation’s commitment to social programs enacted by former President Luiz Ignacio Lula da Silva. Rousseff attacked the “neoliberal” policies of Neves, which she said would abandon the nation’s poor and produce chaotic economic results. However, opponents allege that Rousseff managed to fix Brazil’s accounting records to make it appear that the nation was in better fiscal shape than it really was. The Economist reports on December 5 that the current allegations against Rousseff are that she under-reported budget expenditures during the 2014 presidential campaign, delayed payments for social programs, and used state-owned banks to cover deficits. She failed to inform Congress of this news and this is why the National Audit Tribunal told the Brazilian Congress not to approve Rousseff’s spending accounts. This was the first time that the National Audit Tribunal made such a recommendation in its history.
Another strike for Rousseff’s integrity has been the multi-year scandal involving the state oil company Petrobras, which Rousseff headed during the da Silva administration from 2005-2010. Experienced extempers should remember that this scandal involves charges of construction firms giving bribes to Brazilian legislators in return for lucrative contracts from the oil company. According to The Economist, the scandal has caused thirty-four sitting congressmen to be placed under investigation and has led to the arrest of numerous businessmen throughout the country. The New York Times writes on December 3 that critics say that bribes given out during that scandal, which apparently flourished under Rousseff’s watch at the company, enriched the Worker’s Party (PT) and thereby helped Rousseff’s presidential campaigns in 2010 and 2014. Although Brazilian law says that a president can only be impeached for offenses conducted during their existing term, a revelation that Rousseff played a big role in the Petrobras scandal (thus far no connection has been made between her and the bribes that were being passed around the company) could cause her to lose favor among her supporters and force her resignation.
Brazil’s people, though, do not really care about either of these charges. What they are most concerned about is the state of the nation’s economy, which is not very good at the moment. The BBC reports on December 2 that the economy is 4.5% smaller than it was a year ago, with Economy Minister Joaquium Levy blaming the poor performance on declining foreign investment due to swirling corruption scandals that have engulfed a sizable part of the national legislature. The economic situation is not getting better either, with The Financial Times on December 3 reporting that most economists are projecting a 2.8% economic contraction next year. Although Rousseff has tried to pursue budget reduction measures since winning re-election, she has run into opposition among legislators in her political coalition and this has created gridlock akin to what Americans see on a daily basis between Congressional Republicans and President Barack Obama. Brazilians are angry that the government has apparently mismanaged the economy, with Forbes reporting back on March 25 that more than 60% of Brazilians favor Rousseff’s impeachment. The Economist on December 5 writes that this is based on the economic recession, as well as the fact that 80% of Petrobras’s stock value has fallen over the last five years – thereby hurting the pensions of millions of Brazilians – as well as double-digit inflation and unemployment that is rising above 7%. Rousseff is running into this stiff economic headwind and she is hoping that her supporters in Congress will not cave to protesters that wish to evict her from office. However, that could eventually prove difficult as The New York Times notes that 34% of Brazilians consider corruption the nation’s biggest problem, outranking concerns about the nation’s public health system and unemployment.
Extempers should be prepared for a length impeachment process if things go as expected. Most assume that congressional deliberations could last for six months, ending around the time that the National Speech and Debate Association (NSDA) National Tournament will take place in Salt Lake City, Utah. The last time that Brazil impeached a president was in 1992 when President Fernando Collor, the nation’s first directly elected president after twenty years of military rule, was removed from office on corruption charges. Like Rousseff, Collor faced economic problems as hyperinflation triggered street protests and tensions with Congress. Under the Brazilian constitution, impeachment is a multi-tiered process. After Speaker Eduardo Cunha decided to initiate proceedings against Rousseff last week, a committee is being formed of the various parties in the Brazilian Chamber of Deputies (the name for Brazil’s lower house). The Financial Times writes that this committee will hold a series of meetings – ten in total to hear Rousseff’s defense against the charges that have been levied against her – and then will deliberate in up to five more sessions before deciding whether to proceed with impeachment. The committee is likely to move forward with letting the entire Chamber of Deputies debate the charges. In this case, two-thirds of deputies in the 513-member chamber must vote to recommend that the Senate hold a trial. If this threshold is reached, the Senate would then hold that trial. Like the Chamber of Deputies, the Senate, which has eighty-one members, would need to convict Rousseff with a two-thirds vote. In an interesting twist to the proceedings, Rousseff would have to step down for 180 days if a Senate trial is held so she would have no influence on the government during that period. Her vice president, Michel Temer of the Brazilian Democratic Movement Party (PMDB), would take over during this period.
The Political Dynamics of the Impeachment Process
As extempers can tell, the opposition will have to overcome some significant hurdles if they wish to remove Rousseff from office and this is why some are criticizing the proceeding, saying that it is a waste of time and is politically motivated. Those supporting this argument note that Speaker Eduardo Cunha, who initiated the impeachment proceedings, only did so after the PT took steps to remove him from office on corruption and money-laundering charges. It was once thought that Cunha and Rousseff had a deal whereby Cunha would not pursue her impeachment in return for Rousseff not having members of her PT target Cunha for removal. The Economist writes that Cunha stands accused of receiving $12 million in bribes from the investment bank BTG Pactual in return for political support. MercoPress reveals on December 3 that Swiss prosecutors have also confirmed that Cunha has deposits in several Swiss banks. These deposits were made at the same time that Brazilian investigators allege that Cunha was to have taken bribes. The timing of the impeachment proceeding is suspicious as well, with Cunha deciding to act hours after PT legislators decided to open up a probe into corruption allegations against him. According to Bloomberg on December 4, the Brazilian Supreme Court has found that Cunha has not violated the powers of his office by seeking Rousseff’s removal, but his role in the process definitely taints the proceedings. Rousseff and her supporters argue that there is a coup being launched against her and she is attempting to make the impeachment more about Cunha’s character than her own.
When looking at the numbers, it appears that Rousseff can avoid impeachment in the lower house. The Financial Times reports that the PT and its allies have more than 300 seats in the Chamber of Deputies. If all of these legislators decide to back Rousseff then impeachment becomes a non-issue. The Agence France Presse writes on December 5 that Rousseff needs the support of at least 171 legislators in the lower house to avoid a Senate trial. Thus far, she has a safety margin of fifty votes, but this leaves her at the mercy of the PMDB, a “big tent” party with no real ideology. If the PMDB were to desert her, it would be very difficult for Rousseff to sustain enough votes to survive her term of office. However, all would not be lost for Rousseff if she were to lose the vote in the lower house as The Guardian notes on December 3 that she has the public backing of fifty-four of the eight-one senators.
Another reason that Rousseff might avoid impeachment is, ironically, economic in nature. Forbes explains that Levy is popular with markets and if Rousseff were impeached it is very likely that he would resign. Levy has been trying to engineer more fiscally responsible reforms in Brasilia although Congress has blocked several of them. Some of these reforms include raising taxes and reducing spending on social programs. Although some businessmen want Levy removed because they believe austerity is hurting the national economy, foreign investors are still watching his actions carefully. The prospect of a government without a credible financial mind could hurt Brazil’s credit rating, which Standard & Poor’s downgraded in September to junk status. It is unclear whether Moody’s and Fitch, the two other major ratings agencies will do the same, but Levy’s exit and the turmoil it could produce might cause them to act.
Scenarios for the Impeachment Process
Still, all of these political calculations do not include the prospect of sustained street demonstrations against Rousseff. As noted earlier, a majority of Brazilians favor her impeachment. In fact, Brazilians took to the streets in March, April, and August to protest against corruption and Rousseff was a prominent target of these protests. Deutsche Welle explains on December 6 that Cunha has justified the impeachment push on the grounds that the “voice of the streets” is demanding it. Public pressure is one of the reasons that Brazilian legislators removed Collor from office in 1992 and according to The Americas Quarterly on December 3 this pressure is the worst-case scenario for Rousseff. The Americas Quarterly notes that Brazil’s political elite come from more privileged backgrounds than the majority of Brazilians, who are working-class and poor. As a result, these elites are sensitive to shifts of the public mood since they are largely elected from working-class districts. Rousseff and her allies wish for the impeachment process to be concluded swiftly so that public protests do not have time to build against her, but Bloomberg notes that the opposition PSDB wants to use the December recess to organize protests and rally anti-corruption forces.
Another scenario might see the PMDB and the PSDB work together to oust Rousseff. In this scenario, both parties would combine their votes with some of their allies in smaller parties and this would pave the way for the PMDB to make Temer president. Markets like Temer, but one of the problems of the PMDB as a catch-all party is that it does not stand for a set of specific issues that can lead the nation out of recession. Like the old Habsburgs of Europe, the PMDB’s strength is really its size. Furthermore, several of its politicians, of which Cunha is one, are currently being investigated for corruption. That is hardly a significant sign of reform for foreign investors or a way to calm markets. Such an arrangement, although being popular in the short-term with a majority of Brazilians, may also prove disastrous for the long-term prospects of both parties as it would validate Rousseff’s claims of a “coup.” It may even galvanize members of the PT and labor unions aligned with it, thereby creating more economic chaos than exists in the status quo. Lastly, it is still uncertain whether Temer even wants to be president. He has stood by Rousseff thus far, but there are some signs that the PMDB is creating distance between itself and the PT within the governing coalition. For example, Civil Aviation Minister Eliseu Padilha resigned last week and some think this is a sign that other PMDB members may leave the cabinet. According to The Guardian on December 4, Padilha’s decision to resign shows that Rousseff will need to fight her impeachment battle alone. Still, it is notable that six PMDB ministers remain in Rousseff’s cabinet at the time of this brief so she has not completely lost the support of one of her main allies.
A final scenario might see the PMDB and the PSDB decide to do little to contribute to Rousseff’s impeachment. Brazil faces significant economic headwinds and it is not probable that either party has an effective economic platform that can fix the economy before the end of next year. MercoPress writes that the next Brazilian presidential election in 2018 will play into the opposition’s hands as they will be able to campaign on the duplicity of Brazil’s finances during Rousseff’s tenure in office and the horrible state of the economy. Instead of ousting Rousseff and then being blamed for the lack of an economic recovery, it may prove better for the opposition, and the PSDB in particular, to let Rousseff remain in power and thereby let the PT accept all of the blame for the economic crisis. The Huffington Post also writes on December 4 that other anti-Rousseff voices wish for her to remain in power so that the nation can have a conversation about what the state’s role in the economy should be, noting that if she is removed from power that it will shift the conversation more to political ideology rather than the economic ideology that contributed to the nation’s financial woes.
As of right now it appears that Rousseff will escape impeachment, but the process will be an unwelcome distraction for Brazil when it grapples with significant economic problems. The impeachment charges have merit, as fiscal irresponsibility cannot be tolerated in a democratic society, but unless evidence emerges that Rousseff directly played a hand in the bank transfers and/or facilitated a climate of irresponsibility when directing Petrobras, it is unlikely that she will be forced from office. That may suit the PSDB just fine, but it will provide little comfort to Brazilians that wish for the economic recession to end and for Latin America’s largest economy to get going again.