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Center for Latino and Latin American Studies

"Brazil's president weathers multiple storms" - The Economist

 
 
 
 

Brazil’s president weathers multiple storms

A scandal and a further contraction of the economy make things difficult for the government

 

MICHEL TEMER, Brazil’s president, was as shocked as all his countrymen by the crash of an aeroplane in Colombia in which 71 people died, including most members of a popular Brazilian football team (see article). The tragedy also had the effect of removing from the headlines other bad news that affects the president more directly. Data published on November 30th suggest that the economy will recover more slowly from a severe recession than many analysts had expected. A fresh scandal has forced yet another member of the cabinet to resign, the sixth in the six months since Mr Temer took charge. His efforts to reform Brazil’s economy are making progress, but his government is in turmoil.

The latest scandal looks more like an embarrassment than a threat. Geddel Vieira Lima, who was in charge of the president’s relations with congress, quit after the former culture minister, Marcelo Calero, accused him of demanding that an arm of the ministry unblock construction of a high-rise building in Salvador, in which Mr Vieira Lima had bought a flat. Mr Calero, who had resigned earlier, claimed that Mr Temer had insisted that he patch things up with Mr Vieira Lima.

To many Brazilians, already enraged by the massive corruption scandal surrounding Petrobras, the state-controlled oil company, that looked like Mr Temer pressuring Mr Calero to help his long-time friend. A tape of the conversation, which was leaked to the press, confirms that Mr Temer did ask Mr Calero to bring the solicitor-general into the dispute. The president says he was merely suggesting him as an arbiter. Many Brazilians do not believe him. Once again, Mr Temer took too long to get rid of an errant minister, they complain.

The controversy suggests that scandal will continue to plague Mr Temer’s presidency, which began in May with the impeachment of his predecessor, Dilma Rousseff, for manipulating federal accounts. The Petrobras affair will continue to shorten political lives. A plea bargain between prosecutors and executives of Odebrecht, a construction firm at the centre of the Petrobras scandal, could lead to charges against 150-odd congressmen and several ministers, or so it is rumoured. “It would be disingenuous to say it doesn’t worry me,” Mr Temer admitted at a press conference on November 27th. Then there is the (slim) possibility that the electoral tribunal will annul the results of the presidential election in 2014, in which he was re-elected as vice-president, on the grounds that his campaign and that of Ms Rousseff were financed illegally.

News that GDP shrank by 0.8% in the third quarter of this year confirms that the economy was still in deep trouble. Temporary factors caused some of the decline. A dispute between Volkswagen and a supplier halted car production at some factories, and a drought cut coffee and maize harvests. Consumption, under pressure from high unemployment and household debt, fell along with investment. GDP will probably grow next year, but not by much.

Despite these storms, Mr Temer has kept Brazil heading in the right direction. His most important policy is a constitutional amendment to freeze federal spending in real terms for 20 years, which ought to reduce debt and interest rates and spur private investment. It passed the first of two tests in the senate on November 29th; a final vote is expected later this month. This week Mr Temer signed a law that gives foreign firms more access to deep-sea oilfields; and the federal government invited private firms to bid for the right to manage four airports. The central bank gave Mr Temer’s economic policy a vote of confidence on November 30th by cutting its benchmark interest rate by a quarter-point, to 13.75%.

The prospect of much lower rates, and thus of a revival of business confidence, depends on a second big reform, to Brazil’s budget-busting pension system. That is needed to carry out the spending freeze. It will provoke opposition from Brazilians who will have to work longer and retire later. Mr Temer has promised to send a draft reform bill to congress this year.

Ironically, the fuss over Mr Vieira Lima’s flat may help get it through, argues Ricardo Mendes of Prospectiva, a political consultancy. The minister’s departure opens up a job that Mr Temer can offer to a congressman who helps enact pension reform. Voters’ anti-corruption vigilance has killed at least one dubious law: an amnesty for politicians who had accepted illegal campaign contributions. Mr Temer threatened to veto it, and legislators backed off. The lower house of congress has passed a worse measure, to give the appeals courts greater power to discipline zealous judges and prosecutors for “abuse of authority”. If the senate approves it, voters will demand that Mr Temer veto that, too.

The odds are that he will spend the rest of his presidency, which ends at the end of 2018, battling scandals and grinding out legislative victories. As long as the scandals do not prevent the victories, Brazil should slowly recover.

 

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