If Brazilian President Dilma Rousseff is impeached in her country’s lower house next month, it will be part of a bigger story than just Brazil’s.
It will be the continuation of what has become an international political revolution.
Or the end of a revolution, depending on how you look at it.
In 1999, the late Hugo Chavez became President of Venezuela, and a wave of leftist leaders all over Latin America followed him — in Bolivia, in Ecuador, in Argentina and in Brazil.
It came to be known as “The Pink Tide.”
But Chavez is dead, and his party in Venezuela is at war with a collapsing economy and its own angry citizens. Recent attempts by the leaders of Brazil and Ecuador to end term limitations have failed. Argentina’s new government, installed last December, is center-right, and global markets are welcoming the former-pariah debtor nation with open arms.
In Brazil, the end of Dilma Rousseff and her party, the PT — which has ruled the country since 2002 — will likely signal a handover of power from left to right in Latin America’s biggest country.
Of course, none of this means that Brazil’s problems will be solved once (if) the center right takes power. Right now, as it awaits Rousseff’s removal, the market is being incredibly kind to Brazil, despite the fact that the country is in the throes of a recession.
That said, the country has intense structural problems to work through, and the market will only wait for so long. It is not known for its patience.
‘O Bêbado e a Equilibrista’
Rousseff is facing impeachment proceedings, according to her opposition, for being dishonest about the state of the economy in 2015.
Of course, that wouldn’t be a consideration without Operation Car Wash, the corruption sting that started in 2014 and reached the highest levels of Brazilian society.
Essentially, the sting found that the PT had been using quasi-state oil company, Petrobras, as its personal slush fund to pay political bribes.
That combined with mismanagement blew a $2 billion hole in the company’s balance sheet. During parts of 2015, Rousseff’s approval rating fell to as low as 7%, and has barely recovered.
So Rousseff must pay, and her party must pay. Never mind that the opposition politician, who started impeachment proceedings, House Speaker Eduardo Cunha of the center right PSDB, i
s also being investigated for issues related to Operation Car Wash.
As of Tuesday, Brazil largest party, the PMDB broke its coalition with the PT so that it could vote for Dilma’s impeachment. Proceedings should begin on April 13, and they’re not looking good based on the numbers.
Rousseff and her once-wildly popular predecessor Luiz Inacio Lula da Silva, have moved to the left to try to rally their base, but analysts don’t see that doing much. The protests that have gone on on both sides have been peaceful, no one is expecting total chaos.
“I see this thing as being pretty well scripted,” said Brian Dean, a partner at ACG Analytics. “What we’re looking at is the inevitability of the impeachment voting in the House.”
Once Rousseff is impeached from Brazil’s House, her case will be tried in the Senate.
“I see Rousseff at least being out of power while the Senate tries her case at some point in the month of April, subject to Brazilian political calendar,” Dean continued. “By then, I don’t think there will be a lot of Senators who will hold the view that they should reconstitute a government that has been impeached.”
The new party
So what happens next?
Rousseff’s vice president, who is from the PMDB, will likely take power in coalition with the PSDB.
Already the Brazilian press is talking about what that would look like, including installing Arminio Fraga, the country’s former Central Bank head, as finance minister.
Fraga is well known quantity in international financial markets and on Wall Street.
It’s a clear signal that the whole system will move to the right.
And they have a lot of work to do.
Brazil is battling double digit inflation. Economic activity has fallen 8% from the same time last year.
The country’s also loaded with debt. The fact that commodities prices around the world have fallen to historic lows hasn’t helped either — Brazil is an exporter.
So the new leadership — which will include the PMDB’s Aecio Neves who lost the presidency to Rousseff by a hair in 2014 — will have to work fast to restore confidence and hold off the tide of continuous bad economic data.
“The political stuff that has been driving the market… is about to come to closure in the next several weeks,” Dean said.
Then Brazil will go back to trading on fundamentals, and that will be trouble.
“The process of getting Brazil’s house in order… is going to be a long hard slog,” he continued. “So I think it’s going to be a couple of years of pain, but at least you’ll have a government election that is moving in the right direction.”
At least, that’s what Brazil will have until 2018 when there’s another presidential election. Then it’s really anybody’s game.
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