It’s chaos in Brazil.
President Dilma Rousseff’s chief political opponent — Eduardo Cunha — has started the ball rolling on her impeachment.
“Members of Congress are expected to take weeks until they reach a final decision, meaning that high levels of political uncertainty will continue to pose a significant challenge…” writes José Flores, an analyst at consultancy Control Risks.
That, perhaps, is an understatement.
Rousseff is accused of breaching fiscal discipline in 2014 and 2015. Specifically, the opposition alleges the Rousseff — who won reelection in 2014 by the slimmest of margins — made the country’s economic situation seem better than it was both before and after the vote.
The reality of the situation, however, is far more complex. For over a year Brazil has suffered from a major economic crisis. Both government revenues and the country’s GDP rate are contracting, inflation has hit around 6.5% and is expected to rise next year, and Brazil is projected to run a 7.5% fiscal deficit in 2016.
This is all, in part, due to the fact that the nations main exports — commodities — have seen their prices collapse over the last year.
Rousseff’s disaster is also, in part, due to ‘Operation Car Wash’ — the investigation that, starting in March 2014, that uncovered the deepest corruption scandal in the country’s history embedded within the state oil company, Petrobras. The scandal has reached the highest levels of government, including beloved ex-President Luis Inacio Lula da Silva.
Think: briefcases of cash, money laundering, kick-backs — the works. Optimistic pollsters now put Rousseff’s approval rating at 10%. At protests over the spring, some Brazilians were calling for a return to rule by military junta.
Which explains why, in some quarters, the possible impeachment of a twice elected leader is being viewed as progress. On the news that Rousseff may be ousted, Brazil’s stock indices, the battered iBovespa, is up 3.5%.
The iBovespa over 2 years:
Everyone is just dreadful
Cunha, who is the leader of Brazil’s lower legislative house, is also being investigated for corruption associated with the Petrobras scandal. As such, some political analysts believe this is his attempt to deflect attention from his alleged connection to what has, since last year, has attacked the psyche of Brazilians, eroding their confidence in the democracy that brought them so much prosperity more than a decade ago.
“It is difficult to say whether the opposition has the required strength to pass and send the impeachment process to the Senate, but the process could still delay the legislative agenda even if the government survives. At the very least, it continues to raise investor anxiety and uncertainty over policy direction,” wrote analysts at Societe Generale in a recent note.
Delay is the last thing Brazil’s legislative agenda needs. The country must somehow strike a balance between cutting costs and allowing for growth. That’s a difficult task in difficult times and nearly impossible during all-out political war.
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