What’s Next as Brazil Faces a Government Crisis?

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The Brazilian government is now in the midst of its worst crisis of confidence since 2003.

The government has been the object of protests from large sectors of civil society but mostly from the middle class. The protests stem from Brazil’s now unstable economic situation as well as a major scandal involving bribery of politicians connected to the Brazilian state owned oil giant, Petrobras. A massive corruption scheme at Petrobras saw billions being paid in bribes through inflated contracts and kickbacks to politicians, entrepreneurs and Petrobras executives. The Petrobras scandal involves more than 20 big companies and more than 50 politicians, most of them from the ruling coalition led by the Workers Party (PT).

It has been reported that on August 9th close to 800,000 people took to the streets in 15 Brazilian states demanding, among other things, the impeachment of President Dilma Rousseff who was reelected last October. But mega-corruption is not the only problem. Inflation is now up to 9 % and unemployment is on the rise. Likewise, public debt increased dramatically and the gross domestic product is in a state of recession, having contracted to negative growth of 0.1%

According to polls, more than 60 percent of the Brazilian population supports impeachment against the President. The president currently has no more than 7 percent support among the population. Furthermore, two political parties that are part of the ruling coalition, the Brazilian Labor Party (PTB) and the Democratic Labor Party (PDT) announced that they will no longer support Rousseff in Congress. Both parties have 46 representatives in the lower House and 10 % of the entire Congress. Their withdrawal could result in a serious blow for Ms. Rousseff and the 12-year domination of her ruling Workers Party. The Brazilian justice system is now investigating whether part of the Petrobras scheme also served as a mechanism to provide undeclared funds to the Workers Party electoral campaign, including the presidential one. It is estimated that the Petrobras corruption scandal involved embezzlement of 10 billion dollars.

The crisis that the country is experiencing is aggravated by the fact that it seems to involve not only government members but also members of the opposition including Rousseff’s chief adversary and speaker of the lower house, Eduardo Cunha and Senator Fernando Collor de Melo who is also a former President, impeached in 1992 over campaign finance violations.

Cunha belongs to the Brazil Democratic Movement Party, a party that is part of the government coalition. But Cunha became Rousseff’s main detractor as reports on corruption came to the surface. Allegedly, he took $5 million in bribes in exchange for providing contracts to a construction company to work on multi-million dollar Petrobras projects. The accusation is not just about corruption but about money laundering, as well.

Potentially, this could be a major crisis, not just for the government, but also for the entire political class.

So, it is no surprise that it was civil society groups that organized the protests, not the parties of the opposition. There is no rally around one particular leader (except Sergio Moro, the judge in charge of investigating and indicting individuals involved in corruption). These protests reflect the crisis of an entire system that seems to involve several political parties and businessmen. When the ruling party sought to recruit counter-protests they mobilized their base, the social movements and the trade unions, but no more than 40,000 people showed up.

All of this corruption was possible thanks to the years of bonanza that Brazil experienced as a result of the commodity boom. Thus, the Brazilian government enjoyed large revenue, large credit policies and also a welfare state based on government largesse.

Furthermore, the economic boom raised Brazils political ambitions making it believe that a superpower was on the rise and thus demanded its rightful place in the world. It demanded a permanent seat at the United Nations and flexed its muscle by increasing its regional power even by supporting the Venezuelan and Cuban regimes in an effort to break U.S. hegemony in the area. Thus, the tyrannical Maduro government in Venezuela has survived partly in thanks to the political support of the Brazilian government.

The current crisis in Brazil is a nightmare for Brazilians who have come to realize that the Workers Party’s promise of a big nation has crumbled into bankruptcy, recession and an orgy of government abuse and dishonesty. Hopefully, this crisis will lead to the reforms necessary to create a more transparent and accountable system. Also, this difficult moment might hopefully provide a good opportunity for the region if Brazil votes the Workers Party out of power and ends up changing its more than a decade-long dangerous foreign policy.

Luis Fleischman

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