Diplomatic Pouch / August 24, 2015
By Larry Luxner
In the wake of huge protests by hundreds of thousands of Brazilians demanding the ouster of President Dilma Rousseff — and with even bigger demonstrations planned for next weekend — some of Washington’s top Brazil-watchers gathered Aug. 19 at the Inter-American Dialogue to discuss the worsening crisis.
The think tank’s event “Can Dilma Weather the Storm?” brought together three panelists: João Augusto de Castro Neves, Latin America director at the Eurasia Group; Paulo Sotero, director of the Woodrow Wilson Center’s Brazil Institute; and Peter Hakim, president emeritus and senior fellow at IAD.
“There’s a great deal at stake here. Brazil is not only Latin America’s largest country, but also a regional and global power,” said moderator Michael Shifter, president of IAD. “I don’t think anyone believed that Dilma Rousseff’s second term was going to be easy after last fall’s close election, but I’m not sure anyone could have predicted how difficult and complicated it would be for her six months into her second term.”
Rousseff, who narrowly won a tight runoff election last year, now has an approval rating of only 8 percent. Her popularity has plummeted as federal investigators probe a massive kickback scheme at Brazil’s state-run oil giant Petrobras.
Complicating matters is the fact that the 67-year-old Rousseff — Brazil’s first woman president and a protégé of former President Luiz Inácio Lula da Silva — was chairwoman of Petrobras during many of the seven years the alleged corruption took place. Prosecutors say the company approved inflated contracts to suppliers and subcontractors in exchange for billions of dollars in kickbacks.
Some 77 percent of Brazilians in a recent poll said Rousseff knew about the corruption, in which more than 80 people have been charged with crimes.
“It’s a deep political and economic crisis, but not an institutional crisis,” said Neves. “The fact that you have an independent judiciary, and prosecutors with enough autonomy to investigate, is a sign that Brazil’s institutions are actually working.”
Adding to Brazil’s pain is the country’s worsening economy.
Brazil’s GDP is expected to shrink 2.3 percent by the end of 2015, compared to a record 7.5 percent growth in 2010, Lula’s last year in office. Brazil's currency, the real, has fallen 24 percent against the dollar this year to its lowest point since 2003, not to mention slowing growth in China, Brazil’s top customer for commodities ranging from sugar to coffee beans.
“When you look at the eight years of Lula’s administration and the first four years of Rousseff’s, you had great economic growth. Brazil benefitted from the commodities boom and from China. But the growth model put in place by the PT [Workers Party] that worked quite well reached an exhaustion point, even before the corruption scandal started,” Neves told his Inter-American Dialogue audience.
“The model worked quite well for some time but needed changing. The Petrobras scandal accelerated some of those trends and made them more visible. Part of that boom was driven by natural resources like mining and oil. Brazil was flooded with money and liquidity. So it’s no coincidence that a lot of corruption scandals popped up.”
Nevertheless, Neves doesn’t think Rousseff will be impeached.
“She’ll survive to the end, despite a deepening crisis,” he said, adding that the crisis won’t peak for another six months. “There are still lots of incentives for prosecutors to keep digging deeper.”
For Rousseff to actually be removed from office, he said, four conditions would have to be met: very low approval ratings (which is already the case); political isolation and a loss of support from the core of the PT as well as social movements; an alignment between the PSDB [Brazilian Social Democratic Party] and PMDB [Brazilian Democratic Movement Party] for impeachment; and finally, a “smoking gun” in the form of more concrete evidence of wrongdoing.
“Even if Rousseff steps down, that’s not going to stop the investigation,” said Neves. “It could even bring into question of the legitimacy of the next government. For that reason, she’s likely to remain, but weak. The PT will continue in government, and return the favor for a PSDB government to take office in 2018.”
Hakim, noting Rousseff’s recent trip to the United States, her meeting with President Obama and her visits with Fortune 500 companies in New York and California’s Silicon Valley, said Brazil has nevertheless lost a lot of credibility here.
Meanwhile, the country’s recession continues, and thousands of people are losing their jobs, forcing them back into poverty.
“Internationally, regionally and economically, Brazil is far less important today for the U.S. than it was before,” Hakim said. “Brazil should learn one thing: that its international influence is due to what happens internally, not what it does externally. It seems to me that [as this scandal unfolds], Brazil will take up less time and interest in the United States.”
Sotero, a frequent commentator on Brazilian political and economic issues, noted that the Petrobras investigation is far from being finished, and that Brazilians are likely to witness the jailing of top officials on a level never before seen.
“Brazil has a tradition for impunity for people in high places. This expectation of impunity — which was once part of popular belief — is now giving way to the expectation of prosecution. People are really expecting that now there will be justice,” said Sotero. “Traditionally, prisons were for black people, poor people and prostitutes. It’s changing; there’s now diversity in our prison population.”
Tom Vogel, a New York-based strategic communications executive specializing in Latin America, said this is “a sign of how far Brazil has come” since the days of former President Collor de Mello — who led the country from 1990 until his impeachment in 1992 on corruption charges — and how much further it has left to go.
“The widespread allegations of corruption under Collor de Mello were a great disappointment, given that he was Brazil’s first democratically elected president followings years of dictatorship. However the strength of the press as a check on the balance of power was good news for the country’s burgeoning democracy,” Vogel told the Diplomatic Pouch.
“Petrobras has long alleged to have been a target of rapacious corruption schemes dating to long before Dilma came to power. So, in terms of the growth of Brazil's democratic institutions, the attention finally being paid to Petrobras now is good news.”