11 December 2015 - 11:59 AM
Brazil's Perfect Storm: Impeachment Charges & Political Crisis
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Since her reelection in October 2014, Brazilian President Dilma Rousseff has suffered an incessant campaign of political destabilization. On Dec. 2, this campaign ramped up yet again when the Speaker of the congressional lower house, Eduardo Cunha, began impeachment proceedings against the president. Cunha is himself accused of bribery and he is largely believed to have used the impeachment as blackmail against the government and as a smokescreen to deflect news coverage from his own case, and the corruption charges against him. 

A banner of Brazil's former president Luiz Inacio Lula da Silva and President Dilma Rousseff appears in front of a banner displaying the head of the lower congressional house Eduardo Cunha during a pro-Dilma march on Dec. 8.

In the impeachment proceeding, president Rousseff is accused of infringing on the Fiscal Responsibility Act, when Brazilian state banks used their own funds in accounting operations to cover payments for state social programs, whose payments were occasionally delayed by the treasury. Such fiscal maneuvers, however, had been used often by previous governments to cover payments. It's clear that the impeachment move is just a means to give the appearance of legality to what many are calling an impending coup d'état. In order to understand what is happening, it's important to contextualize the legal, political, and ideological facets of the current crisis and its possible effect on Brazilian democracy. 

The Lava Jato Petrobras Scandal  

Rousseff's impeachment proceedings come on the heels of an on-going investigation into a massive corruption scandal involving bribery schemes in Brazil's giant state-run oil company Petrobras. Most of the current political crisis stems from here. It has touched all of Brazil's major political parties in Brazil and it has been taking place since the mid-1990s. Altogether, 28 names of politicians have been mentioned as having taken bribery - lawmakers and state governors from PT, PMDB, PSDB, PSB, DEM and PP. The scandal has been named Lava Jato (Car Wash), after a network of dry cleaners and gas stations that were used to move the money involved in the scheme. Lava Jato consisted of payments made by Brazilian construction companies interested in getting advantages in receiving Petrobras contracts. The former director of Petrobras and the most important informer from Lava Jato, Paulo Roberto Costa, was career employee appointed during the administration of Fernando Henrique Cardoso in 1995 and kept high rank positions in the company until fired by President Rousseff in 2012. He took money from subcontractors and passed it to the heads of political parties from the opposition and the ruling coalition. 

Because of the scheme, Brazilian political scientists have started to ask if the funding model of political parties, and their increasingly expensive electoral campaigns, was not behind the repeated scandals in Brazil's recent democratic history.  

Fueled by the massive Lava Jato scandal, Brazil's Supreme Court of Justice issued a sentence on Sept. 17 forbidding donations from businesses to electoral campaigns. With strong support from the Rousseff government and the Workers' Party, this decision was ratified by congress with the dissenting votes largely from the opposition, which revealed their hypocrisy about their struggle against corruption.  

Until that ruling, corporations could donate up to 2 percent of their revenue to campaigns. Individuals can still donate up to 10 percent of their income. Parties also receive public funding in proportion to their seats in congress. However, illegal slush funds, dubbed "caixa dois" or under-the-table, are a frequent sight in Brazilian politics. 

The Spin

The major private media corporations have been spinning all of this to their advantage. The judge Sergio Moro and prosecutors in charge of the police operations have become new national heroes in the public and in the press when they have locked up several big contractors. They have largely joined forces with the media, and major opposition leaders in a tentative alliance. There is only one basic condition: the leadership from opposition parties shouldn’t be accused of anything. They should not be brought up on charges, even if the evidence against them is available. Nearly every name of someone in the opposition brought up by informers has been thrown out by prosecutors. The most important one is the major opposition leader Aécio Neves himself, mentioned several times by key Lava Jato informant Alberto Youssef. 

At the same time, those in charge of the Lava Jato operations have used unorthodox procedures to acquire evidence, such as submitting suspects to long periods of preventive detention to push them to agree with a plea bargain to inform on other possible criminals. Massive pressure from private media against the Workers' Party government and an arbitrary hand from the justice system has created a lynch-mob mentality whose preferential target is the PT and its allies. Judge Sergio Moro of the Federal Court of Paraná is openly engaged in selective and illegal leaks of information from the investigation, creating a climate of media terrorism. That is, much of the leaked information isn't corroborated by material evidence, and benefits the informer more, as well as ensuring the hysterical support of public opinion. Moro seems to be taking a page out of the handbook of the Italian operation Mani Pulite (Clean Hands). Moro wrote down several articles using Mani Pulite as exemplar case of inspiration. He and the prosecutors usually name Lava Jato as a page turner of Brazilian corruption and themselves as a national redeemers. Disturbingly, that operation resulted in the complete collapse of the Italian political system, producing erratic political behavior that resulted in emergence of the crypto-fascist and corrupt Prime Minister Silvio Berlusconi.  

During this complicated moment, Brazilian media conglomerates are also going through their largest financial and audience crisis. The largest newspapers are dismissing numbers of journalists, frightened by the free fall of ad revenue. The Brazilian weekly news magazine Veja — well known for its stark opposition to the PT — is nearly bankrupt. The Globo oligopoly is seriously at risk of losing its longstanding position of audience leader. The internet is undermining everyone, dragging down advertising revenue and audience, and endangering their power positions.  

The Workers' Party governments have pushed for a democratization of media, but they have not broken the oligopolistic and manipulative ownership structure of the powerful media groups in Brazil. That said, there is also no chance that the Rousseff government will turn to old market protection schemes — advertising, credit and government purchases — to save bankrupt media companies. Maybe the collapse of the government is the last media barons' lifeline. 

The Economics

Another aspect of the political crisis is the economic impact produced by the investigations. Unemployment and inflation is rising and affecting a huge sector of the population, weakening government’s popularity ratings. The Lava Jato investigations are largely responsible. They have paralyzed all investments in infrastructure and oil in the country. Subcontractors under suspicion for their involvement in the scandal have been suspended from acquiring contracts with the government or lending money from state public banks. The effects from these economic sectors are spilling over into the entire economy, further depressing investments. The Petrobras scandal didn't only create legal problems for the Workers' Party government, but also economic troubles which exacerbated the political crisis feeding the impeachment proceedings against the president. 

Overall, there is also an ideological component to this alliance between the judiciary and big media barons working to overthrow president Rousseff. State public banks played an active role in her first term (2011 – 2014). This was particularly the case with the Brazilian Development Bank (BNDES), which since 2009 received huge amounts of money from the government treasury — roughly R$ 455 billion or US$120 billion — to implement counter-cyclical fiscal policies to prevent the global financial crises reaching Brazil's economy. From 2009 on, the neoliberal criticism from media barons against the state interference in the market became increasingly bitter. Despite the fact that this fiscal policy prevented a rise in unemployment and maintained long-term credit channels with low-interest rates open to Brazilian businesses, the corporate media never forgave this sin against the neoliberal ideology of free markets. 

These counter-cyclical fiscal policies created financial room for the developmental coalition that brought part of the country's capitalist business classes under the leadership of BNDES in a long-term investment strategy around oil and infrastructure. As the Brazilian economy is addicted to the highest interest rates in the world, a major portion of income and national savings from big investors, such as banks and pensions funds, is applied in treasury bonds and not in the real economy. That’s what we call financial coalition, whichadvocates high interest rates which prevent the national income from being oriented to investments in productive economy. It has blocked development policies and prevented the further reduction of Brazilian social inequalities. Coincidentally or not, the Lava Jato operation hits the backbone of developmental coalition, when the judge and prosecutors do not distinguish between the individuals responsible for the bribery schemes and the companies themselves, paralyzing the entire economy.  

The Politics

The legal excuse used in congress to justify the impeachment attempt is also ideologically biased. The opposition who began the impeachment process says that the Rousseff government committed fiscal crime when state public banks used their own funds to meet the ordinary payment for public policies and programs, in the areas of housing, education, agricultural credits. Despite the fact that this standard administrative procedure is not a crime by law, the ideological justification for the accusation is that the state should not take the initiative to protect society during fiscal downturns using its own financial instruments.  

In addition the Federal Accounts Court, which opined that the government committed a fiscal crime, is an autonomous organ of the state, but its ruling is not legally binding and must be confirmed by the Brazilian congress. Something that has not happened yet. 

Next Moves

Impeachment proceedings are now taking their own course and it's hard to grasp what will happen next. Although opposition leaders and the judicial system have recognized that Rousseff has no involvement in the Petrobras scandal, her lack of political initiative during her second term has frightened her own political allies and weakened the government. Her popularity has dropped to single digits and she is faced with an unstable majority in a very conservative congress with a shaky relationship with their main partner of ruling coalition, PMDB. The country's corporate media conglomerates have continued to attack Rousseff and her predecessor, former president Luiz Inacio Lula da Silva, attempting to link them to the Lava Jato scandal.  

Rousseff is also faced with the complete paralysis of economic investments, a stark increase in unemployment, and she has alienated much of her base by embracing recessive fiscal policies under conservative Finance Minister Joaquin Levy, in an effort to stall further economic woes. Add all of this to the impeachment process — or coup attempt, as many are calling it — and you have a perfect storm.

But people's memories about progressive public policies in last twelve years of Workers Party administration, seeing massive increases in public spending on education and health,and a drop in poverty from 34 percent in 2002 to 15 percent in 2012, are still very strong and could turn the tide. For this it would be important for Rousseff to change her apathetic political behavior and bring about the original macroeconomic platform for which she was elected. Last tuesday the insidious operation from Eduardo Cunha of setting a special commission which will analyse the impeachment procedures (immediately suspended by Supreme Court - STF) defeated the government at a delicate moment. This shows Rousseffneeds to improve her political strategy to consolidate a safe majority in congress to leave behind this threat of coup. The time is running out: she needs to move fast.  

Carlos Henrique Santana is a Brazilian Political Scientist. He is currently working as a Research Fellow at the Humboldt Foundation and TU Darmstadt.

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