Brazilian President Dilma Rousseff suffered a potentially fatal blow Sunday evening when 367 out of the 513 elected representatives of the lower house voted for her impeachment trial to take place. What’s in store for Rousseff? And, more importantly, how will this debacle affect South America’s largest economy?
As the countrymen and women of Brazil picked their sides while united around the television screens at home and on the streets, watching with trepidation and passion the spectacle of the Brazilian lower house voting on President Dilma Rousseff’s impeachment, one could not help but wonder: How did it get this bad?
She was once the most popular leader in the world, with an astonishing approval rating of 92%, a figure even Russian President Vladimir Putin would envy. Now she is fighting for political survival as the whole world watches.
But in truth Rousseff is only now feeling the violent crescendo of what has been a turbulent and, for many, disappointing premiership. She promised policy reform which has not translated into actionable changes. The cost of living is going up, as are unemployment and inflation. With jobs being hard to find and public discontent rising, it is no wonder 60% of people support impeachment.
This cannot have come at a worse time, with Brazil hosting the Rio 2016 Olympics in August and the Zika virus presenting an immediate health threat. The Brazilian establishment has bitten off more than it can chew.
But will getting rid of her improve anything? That depends on the timescale.
In the short term there will likely be investor jitters. With no clear future economic plans to work towards, Brazil will likely see further economic problems, desperation, and a widening of the wealth gap. However, there are unlikely to be any drastic upsets coming from the market as a result of the impending impeachment. In fact this may be a good thing for Brazil’s economy, as markets tend to reward active steps in curbing corruption.
The long-term economic future of Brazil is what should really be questioned.
According to the IMF, Brazil’s poor economic health is bringing down the rest of Latin America. IMF head Christine Lagarde has urged the leadership to take charge and make necessary reforms to improve.
Corruption has stained credibility
Far from being the main instigator of her own downfall, President Rousseff and the charges against her (the manipulation of government finances to hide an increasing growing deficit) represents a wider endemic problem of the Brazilian body politic. These political scandals have robbed the establishment of any credibility to rule. In fact, 352 of the 513 members of Parliament face criminal charges.
What does that say for the wider credibility of the political system? Well the numbers speak for themselves, and people are voting with their feet. No doubt there will be further public discontent, especially in light of the recent Panama Papers leaks, where 57 Brazilian politicians from seven parties where named as having off shore accounts in Panama.
Meanwhile Brazil’s brain drain issues continue to grow. Many poorer families rely on remittances from relatives working in counties such as the US, with remittances in 2014 valued at 2.43 billion dollars. The world is changing and the youth of Brazil can choose to work and live abroad if they feel it beneficial.
Where does Brazil go from here?
If the senate votes to accept the impeachment motion, then Rousseff must step aside for 180 days for an investigation to take place, leaving Vice President Michel Temer as her interim replacement. In fact, a leaked audio-recoding has surfaced of Mr Temer reciting his swearing in speech, which caused a lot of embarrassment and tension among Rousseff and Temer.
If, however, by divine intervention, Rousseff is spared the proverbial guillotine, she faces a truly sisyphusian struggle to regain trust in the public eye. Her political opponents, notably house speaker Eduardo Cunha will undoubtedly be looking to draw blood elsewhere.
Either way, one should expect further public dissatisfaction and further public sector cuts on the horizon. With commodities still facing a bear market, industry in the football haven will continually stagnate. What the country desperately needs is a collective direction, something that has been severely lacking. Unlike global markets, which cannot be fully influenced by one nation like Brazil, direction is something that in theory is possible. Whether or not this politically polarised country can come together is a different story.