Trauma in Brazil

The people of Brazil confront the impeachment of their President for the second time in 25 years. It is always a traumatic event. What does it mean? Is it true that President Dilma Rousseff is under attack because our elite can’t stand a popular government, as the members of her Workers’ Party (Partido dos Trabalhadores, or PT) say? Or is it a constitutional and necessary step to get rid of a thoroughly corrupt government?

To answer that question we need to go back in time. When the PT’s most famous politician, Luíz Inácio “Lula” da Silva, was elected in 2002 after three failed attempts, he changed his tune and image. From firebrand union organizer he became the Lula of “peace and love,” donning a coat and tie and promising, in an open letter to the Brazilian people, that he would govern as a pragmatist who would keep our institutions and market economy.

Indeed, he kept his promise initially, despite some measures aiming to control freedom of the press in Brazil. Lula kept up policies of the government that preceded him, that of Fernando Henrique Cardoso, a social democrat allied with neoliberals. While Argentina defaulted on its international loans in 2001, Brazil paid off its IMF debt ahead of schedule. The Brazilian economy thrived with responsible people in command, such as Henrique Meirelles and PT veteran Antonio Palocci. We also had a great help from China and the low cost of capital in developed countries, that’s for sure.

During that time, however, the PT had been bribing members of Congress from several political parties to vote in support of Lula’s program. When the scandal known as “the mensalão” (a nickname referring to lawmakers’ monthly stipend of political payoffs) became public in 2005, Lula almost lost it all, but Brazil’s healthy GDP rescued him as did a weak political opposition. Finance Minister Palocci was accused of corruption and abuse of power, and resigned. But Lula was reelected, and beyond that, he was able to pass the mantle of leadership to his protégé in the PT, Dilma Rousseff.

The former Regis Debray acolyte and political prisoner during Brazil’s military dictatorship in the early 1970s had served as Lula’s chief of staff. She proved to be a less than strong head of government; but again, the economic winds were at Dilma’s back, at least for a while. China’s economy kept growing fast and the Chinese kept buying our natural resources, which tripled in price. The cost of capital was still near zero in rich countries, and it was the origin of the “monetary tsunami” that loaded emerging countries with money.

Investors didn’t want to know about the underlying institutional and political problems. The Economist featured the Brazilian economic miracle on its cover. Everyone was drunk with such liquidity in place. It was a bubble that was bound to burst.

In 2014, with Dilma pursuing another term in power, our economy showed some signs of trouble. It was only the beginning of the depression we’re now in. Flush with cash—diverted from our state-owned companies—and using aggressive tactics against a stiff challenge from Aécio Neves, a center-right legislator and former governor, Dilma got reelected. But it was a Pyrrhic victory.

The year 2015 was our annus horribilus. Hit by the collapse of oil prices, the country could not continue hemorrhaging money on public spending. It became clear that the populist measures during the summer of 2015 were not sustainable, and the winter had come for the grasshopper, as in the fable. We were not prepared.

When the tide goes out you discover who’s been swimming naked. Brazil was naked, and everyone could see it now. The good days were gone and so was the money. Instead of accepting the new reality and humbly changing course—moving to rein in the vast bureaucracy, for example, or reforming entitlements to make social security sustainable, or giving the central bank greater independence so it could take action to curb runaway inflation—our government decided to double down on statist policies. President Rousseff used our state banks to lend even more, and public spending went through the roof.

Soon we lost our “investment grade” status. The “monetary tsunami” reversed its course, and foreign investors pulled money out of Brazil. The bond rating of Petrobras, the government-owned oil company, plunged. What had begun as stagnation became a full-on depression—the worst Brazilians have experienced since the 1930s—and we reached 10 million people unemployed.

Brazilians were angry at the newly reelected President. And it only got worse with “Operation Lava-Jato” (Portuguese for “car wash”), the federal investigation of corruption at Petrobras, which had been ongoing since November 2014. When the economy goes south, corruption charges (never in short supply in Brazil) begin to stick. As millions of people with no political connection began taking to the streets to protest, the politicians, usually so good at looking the other way, had to notice it.

But the government still has control over money and jobs in a country where the state is everywhere and is responsible for 40 percent of GDP. It’s not easy to declare yourself a state’s enemy; there is usually a high price to pay. Yet even with the risks involved, more and more people and institutions supported those millions out in the streets. Brazil under the PT was taking Venezuela’s path: Its answer to the economic crisis was to increase its control over our institutions.

In charge of “Operation Car Wash” is Sérgio Moro, a federal judge who has sentenced high-profile Brazilian businessmen to prison sentences. He is the hero of antigovernment protesters. When Moro’s investigation came close to Lula, Dilma tried to make her embattled mentor state minister, so that he would be beyond Moro’s reach. With that blatant move, there was no doubt anymore: The PT was capable of anything to stay in power and to protect its own.

As Simon Romero of the New York Times reported on April 3, 2016, Lula, who stands accused of taking illicit benefits from construction companies, “called on his comrades in the Workers’ Party to ratchet up pressure on prosecutors.” As Lula put it to one PT congressman: “Why can’t we intimidate them?” He laid out this scenario: “He [the investigator] needs to go to sleep knowing that the following day he’ll have 10 legislators irritating him at this house, irritating him at his office, facing a case at the Supreme Federal Tribunal.”

They have been trying to destroy our democracy in order to survive. Now a majority of Brazilians want to see President Rousseff and her vice president, Michel Temer, leave office, while a minority, made up of the intelligentsia and public servants, are stalwart in their support for the government.

Naturally, impeachment is always of a political nature. That was true when conservative President Fernando Collor de Mello was impeached in 1992. He went down on a corruption charge. But the legal part must be there also. With its “pedaladas fiscais” (fiscal fancy-footwork), the Rousseff administration trampled on Brazil’s Fiscal Responsibility Law. Specifically, Dilma disguised from the Congress her administration’s wild spending and forced state banks to lend money to the government. The amount was huge: more than $20 billion. This is malfeasance on a scale never seen in Brazil.

The consensus for impeachment is so strong that it extends to the Brazilian Supreme Court, almost all of whose members were appointed by Lula or Dilma. The Chamber of Deputies (the lower house of the legislature) approved the impeachment process with 367 votes in favor and only 137 against.

The PT knows that it will probably lose within the legal system, but the party needs its victim’s narrative to keep socialism alive as an idea. That’s why its members are now carping about an alleged coup d’état, as if we lived in the 1960s and the Brazilian military were still in charge. They conveniently forget that they have been at the helm for more than 13 years, that they appointed almost all members of the Supreme Court, that the “financial elite” was part of their government, and that legions of those demanding that Rousseff and Temer leave office live in the favelas in poverty.

There is much irony here. The Brazilian Left talks a lot about democracy and helping the poor but when populist politicos get in trouble, they recur to accusing their opponents of what they are guilty of: abuse of power and a hand in the till.

One thing, to be sure, helps the PT’s narrative: the president of the Chamber of Deputies is Eduardo Cunha, who has been implicated in the Petrobras scandal and is accused of having an undeclared, offshore bank account. Cunha is no saint and everybody knows it. So Dilma and her team say that the whole impeachment thing is only Cunha’s revenge, because he wanted help from the government and didn’t get it. But the impeachment was prepared by three well-known lawyers, one of them a founder of PT in the past.

So that’s what really is going on in Brazil right now: a government claiming to serve “the masses” is massively corrupt. It tried to get hold of the whole state, an effort that was succeeding as long as the economy flourished. When the downturn came, the government lost the support of ordinary Brazilians, and important members of the Rousseff administration have been accused of corruption.

Impeachment is the only remaining way to turn this crew out, because nobody expects Dilma Rousseff to voluntarily step aside as did Fernando Collor de Mello. Tribunes of “the people” hang on because their self-righteousness simply cannot be contradicted by facts and the law.

Rodrigo Constantino

Brazilian economist and journalist Rodrigo Constantino has been a columnist for the weekly magazine Veja and O Globo newspaper. His column currently appears in the Gazeta do Povo, and he blogs at www.rodrigoconstantino.com.

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Comments

  1. Suzane says

    Great explanation, you just forgot to talk about something that nobody outside of Brasil knows,
    Foro de Sao Paulo, and the deal that Lula have with Fidel Castro, and the plan to turn Brazil in communism folowing the revolucionary people of 1964 that are all working for the goverment, or are in prison for receiving bribe to be usef by the “president’s and ex” party.
    Thank you

  2. Marcus D'Arrigo says

    Mr. Constantino perfectly summarized the actual political and economical situation in Brazil. Of course there is plenty of more things to say regarding the corrupt members of the workers party (PT) and the unions that support them. This government added more than 200.000 people to the government payroll. Transfer more than 1 billion dollars to a terrorist organization the MTST ( Movimento dos “Trabalhadores” Sem terra (no land “workers” group). Transfer billions of dollars throug a “secret agreement of our BNDES development bank to governments of Cuba, Venezuela, Angola and Bolivia. I could write a paper on the swindles this group orchestrate.

  3. gabe says

    For a moment there, I thought Mr. Constantino was talking about the Democrat Party in the United States – just substitute Hillary and Billy Boy for Dilma and Lulu and it does seem to show that we are, after all, just (corrupt) brothers under the skin.

  4. R Richard Schweitzer says

    At first blush, this piece about what appears to be a “political disorder” in Brazil may seem unrelated to the “individual liberty” concerns of Liberty Fund – and to which this site was oriented. However, it is exemplary.

    Individual liberty is impacted by the functions of government (e.g., the “Administrative State”). Those functions differ and develop differently in different societies (social orders). In the Western Hemisphere, the societies in smaller portion of the land mass and populations north of the Rio Grand evolved separately from those to the south.

    References: Acemoglu & Robinson, “Why Governments Fail;” North, Wallace & Weingast , “Violence and Social Orders.” But, more precisely Quigley, “Tragedy and Hope” pp. 1109 et seq. with its focus on Brazil and its social structure. Little has changed in that social structure and the place of functions of government in it during the 50 years since Quigley’s study.

    How, does this relate to “our” individual liberties? Examine that issue by asking what are the functions of governments in Brazil and the rest of the Western Hemisphere – are the functions *our* government developing the characteristics of those others? If so,and it appears that it may be, what is (and has been) occurring in our social order to cause this trend?

  5. says

    We are this close now to get rid of those comunists in desguise. The “D” day is set to may 11th or 12th. And that will be the first step of a long ride: provinding brazilian people with awareness on the risks of a giant paternalistic state!

    Congratulations and thank for all your work since 2005, Rodrigo Cosntantino. You took some bullets for the team. We owe you that!

  6. Ronald S De Mota says

    I strongly agree with Ms Suzane. Constantino has forgot to mention about Foro de São Paulo , a political group founded by Lula , Fidel Castro and Frei Beto ( a brazilian member of leftist organization which is responsible of speading the comunist version of the catholic church in Brazil) . The Foro de São Paulo was kept in absolut silence by the brazilian media for many years. From this group is told to determine a transnational political policies evolving countries in Latin América. As a result of those policies has rising to the power , goverments of Venezuela , Ecuador , Brazil itself with Lula , Bolívia , Nicarágua , Argentina ( until the last election for presidente) . They also rules on Mercosur , and other representatives associations . Althoight they not overt admist is in fact a comunista organizacion founded in order to rebuild the strenght of the comunist party after the fall of the Berlin Walls on 1989.

  7. Rodrigo Tonietto says

    I believe you made a small (yet significant) mistake when mentioning Aécio Neves. His position is cited as center-right, when we all know he and his party are social-democrats, hence center-leftists. As a long-time reader of your former blog on Veja, and also the current independent one, I’m certain that you’re aware that this is not accurate.

  8. Scott Amorian says

    Argentina’s political trajectory is easy to understand. Look at the dynamics.

    Argentina’s Constitution is based generally on the US Constitution. But its senate is really another House of Representatives because the Argentine senate can propose laws. As in the US the Argentine senate is democratically elected, but unlike US senators, the Argentine senators are elected by a pluralist majority. Like the US senate, the individual votes of individual senators are publicly recognized.

    What all of that means is that populism is very powerful in the Argentine government. Because they have the power to propose laws, the senate has a lot of potential for bribery. The US senate only approves laws (in theory), so it provides at least a weak check on corruption in the form of bribery for proposed laws coming from the House.

    Because the Argentine senate is elected by a plurality, its easier for lesser quality candidates to get elected.

    Like the US senate, the Argentine senate votes are publicly recognized, which means the senators must conform to the will of the plurality, which makes it populist by definition.

    Argentina is a smaller country than the US, so it can change faster.

    All together, corruption is more likely to occur, populist nonsense can make its way into government easily, weak senators are elected, and corruption can occur faster.

    I guess I don’t see what the issue is here. The Argentine government works as is designed to work. If the people there don’t like it, they should change it. You sit there pounding on your head with a hammer, and then ask for sympathy because your head hurts. I don’t get it.

    Look at the dynamics of your system, people, and make well researched corrections where necessary. Remove the power to propose laws from the senators. Modernize their elective methods. Base democratic elections of senators on character and knowledge, not on popular control.

    If your approach to reform only involves changing a few minor laws and replacing the current bunch of criminals with another bunch, you might feel better for a while, but you will eventually be right back where are now.

  9. R Richard Schweitzer says

    Scott,

    “Argentina is a smaller country than the US, so it can change faster.”

    Change what?

    Can it change the function of government in its social order? Is size of population or of accumulated wealth a determining factor in changes in the social order and therefor in the functions of government?

    Are you conflating a society with its government? Is the social structure of the Argentine changing?

    • gabe says

      Scott:

      I will have to disagree with you on this statement:

      “Argentina is a smaller country than the US, so it can change faster.”

      Size (contrary to many folks opinion) does not matter. What is essential is the depth / extent / breadth of (political) practice(s), beliefs, motivations, etc. Think in terms of a small group such as you may have encountered at work (I certainly have) where there is no way that this little “steering” committee / task force is going to change their view – no matter how much one demonstrates that their proposals are ineffective / counterproductive, etc.

      No, it seems that the nexus of associations / beliefs / motivations of either, or both, the elite and the masses are no quite so susceptible to change as many of us would prefer. Regrettable, but true.

      seeya

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