Year in to new regime, Brazil still strained

MARIO SERGIO LIMA AND SAMY ADGHIRNI

The stock market may have rallied, the currency may have strengthened, but one year after President Dilma Rousseff’s dramatic ouster, Brazilians see few reasons to cheer.

The country’s deepest recession in history grinds on. Unemployment has reached a record high. The government wants everyone to push back retirement. And now, video testimony has emerged of corporate executives detailing — sometimes, laughingly — how they bought off dozens of top politicians.

“Brazilians are traditionally optimistic,” said Dorival Machado, the director of polling firm Data Popular. “This is changing for the worse.”

For those who believed the removal of Rousseff and the leftist Workers’ Party from power was all that it would take to restore Brazil’s swagger, the last 12 months have proved a slow and painful lesson. The country’s gross domestic product is forecast to grow a meager 0.4 percent this year even after the central bank cut benchmark borrowing rates by three percentage points since October. Frustrated by a seemingly endless corruption scandal and the government’s austerity program, patience with Brazil’s political establishment is growing thin ahead of next year’s general election.

“A population with a degree of economic pessimism and disillusion is more likely to back opportunists and saviors of the country,” Machado said.

The gloom on the streets has yet to affect the markets. The stock index has risen more than 22 percent and the “real” is up 16 percent since April 2016, highlighting investors’ unwavering confidence that the deeply unpopular government of President Michel Temer can turn around the economy and push through crucial reforms just as the corruption scandal, known as Carwash, flares up again.

Given that Brazil has repeatedly bounced back from political scandals, economic crises and a previous traumatic impeachment process, they may be on to something.

But even Temer’s allies in Congress are worrying that his administration is not doing enough to boost the economy in the short-term.

Rogerio Rosso, a legislator and amateur guitarist from the allied Social Democratic Party who helped oversee Rousseff’s impeachment, believes the government is right to push through structural economic reforms, though he worries it is not giving enough importance to the productive economy.

“The economic team just thinks of numbers and adjustment and not about the day-today of the productive sector,” he said.

Operation Carwash has been running for more than three years, but the scandal took a dramatic turn earlier this month after Supreme Court Judge Luiz Edson Fachin authorized investigations into eight members of the Cabinet, around a quarter of the Senate and dozens of congressional deputies.

Four of Brazil’s five living former presidents have been cited by executives from Odebrecht SA in relation to corruption allegations. Temer, though effectively shielded from prosecution relating to acts predating his presidency, issued a video defending himself from claims that he took part in discussions involving illegal campaign financing.

Leaving aside the presidential race, some political analysts believe the revelations will result in a significant turnover in Congress. For David Fleischer, professor emeritus at the University of Brasilia, up to 70 percent of the 2018 intake may be fresh faces.

“On the one hand this would be good, because it takes out the rotten wood,” he said. “But the problem is that we would have few experienced deputies.”