A set­back in Brazil

Pres­i­dent Dilma Rouss­eff strug­gles with re­ces­sion and scan­dal.

The Washington Post Sunday - - SUNDAY OPINION -

JUST A cou­ple of years ago, it was widely con­cluded that Brazil had fi­nally over­come the decades-old gibe about the world’s fifth­largest coun­try: that it would al­ways be “the coun­try of the fu­ture.” Ex­ports, par­tic­u­larly to Asia, were boom­ing; a mid­dle class was fill­ing in the once-po­lar­iz­ing gap be­tween the very rich and very poor; and huge off­shore oil dis­cov­er­ies ap­peared to en­sure yet another eco­nomic ac­cel­er­a­tion. In seem­ing con­fir­ma­tion of its new sta­tus, Brazil was cho­sen to host both soc­cer’s World Cup last year and the 2016 Olympics.

The Rio de Janeiro games are still a year away, but al­ready Brazil’s bub­ble ap­pears to have burst. The econ­omy is mired in a deep­en­ing re­ces­sion, thanks to the drop in oil and other com­mod­ity prices. The state oil com­pany, Petro­bras, has trig­gered the big­gest cor­rup­tion scan­dal in the coun­try’s history, with dozens of busi­ness­peo­ple and more than 50 mem­bers of Congress im­pli­cated in some $2 bil­lion in kick­backs. In­vest­ments in the vaunted new oil fields have been cut back, even as Brazil­ians fume over the bil­lions spent on new sta­di­ums.

Most trou­bling, the set­backs have trig­gered a cri­sis for Brazil­ian democ­racy, which has flour­ished in the 30 years since a mil­i­tary gov­ern­ment yielded power. Left­ist Pres­i­dent Dilma Rouss­eff, who is due in Washington this week for a long-de­layed of­fi­cial visit, eked out re­elec­tion in Oc­to­ber af­ter claim­ing that her more con­ser­va­tive op­po­nent would sur­ren­der to the dic­tates of bankers and the In­ter­na­tional Mon­e­tary Fund. Now, with Brazil’s credit rat­ing in dan­ger, Ms. Rouss­eff is im­pos­ing the same aus­ter­ity mea­sures typ­i­cally fa­vored by the IMF, in­clud­ing cuts in energy sub­si­dies.

Mean­while, al­le­ga­tions of cor­rup­tion are pend­ing against dozens of mem­bers of Ms. Rouss­eff ’s party, in­clud­ing its trea­surer, in con­nec­tion with the Petro­bras scan­dal. The heads of two huge con­struc­tion firms, in­clud­ing the largest in Latin Amer­ica, were ar­rested June 19. Two days later, a poll showed the pres­i­dent’s pop­u­lar­ity had dropped to a record low of 10 per­cent. The Post’s Dom Phillips re­ported Ms. Rouss­eff has stopped ap­pear­ing on tele­vi­sion for fear she will only in­spire more anti-gov­ern­ment protests.

The pres­i­dent now faces the chal­lenge of sur­viv­ing in of­fice, and at­tempt­ing to gov­ern, for another three-and-a-half years. It won’t be easy: She has seen much of her power ef­fec­tively stripped away by con­gres­sional lead­ers, who di­luted some of her aus­ter­ity mea­sures. Ms. Rouss­eff’s Work­ers’ Party ob­jects to her eco­nomic cor­rec­tions, which partly re­verse her statist course dur­ing her first term.

But Brazil needs more lib­er­al­iz­ing re­forms. Petro­bras’s cor­rup­tion was in large part the prod­uct of Ms. Rouss­eff ’s mis­guided poli­cies, such as try­ing to re­strict its sup­pli­ers to Brazil­ian firms. The pres­i­dent made much of $53 bil­lion in in­vest­ment deals she an­nounced with vis­it­ing Chi­nese Premier Li Ke­qiang last month, in­clud­ing $7 bil­lion in fresh fi­nanc­ing for Petro­bras. But to get back on track, Brazil needs not just checks from Bei­jing, but also the re­moval of dis­in­cen­tives for pri­vate do­mes­tic and for­eign in­vest­ment. With­out it, Brazil’s fu­ture will re­main on hold.

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