Brazil Needs to Get Past Dil­maged­don

Vice Pres­i­dent Te­mer is pre­par­ing for the postRouss­eff era. There’s lots to do—and quickly

Bloomberg Businessweek (Asia) - - BLOOMBERG VIEW -

The vote by Brazil’s lower house to push for­ward the im­peach­ment of Pres­i­dent Dilma Rouss­eff prom­ises an end to a long po­lit­i­cal im­passe. Mar­kets have been re­spond­ing with an op­ti­mistic surge. But once Rouss­eff is out of of­fice, Brazil’s next lead­ers will need to ap­pre­ci­ate that the win­dow for new co­op­er­a­tion and re­form will be nar­row.

The wide mar­gin of the lower house vote sug­gests the Se­nate may con­clude im­peach­ment pro­ceed­ings as early as midMay. Vice Pres­i­dent Michel Te­mer, the leader of the Brazil­ian Demo­cratic Move­ment Party—pre­vi­ously Rouss­eff’s chief coali­tion part­ner—has al­ready been reach­ing out to po­ten­tial cabi­net mem­bers to form a govern­ment of na­tional unity.

Te­mer has his work cut out for him, and not only be­cause he lacks wide­spread pub­lic sup­port and will face stub­born re­sis­tance from Rouss­eff and her pa­tron, the for­mer Pres­i­dent Luiz Iná­cio Lula da Silva. Like many other mem­bers of the Demo­cratic Move­ment Party—in­clud­ing the lead­ers of the lower house and the Se­nate—Te­mer him­self may yet be im­pli­cated in the multi­bil­lion-dol­lar bribery and kick­back scan­dal at the state-owned oil com­pany, Petro­bras, that is cen­tral to Rouss­eff’s cri­sis. There’s still a chance the elec­toral court will call for new elec­tions be­cause of cam­paign fi­nance ir­reg­u­lar­i­ties in the 2014 con­test.

Even set­ting aside such threats, the work needed to im­prove the econ­omy is con­sid­er­able. Rouss­eff ’s ad­min­is­tra­tion squan­dered the fruits of the global com­mod­ity boom. With that boom now a bust, pub­lic and pri­vate debt is grow­ing. Last year the econ­omy shrank by al­most 4 per­cent, and the con­trac­tion is ex­pected to con­tinue in 2016. Un­em­ploy­ment has al­most dou­bled since Rouss­eff’s 2014 re­elec­tion.

So vot­ers are in no mood to see a care­taker govern­ment im­pose the kind of aus­ter­ity it would take to get Brazil out of its fis­cal bind. Te­mer will need to work with other mar­ket-friendly par­ties to spur growth. In a man­i­festo is­sued last fall, his party

pro­posed, among other things, bol­ster­ing the in­de­pen­dence of the cen­tral bank, re­duc­ing the state’s role in the oil sec­tor, and loos­en­ing var­i­ous man­dates that strait­jacket the na­tional bud­get.

Also im­por­tant to a jaded elec­torate will be to ex­pand an­ti­cor­rup­tion laws—many of them en­acted un­der Rouss­eff. Last month the pub­lic prose­cu­tor’s of­fice (which has led the Petro­bras in­ves­ti­ga­tion) said it had gath­ered 2 mil­lion sig­na­tures on a pe­ti­tion ask­ing Congress to con­sider 10 new laws that would help it bring cor­rupt of­fi­cials to jus­tice.

Ideally, all or most of this should get done by the end of sum­mer. Mu­nic­i­pal elec­tions sched­uled for Oc­to­ber will re­vive the po­lit­i­cal par­ties’ an­i­mal spir­its, re­duc­ing the prospects for co­op­er­a­tion. If a Pres­i­dent Te­mer wants to get on the right side of his­tory, he’ll need to move quickly.

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