Brazil­ian busi­nesses crave res­o­lu­tion on the ouster of Dilma Rouss­eff

The im­peach­ment cri­sis has put off key busi­ness de­ci­sions “It be­comes clear that she has no so­lu­tion to present to us”

Bloomberg Businessweek (Asia) - - CONTENTS - Fabi­ola Moura, Ger­son Fre­itas Jr., Anna Edger­ton, Ar­naldo Gal­vao, and Cris­tiane Luc­ch­esi

The drawn-out po­lit­i­cal drama over the ouster of Pres­i­dent Dilma Rouss­eff of Brazil has sent lo­cal stocks reel­ing and re­cov­er­ing again and again. On May 9, in­vestors, who’d al­ready fac­tored in a tran­si­tion pe­riod un­der Vice Pres­i­dent Michel Te­mer, were spooked when the im­peach­ment process was briefly put into doubt by a leg­isla­tive ma­neu­ver. Af­ter that was ironed out, the march to­ward Rouss­eff ’s trial and likely re­moval from of­fice pressed on, and stocks and the Brazil­ian cur­rency ral­lied.

With po­lit­i­cal grid­lock par­a­lyz­ing the na­tion’s cap­i­tal since last year, cor­po­rate Brazil has been liv­ing with un­cer­tainty—and that’s been bad for busi­ness. Al­though ex­ec­u­tives have been re­luc­tant to take sides pub­licly

in the de­bate over the charges against Rouss­eff (us­ing state-run banks to cover up a bud­get gap, an al­leged breach of a fis­cal re­spon­si­bil­ity law), they’ve be­moaned the lack of clear gov­ern­men­tal poli­cies. Bu­reau­crats have been sit­ting on their hands as Rouss­eff’s govern­ment and the coun­try’s law­mak­ers ran from ring to ring in the im­peach­ment cir­cus. “If you hear ab­so­lutely noth­ing from the pres­i­dent re­gard­ing what con­cerns us the most, which is a year and a half of the econ­omy at a halt, it be­comes clear that she has no so­lu­tion to present to us,” says An­tônio Emílio Fugazza, chief fi­nan­cial of­fi­cer at home­builder Eztec Em­preendi­men­tos e Par­tic­i­pações.

At the top of the cor­po­rate list of con­cerns are tax and la­bor re­forms that ex­ec­u­tives say will help them hire and in­vest more. There are also more spe­cific mea­sures that af­fect in­dus­tries from tele­com to auto man­u­fac­tur­ing. Oi, the strug­gling phone car­rier, has been wait­ing for months for an over­haul in reg­u­la­tion that would free it from in­vest­ing in out­dated, mon­ey­los­ing fixed phone lines. The pro­posal has been stuck be­tween the com­mu­ni­ca­tions min­istry and Ana­tel, the in­dus­try’s gov­ern­ing body, which says it needs more study.

Au­tomak­ers saw car sales fall about 28 per­cent for the first four months of 2016 from a year ear­lier, on top of a 27 per­cent full-year drop in 2015. They’ve been wait­ing since last year for the govern­ment to sign a plan to give con­sumers in­cen­tives such as re­bates to up­grade their ve­hi­cles.

If Te­mer does step into a care­taker pres­i­dent role, his long ex­pe­ri­ence in Brasília should en­sure he has the clout to quickly ad­dress the cri­sis of eco­nomic growth, ac­cord­ing to An­tônio Delfim Netto, a for­mer fi­nance min­is­ter and long­time eco­nomic ad­viser to top Brazil­ian politi­cians. The vice pres­i­dent is ex­pected to en­act more busi­ness-friendly poli­cies than Rouss­eff, whose Work­ers’ Party has re­sisted mea­sures that could sac­ri­fice pro­tec­tions for la­bor. Te­mer is likely to re­place cur­rent Fi­nance Min­is­ter Nel­son Bar­bosa, the third such change in the post in 18 months. “The peo­ple that are com­ing in know what needs to be done, and they know it needs to be done quickly,” says Paulo Bi­lyk, chief in­vest­ment of­fi­cer at Rio Bravo In­ves­ti­men­tos.

Sér­gio Fis­cher, chief ex­ec­u­tive of­fi­cer of Log Com­mer­cial

Prop­er­ties, a real es­tate com­pany based in Belo Hor­i­zonte, says there are in­di­ca­tions that busi­ness will pick up once Te­mer steps in. “I’m al­ready feel­ing it,” he says. “We’ve been get­ting re­quests, big ones, from com­pa­nies who are al­ready con­sid­er­ing a bet­ter sce­nario in the fu­ture.”

Once her im­peach­ment trial be­gins, Rouss­eff must tem­po­rar­ily step down. The Se­nate has al­most six months to make a fi­nal rul­ing. If a two-thirds ma­jor­ity votes against her, Te­mer would con­tinue as pres­i­dent un­til 2018.

For now, Te­mer says he wants to use his in­terim man­date to ease rules on govern­ment pro­cure­ment and give the pri­vate sec­tor a big­ger role in the oil in­dus­try. His plans to elim­i­nate a third of min­istries are be­ing scaled back, and tax in­creases have been ruled out for the time be­ing, ac­cord­ing to two Te­mer aides, who asked not to be iden­ti­fied be­cause the dis­cus­sions aren’t pub­lic.

Brazil will even­tu­ally need to deal with longer-term struc­tural is­sues. Its cor­po­rate tax rate is 34 per­cent, among the high­est in the world. And its la­bor laws are no­to­ri­ously re­stric­tive, with en­forced work­ing hour lim­its and a 30 per­cent ex­tra pay­ment for va­ca­tion time. “It sti­fles any en­trepreneur­ship,” says Fer­nando Simões, CEO of JSL, a cargo trans­porta­tion and lo­gis­tics com­pany. “It ends up hurt­ing the worker him­self, since you think twice about hir­ing any­body.”

Te­mer has other chal­lenges. He’s al­most as un­pop­u­lar with the masses as Rouss­eff, and the scan­dal that’s sink­ing her ad­min­is­tra­tion over

Petro­bras, the na­tional oil com­pany, has en­snared some of his al­lies. If his re­forms are seen as harm­ful to the poor, he may pro­voke demon­stra­tions and protests.

The bot­tom line Com­pa­nies have been stalled as the Rouss­eff im­peach­ment par­a­lyzes the Brazil­ian govern­ment and im­por­tant re­forms.

Te­mer Rouss­eff

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.