SAO PAULO (MNI) – With an economy in free fall and a president threatened with impeachment, Brazil is unlikely to see political stabilization any time soon, local analysts say, while policy uncertainty may rise with Finance Minister Joaquim Levys expected departure imminent.
Markets have had occasional moments of optimism over the possibility that President Dilma Rousseff might be impeached and removed from office, in the near term, but the process is likely to be lengthy and its end result is uncertain.
Senate President Renan Calheiros recently confirmed Congress will enter its normal summer recess, so legislators will not resume deliberations until February.
By the time the process works its way through committee, which requires Rousseff be given the mandated number of sessions to defend herself, and the full lower house of Congress finally votes, it could be May or even June.
“The market is pricing in a much faster resolution than is likely,” Rafael Cortez, political analyst at the Sao Paulo consultancy Tendencias, told MNI.
“Meanwhile the economic paralysis will continue.”
It is still possible that Calheiros will change his mind and agree with the lower house Speaker Eduardo Cunha to call Congress back for a special session, but even then a vote before March is nearly impossible.
And since Cunha is under investigation for corruption, he may soon be removed from the speakership, which would then require the lower house to elect a new leader and delaying the process further.
Should the lower house vote by a two-thirds majority to impeach the President, the Senate, according to a Supreme Court decision issued Thursday night, would vote by a simple majority whether to accept the lower house vote and begin a trial.
The Supreme Court ruling was a victory for the government, which has stronger political support in the Senate and the Senate President is, for now at least, an ally.
But Cortez said Friday the decision did not significantly change the odds for Rousseffs political survival, which continue to depend on her relations with Congress and the level of popular hostility against her.
If the Senate votes in favor of a trial, Rousseff would be removed from office while the trial takes place, and the Senate would have up to 180 days to vote, with a two-thirds majority required to convict the President and remove her from office permanently.
On paper, Rousseff should not have a hard time staying in office. She needs 171 votes in the lower house to defeat the proceedings, and even the most pessimistic projections give her 130 or so hard-core supporters.
To find an additional 40 votes would normally not be hard for a President, who has enormous power to distribute plum jobs and other political favors.
But Rousseffs approval rating currently stands at 9%, and she has been clumsy at the political horse-trading that is the lifeblood of most politicians here.
“I give her about a 45% chance of staying in office,” Cortez said.
Carlos Melo, a political science professor at the Insper business school in Sao Paulo, said her situation appears grim.
“Before this week, everyone thought she had the votes in Congress to stop impeachment. But if the vote were held right now, she might lose,” he told MNI.
Police investigators looking into a gigantic corruption scheme, centered on state energy company Petrobras, Tuesday raided the homes or offices of over 50 legislators from the PMDB party.
The PMDB is in theory part of Rousseffs coalition, but many members, including Vice President Michel Temer have been defecting. Since many legislators believe Rousseff could stop the corruption investigations if she chose, the latest police raids will probably increase defections, especially among those legislators who could usually be bought with political favors.
Yet Melo noted that the situation is highly uncertain, and no one can predict how the economy, the popular mood, or even Congressional leadership will stand when impeachment proceedings finally begin.
Earlier in the year, anti-Rousseff protests brought millions into the street, but a similar protest earlier this month only brought out a few tens of thousands, while a pro-Rousseff demonstration actually managed a slightly larger number.
“We can talk about the odds now, but no one can say with any certainty what will happen in a few months. Everything is changing so quickly,” he said.
The dismal state of the economy probably will not help Rousseff, and the governments focus on survival could reduce the odds officials will implement the tough love economic policies Brazil needs.
Inflation is over 10%, while GDP is expected to contract 3.6% this year and 2.7% next year, according to the central banks latest Focus survey of local financial institutions, and these forecasts have been worsening steadily.
Unemployment was 7.5% in November, a little better than October, but far worse than November of last year, when it was 4.8%, so the downward trend remains intact, and many economists predict double digit unemployment next year.
The government currently is running a nominal budget deficit of 9.50% of GDP and a primary account deficit of 0.71%.
To make matters worse, Finance Minister Levys departure is now seen as certain after an interview he gave Thursday evening in which he admitted his exhaustion, criticized the government to which he belongs, and when questioned directly about his departure, answered that at the end of the legislative year, his “options would broaden.”
The legislative year ends this week, so an announcement may take place in the coming days.
Alex Agostini, chief economist at the Brazilian ratings agency Austin Rating, said Levys departure might not be all bad, though here too uncertainty reigns.
“Levys time has passed. He clearly wasnt going to succeed in getting the needed fiscal adjustment through Congress,” he told MNI.
The question is who might replace him. And will that person have any more success.
Earlier this year markets rose on rumors that former Central Bank president Henrique Meirelles might replace Levy. Meirelles is considered to share Levys orthodox economic ideas but to be a more skilled political operator who might have more success with Congress.
But recent rumors have focused more on the current Planning Minister Nelson Barbosa, an intimate of Rousseff who has a more heterodox history.
In the end, the name might not even matter.
“The problem isnt the Finance minister, its the government,” Agostini said. “Theyre focused on short-term survival, not on economic policies that, though necessary, might harm their chances of surviving.”
** MNI – Sao Paulo **
Fonte: MNI – 18/12/2015