On Sunday, 17 April 2016, the Brazilian Chamber of Deputies approved a motion to forward a petition to the Senate to impeach President Dilma Rousseff. What led Brazil to this moment? Looking back, the re-election of Dilma Rousseff to a second term as President of Brazil in October 2014 was viewed by her supporters in the Workers Party (PT) as confirmation of the rise of the working class to power in Brazil. The election of Luiz da Silva (“Lula”), the “Godfather” of the PT, in October 2002 after three unsuccessful campaigns was a decisive break with the tradition in Brazil of talking to the Left but voting to the Center-Right in national campaigns. International financial markets were very suspicious of Lula, whose career had been markedly anti-capitalist. With Lula in 2002, the campaign rhetoric of the PT changed dramatically. Lula stated that all contracts would be respected if he won the race for the presidency. After his victory, defeating the center-right Social Democratic Party (PSDB) that had governed during the previous eight years, he quickly signaled his intentions of fiscal austerity by appointing a well-known private sector banker as head of the Central Bank.
Much of life in politics is luck. And Lula and Brazil were lucky in 2003-2004. China rapidly became a major economic power. To fuel growth, Beijing needed natural resources. Latin America was a prime target of Chinese economic growth. Brazil, in particular, became a major trade partner and, indeed, within a few years, China would replace the United States as the principal partner of Brazil. Suddenly, the prices of raw materials soared. Exports of iron ore to make steel – beef and soy beans to feed a burgeoning urban population – made Brazil a wealthy country. At about the same time, Goldman Sachs, the New York investment firm, needing a good marketing strategy, identified the BRICS – Brazil, Russia, India, China and South Africa – as the future global economic leaders. Lula quickly became President BRICS. He travelled widely vaunting the “new Brazil.”
Conditional Cash Transfer programs were created to bring tens of millions of poor Brazilians into the lower middle class. Bolsa Familia (Family Package) became a global model for poverty reduction. As if the soaring foreign exchange generated by the trade with China was not enough, massive oil deposits were discovered off the southeast coast of Brazil. The “pre-salt” petroleum (it was found under thick layers of ocean salt), Lula said, was Brazil’s ticket to prosperity and developed economy status. Lula pondered that God had to be a Brazilian for the country to be so lucky.
But suddenly, in the middle of his first term in office, it was discovered that his legislative successes were tied to a “mensalão” – a big monthly payment to legislators to induce them to vote for the government program. “Teflon” Lula escaped prosecution but many of his close aides were sent to jail. Easily re-elected in 2006, the sky began to darken in the second term. Chinese growth slowed. Oil prices fell. Then the financial crisis of 2008-2009 stopped the flow of direct foreign investment. But the charismatic Lula finished his term with high popularity ratings and passed the baton to his Chief of Staff, Dilma Rousseff. It was expected that this third PT government would be an extension of the first eight years of PT rule, but the train suddenly went off the tracks. Dilma (as she is known) is a technocrat with no electoral experience. She found it difficult to do the bargaining with a multiparty Legislature that required skill, guile, and lots of money. But the well was drying up. Her government decided to stoke the fire to maintain popularity. There was a credit boom. Prices were frozen. The transfer programs continued and were extended. Dilma appeared immune to warning signals.
She barely won reelection in 2014, running on a traditional PT populist platform – but she won. Then it all began to fall apart. Federal prosecutors began to look into a massive corruption scandal in the state-oil company, Petrobras. Millions of dollars were spent on phony contracts, the money from which went into political campaigns. The country’s major construction companies were identified as conduits for the cash transfers. Leading business figures were indicted and sentenced. Suddenly, impunity, a long standing political tradition for the wealthy and influential, was under siege. Then Dilma’s government was accused of using state bank funds to cover a budget deficit during her reelection campaign. While not accused of personal corruption, she had served as the Chair of Petrobras during the height of the corruption scheme. It did not help that inflation and unemployment were trending upward. The three credit rating agencies had downgraded the country to junk status. Trade was flat, as was FDI. Politically inept, Dilma tried to undermine Eduardo Cunha, the leader of the lower Chamber in the Parliament. In return, Cunha, himself under investigation for massive corruption and money laundering, accepted a petition to impeach the president. Now, the Chamber of Deputies has approved a motion to forward an impeachment petition to the Senate. The 81 federal senators will now decide the fate of Dilma and, indirectly, the future of the PT. The heady expectations of 2003 are now in ruin. Brazilians anxiously await the next general election in 2018 to redirect the political fortunes of Brazil.
Feature Image: Flag of Brazil by jorgeribas. Public Domain via Pixabay