Rousseff Faces Rebellion in Congress Before Brazil Elections

A rebellion by Brazilian President Dilma Rousseff’s leading ally in Congress threatens to stall her legislative agenda, undermine her budget targets and erode support for her party in October’s general election.

Eduardo Cunha, a leader of the Brazilian Democratic Movement Party, or PMDB, said its alliance with Rousseff’s Workers’ Party, or PT, is in “crisis” and half the party says it needs to be reevaluated. The dissident PMDB legislators and opposition parties yesterday defeated the government by approving an inquiry into alleged corruption at state-controlled oil company Petrobras.

Dissatisfaction in Rousseff’s coalition over cuts in legislators’ pork barrel spending and over rival candidacies in gubernatorial races risk delaying bills to regulate the Internet and renegotiate debt of state governments. If Rousseff fails to appease allies, she may also lose support in key electoral states in the Oct. 5 presidential vote, said Cristiano Noronha, vice president at Arko Advice consulting firm in Brasilia.

“The risk is that the discontent could snowball to other parties and that would be bad news heading into an election,” Noronha said by telephone. “The dissatisfaction is not new but it’s more intense this time due to the electoral dispute.”

The presidential press office didn’t respond to an e-mail request for comment. Rousseff is eligible for re-election in October.

‘A Marriage’

Finance Minister Guido Mantega last month said the government would reduce 44 billion reais ($19 billion) in expenditures from this year’s budget, eliminating 70 percent of funds earmarked for spending on projects in lawmakers’ constituencies.

“A political alliance is like a marriage,” said Cunha. “When you have an alliance, you have to respect your allies in a way that shows you care for them.”

Lower house committees have called nine ministers as well as Petrobras Chief Executive Officer Maria Das Gracas Silva Foster to answer questions concerning government measures and contracts in their areas, according to a note posted today on the congressional website.

Petrobras said in February it started an internal audit of allegations of contract irregularities.

More Alliances

When Rousseff was elected in October 2010, she had 402 of 512 votes in the lower house. In yesterday’s vote to investigate alleged Petrobras corruption, 276 legislators voted against the government.

The PMDB, which holds five ministries and the leadership of both houses of Congress, is seeking more regional alliances with the PT to prevent the two parties from competing against each other in gubernatorial races, PMDB President Valdir Raupp told reporters March 10.

Congress hasn’t voted on the framework Internet legislation since Rousseff marked it as urgent in September, preventing other bills from being voted on the floor of the lower house. Lawmakers returned from a recess Feb. 2.

Henrique Alves, also of the PMDB and president of the lower house, asked for the Internet bill known as Marco Civil to be removed from the agenda today to allow for more time to reach an agreement, according to a note on the congressional website. Cunha said he would vote against the legislation.

Rousseff’s popularity will be fundamental in determining the PMDB’s allegiance, Joao Paulo Peixoto, a political science professor at the University of Brasilia, said. Her government approval rating fell to 39 percent from 43 percent in December, according to an Ibope poll published Feb. 21 in Estado de S. Paulo newspaper. The survey had a margin of error of 2 percentage points.

“No one likes to be on a sinking ship,” Peixoto said by phone from Brasilia. “If the other parties feel like she’s vulnerable, they’re going to without a doubt increase the intensity of these attacks.”

Before it's here, it's on the Bloomberg Terminal.