Rousseff Poised to Win on Impeachment, Lose on Brazilian Economy

  • Political turmoil cooled during recess, which ends Tuesday
  • Congress still reluctant to pass measures to shore up budget

Brazilian president Dilma Rousseff.

Photographer: David Paul Morris/Bloomberg

Embattled Brazilian President Dilma Rousseff may get a new lease on political life when legislators return to work Tuesday to discuss impeachment proceedings against her. Just don’t expect much help from them on the economy.

Following a six-week recess, much of the fervor surrounding the political crisis has died down, and with it the drive to oust Rousseff. Yet with consumers and businesses battered by a deepening recession, legislators have little appetite for the spending cuts and tax hikes administration officials say are needed to restore investor confidence. That’s especially true ahead of municipal elections in October, party leaders and political analysts said in interviews.

Dilma Rousseff

Photographer: Evaristo Sa/AFP via Getty Images

The mood could still sour against Rousseff and upset her chances to stay in office if discord increases within the ruling coalition, unemployment surges or the corruption probe that has rattled Congress expands further. But even the politician who stands to benefit the most from the president’s ouster, Vice President Michel Temer, says the mood in Congress has shifted away from ousting Rousseff, according to the G1 news site.

"Impeachment lost strength," said Temer, the head of the largest allied party in the ruling coalition whose critique of his boss in early December intensified the political crisis. "Some time back the issue had more consistency, but it lost it."

Polarized Congress

Congress was polarized before going on recess, as members of the opposition and some in the ruling coalition argued Rousseff should be removed on allegations she doctored accounts to minimize the size of the budget deficit. She says she did nothing wrong, and her supporters liken efforts to remove the president to a coup. Legislators engaged in shoving matches and ransacked voting booths in Congress as they squabbled over impeachment proceedings.

Now cooler heads seem to be prevailing, and the prospect of a Rousseff ouster have become more distant, said Fernando Coelho Filho, the lower house leader of the Brazilian Socialist Party, which is neither part of the opposition nor ruling alliance.

A Dec. 17 Supreme Court decision on impeachment proceedings also gave the administration positive momentum before the congressional recess. The court ruled that the Senate can reject a lower house vote in favor of impeachment and shelve the process without opening hearings. Rousseff aides celebrated the decision as a breakthrough because the upper chamber is seen as friendlier to the administration than the house.

Rousseff also took advantage of Congress’s absence in January to boost her legitimacy and further diminish the odds of her ouster, Gabriel Petrus, a political analyst at business consulting firm Barral M Jorge, said. He cited her highly publicized meeting last week with prominent business executives and labor union leaders that culminated in a government decision to free up billions in credit to revive growth.

Economic Challenges

But the administration discussed other priorities in the gathering that may test its relationship with lawmakers, including plans to trim pension benefits and revive a tax on financial transactions, known as the CPMF. The measures are designed to narrow a record budget deficit and stave off additional sovereign credit downgrades.

Political parties may become more amenable to negotiations over the unpopular proposals once the pressure of October’s municipal elections are behind them, said Michael Mohallem, a law professor at the Getulio Vargas Foundation, a Brazilian business school and think tank.

Still, opposition to the measures is strong in Congress. Several party leaders including the Socialist Party’s Coelho have spoken out against the CPMF, saying Brazilians already are struggling with job cuts and double-digit inflation. And even legislators in the president’s own Workers’ Party oppose efforts to curtail social security benefits.

"It’s political suicide," said Workers’ Party Senator Lindbergh Farias.

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