Some of the Tests Ahead for Brazil’s President: QuickTake Q&A

President Michel Temer of Brazil is in choppy waters, four months after the impeachment of his predecessor, Dilma Rousseff. His majority in Congress has shown signs of crumbling, his bill to cap spending passed the Senate by a much-narrower-than-expected margin, and some leaders in his own coalition are publicly voicing discontent. On and off protests over the past months against corruption and government spending cuts are a reminder of widespread discontent among Brazilians with their political class. Most ominously, perhaps, is that investigations into claims that his 2014 election campaign was illegally financed are gaining steam. That line of inquiry could, in theory, lead to his ouster before his term expires at the end of 2018. He’s pledged not to seek a second term.

1. What’s Temer’s problem in Congress?

Temer is an unpopular president pushing unpopular austerity measures during Brazil’s worst-ever recession. At some point legislators and Brazilians at large will want to see results. While the majority of lawmakers support Temer’s proposed reforms in principle, the closer they move toward 2018 elections the more they’ll want to distance themselves from belt-tightening measures, such as Temer’s proposal to increase the retirement age. 

2. Is Temer’s legislative agenda doomed?

Not necessarily. The speakerships of both houses are up for a vote in February after Congress returns from recess, and candidates for those posts are showing off their independence at the moment. Many legislators still appear to see more cost than benefit to bucking Temer’s proposed economic reforms.

3. What could come of the investigation into his 2014 campaign?

The probe represents a small but growing risk for Temer. Brazil’s top electoral authority is looking into allegations that the winning Rousseff-Temer ticket illegally took money from Odebrecht SA, Latin America’s biggest construction company. A ruling by the electoral court, known as TSE, is expected in the first half of 2017 and could potentially strip Temer of his office. The chance of him not finishing his term due to this and broader political turmoil is 20 percent, according to Eurasia Group political consulting firm.

4. What’s working in his favor?

Judges will be hesitant to plunge Brazil into yet another political crisis. Also, Temer has said he would appeal an annulment of the 2014 election result before the Supreme Court, a process that could take up the remainder of his term.

5. Could the Petrobras corruption investigation reach Temer?

Temer’s name has come up in plea bargains, but there’s no sign of a smoking gun that would implicate him directly. Dozens of legislators and cabinet members are still under scrutiny in the investigation, dubbed Carwash.

6. Will protests against Temer grow?

A weak economy and a controversial pension bill in Congress will likely fuel protests. "Streets will remain noisy" in 2017, says Joao Augusto Castro Neves, director for Latin America at Eurasia. But protests would have to be very large or violent to throw Temer’s presidency off course.

7. When will the economy recover?

The longer it takes for the economy to recover, the higher the risk that Temer’s support erodes. Unlike Rousseff, Temer doesn’t favor government intervention in the economy. Yet his approach of restoring confidence through fiscal discipline has thus far failed to prompt investment or consumption, as companies and households still struggle to pay off debt. Temer has resisted calls for more stimulus, favoring long-term measures to increase the country’s productivity. With the economy expected to grow just around 0.5 percent and unemployment forecast to to rise to around 13 percent early in 2017, Temer may have to choose between adopting more populist measures or risking the loss of more support.

The Reference Shelf

  • A story on Temer’s battle with Congress over austerity measures.
  • An article on economic malaise affecting Brazil.
  • A December poll showed most Brazilians want Temer to resign.
  • A QuickTake explainer on Brazil’s highs and (recent) lows.
  • Brazil’s state debt remains a ticking time bomb despite Temer’s austerity, writes Bloomberg View’s Mac Margolis.
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