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Photographer: Evaristo Sa/AFP/Getty Images

Brazil Declares War on Itself

Mac Margolis writes about Latin America for Bloomberg View. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”
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Brazil is in a bad way. The economy, already in deep recession, is possibly sliding into outright depression, according to Goldman Sachs. The public deficit and inflation are rising, and Congress is quarreling the country into insolvency. So you might expect its political leaders to drop their fists and rally for the national interest.

Brazilians should be so lucky.

President Dilma Rousseff did, in fact, call her closest aides for an unscheduled meeting in Brasilia on Wednesday, but the national interest was not on the docket: That afternoon, lower house speaker Eduardo Cunha, a onetime government ally now battling charges of corruption in the Petrobras scandal, had announced he would launch impeachment proceedings against Rousseff.

Brazil's Highs and Lows

With her job and what remains of her reputation on the line, Rousseff immediately gathered with her cabinet in Planalto Palace, with handlers and speechwriters in tow. "I have no bank accounts outside the country and have never concealed personal wealth from the public," she declared during a nationwide broadcast.

Such is the dismal state of affairs in Latin America's emerging nation of record, where every new emergency trumps the last and governing is a cage fight between a damaged president and an embattled lawmaker.

Cunha v. Rousseff is a rebuke to the official narrative that Brazil's misfortunes are a consequence of a global bear market and a raw materials glut. The $2.2 trillion economy's woes are largely self-inflicted, the result of a semi-functioning democracy in which public institutions too often serve as instruments of partisan ambitions. That may be one reason 26 percent of the lower chamber’s legislators and nearly 40 percent of senators are currently answering to criminal charges or are under investigation.

Consider the latest contortions in Brasilia. Although Cunha and Rousseff were never soul mates, they had struck an uneasy pact of convenience: Rousseff would shield Cunha from ethics committee hearings in Congress in exchange for the lawmaker's commitment to block moves to impeach her.

Then came the mutiny. Worried, perhaps, over the fallout from defending a shady political boss, the ruling Workers’ Party broke ranks and announced late Wednesday it would back a proposal before the ethics committee to formally investigate Cunha for allegedly taking $5 million in kickbacks on Petrobras supply contracts.

In an even more byzantine twist, the chatter in the capital had it that the order to ditch Cunha came from none other than former president Luiz Inacio Lula da Silva, Rousseff's mentor and a political legend, who was whispered to be keen on mopping up the Workers’ Party's corruption-spattered image on the way to another run at the presidency in 2018.

Cunha lashed out immediately, and on Thursday he introduced the 200-page impeachment motion to the lower chamber.

Rousseff is not on the brink. Yes, the charges against her -- breaking the Fiscal Responsibility Law by essentially cooking the government’s books -- are serious. But impeachment is political warfare ("the nuclear option," in the words of former president Fernando Henrique Cardoso), which promises to bring months of partisan tsuris in an already fractious legislature. To send Rousseff off, her foes need the votes of two-thirds of the lower house, where pork and privilege can buy indulgences, even for an enfeebled leader. The fact that Cunha, a political poker player, was willing to take such an extreme gamble suggests he was driven more by desperation than by strength. Tellingly, Rousseff's allies are pushing to accelerate the impeachment vote, betting that Cunha has overplayed his hand. Just in case, they also asked the Supreme Court to overrule the impeachment drive.

That doesn't mean Rousseff's troubles are over. With her popularity dragging along the bottom and facing rebellion in her own party, she must convince a Congress accustomed to plenty to impose austerity in order to rescue Brazil's sinking economy.

But the harder bit may be convincing Brazilians she is still in command.

In her Wednesday night broadcast, Rousseff did her best to refute Cunha and to show strength in the face of adversity. Her argument? That Congress had just approved her plan to ignore constitutional spending caps to avoid a government shutdown -- an arrangement that will leave Brazil's 2015 fiscal accounts about $31 billion in the red.

That's one way to close the books on a miserable year. But spinning profligacy as triumph may not cut it on the streets of Brazil, where fresh protests are already stirring.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mac Margolis at mmargolis14@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net