What went wrong in Brazil?

August 24, 2016 6:45 am
Tripped up by its worst political and economic crises in recent memory, Brazil will hit a new low when suspended president Dilma Rousseff faces an impeachment trial © AFP / Miguel Schincariol

, BRASILIA, Aug 24 – At the height of the emerging markets boom, Brazil looked tantalizingly close to finally living down an old joke: that it is the country of the future… and always will be.

Its economy humming, its international image sparkling, its people exiting poverty by the tens of millions, the Latin American giant looked ready to leap into the ranks of the world’s wealthiest countries.

Fast forward to 2016, and it has come crashing to the ground.

Tripped up by its worst political and economic crises in recent memory, Brazil will hit a new low Thursday when suspended president Dilma Rousseff faces an impeachment trial before the Senate.

What went wrong?

Brazil’s boom coincided with the arrival in power of former president Luiz Inacio Lula da Silva in 2003, a watershed moment for the country.

The first leftist president since a 1964 military coup, the former shoeshine boy and steel worker was also the first president who came from the kind of poverty that millions of Brazilians face.

Activist wears a costume depicting former president Luiz Inacio Lula Da Silva as a prison inmate during a protest against suspended president Dilma Rousseff in Brasilia © AFP/File / Andressa Anholete

Lula and his Workers’ Party had the good fortune to arrive at the beginning of a commodities boom, fueled by ravenous Chinese demand for iron ore, oil and other raw materials that are Brazil’s specialty.

Blending business-friendly economics with revolutionary social programs, he left office eight years later with rock star status. Economic growth was 7.5 percent. More than 40 million Brazilians had escaped poverty. His popularity rating was more than 80 percent.

Sealing its new stature on the international stage, Brazil was picked during his second term to host the 2014 World Cup and Rio de Janeiro the 2016 Olympics.

– Economic tailspin –

Rousseff, his hand-picked successor, has been less lucky.

When commodities prices dropped, Brazil’s economy slowed. Its consumption-driven economic model foundered. Many Brazilians’ new cars and appliances turned out to have been bought on credit.

ith the economy set to shrink for a second straight year in 2016, Brazil is now facing its worst recession in more than 80 years © AFP/File / Tasso Marcelo

“The international economic crisis, the burnout of the internal market, the shrinking external market for Brazilian commodities and a deep political crisis: all that led to a social explosion in 2013,” said Ricardo Antunes, a sociologist at the University of Campinas in Brazil.

That year, millions of Brazilians took to the streets to protest poor public services and the sinking economy — a warning sign that critics say Rousseff failed to heed.

She went on to win re-election by a slender margin.

But her second term started ominously when Brazil slid into recession in the second quarter of 2015.

The bad news kept pouring in: The major ratings agencies all downgraded Brazil to junk status. The economy shrank 3.8 percent on the year. Unemployment hit nine percent, and inflation 10.7 percent.

All those statistics were the worst in 30 years.

And with the economy set to shrink for a second straight year in 2016, Brazil is now facing its worst recession in more than 80 years.

– Hardball and graft –

Brazil’s national flag is projected onto the playing field as singers perform the country’s national anthem during the closing ceremony of the Rio 2016 Olympic Games © AFP/File / Greg Baker

Rousseff, a former leftist guerrilla tortured under the military regime in the 1970s, lacked her charismatic predecessor’s talent for wheeling and dealing in the political jungle of Brasilia.

Cornered by the crisis, she moved to implement austerity measures, alienating her left-wing base — only to have her opponents in Congress block the plan anyway.

Smelling blood, her enemies in the legislature had already begun laying the groundwork for her impeachment.

Accused of cooking the government’s books to make the deficit look smaller, Rousseff lost a series of key allies, culminating in the defection of her vice president, Michel Temer — now interim president — and his powerful centrist party, the PMDB.

In the backdrop was the largest corruption scandal in the history of a country that has seen its share of them: a massive bribery and kickbacks scheme centered on state oil company Petrobras.

More than $2 billion of the firm’s money ended up in the pockets of politicians, construction magnates and oil executives.

Rousseff is not accused in the case. But she now faces an investigation for obstructing justice by naming Lula her chief of staff after he was charged in the probe. The move would have granted him ministerial immunity.

“The corruption at Petrobras showed the Lula and Dilma government was not only allied with parties involved in corruption, but that the Workers’ Party itself was involved,” said Antunes.

The Petrobras investigation also looms large over Temer, who will become the full-fledged president if Rousseff is convicted.

The scandal has felled three of his ministers. And a top construction magnate recently accused Temer himself of accepting illegal campaign funds from his company.


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