The Olympic Games have come to an end – without a major hitch – and now Brazil must once again face its internal issues: a political crisis threatening to oust suspended President Dilma Rousseff and an economy that has been on the downturn for quite some time. The Cipher Brief’s Kaitlin Lavinder spoke with Paulo Esteves, Director-General of the BRICS Policy Center in Rio de Janeiro, about the next steps in Brazilian politics and the economy.
The Cipher Brief: Now that the Olympics have come to an end, suspended Brazilian president Dilma Rousseff’s impeachment trial is scheduled to start. How is this going to play out?
Paulo Esteves: With the information I have today, she will definitely be removed from office. That being said, the political scenario is changing by the hour. We have two parallel processes going on. The first one is the political one at the Parliament, where Rousseff is being judged. The second one is the investigation in the judiciary (focused on the Petrobras scandal), where there is debate on corruption schemes involving several politicians in Brazil.
The impeachment process was initiated because of the investigations in the judiciary by the federal police. Since then, we have had one scandal after another, involving not only people within the Workers’ Party (PT – Rousseff’s party) but across the entire political spectrum in Brazil. These two processes could intersect again, since, at some point, new revelations about the involvement of other politicians in corruption scandals may appear, and this may change the game.
TCB: Assuming that Rousseff is removed from office and interim President Michel Temer becomes the official, permanent President until 2018, what are his policy priorities going to be?
PE: That’s the main problem. The impeachment process opened up a dynamic in which the Vice President and now acting President (Temer) started to push the impeachment process, to get the presidency. In order to get the presidency, Temer has to gather support in the Parliament, and that costs money. Temer is assigning positions to his allies and supporting their projects in order to get their support in the Parliament.
While the interim government has spent a significant amount of resources to drive the impeachment process, the country was, and is, facing a clear fiscal crisis. Moreover, this expenditure contradicts Temer’s alleged first priority, the fiscal adjustment. Hence, the top priority for this new government – which will be really harsh in terms of Temer’s popularity in the near future – is to get the fiscal adjustment approved by the Parliament. That starts with creating a ceiling of expenditure both in the federal government and at the level of the states. The first measures this government will have to take will be to save money, raise taxes, and so on, which might make the economic crisis even worse than it is now.
TCB: Say that for some reason, Rousseff is not removed from office. Then what happens?
PE: Not as an analyst, but as a citizen, I would hope for new elections. That would be the best scenario we could have. But that is highly unlikely; that is not an easy path.
So if Rousseff is not removed, she will be back in power. However, she has no support in the Parliament to do the fiscal adjustment. She tried – in the beginning of her government – to start the process of a fiscal adjustment, but she faced severe opposition from all sides of the political spectrum in Brazil, including her own party. So she would be back, without the majority of Parliament, and she would face a completely divided society – between supporters of leftist programs and supporters of a more liberal project. The prospects are not good.
The only alternative we could have in Brazil would be new elections. But there’s no way to do this unless the electoral court steps in to call for new elections and annuls the last elections. This is not feasible at the moment.
TCB: You mentioned there’s this divide in society between socialist ideology and more liberal ideology. Doesn’t Temer face the same issue if he tries to implement fiscal reform?
PE: He definitely will. The advantage Temer has vis-a-vis Rousseff is that he managed to build up a majority in Parliament that will – for some time – support his proposals for reform. But at the same time, in the streets – as long as the financial and economic crisis continues worsening – Temer will face severe opposition. What he has now is two months in which he has to approve through the Parliament a series of economic measures that show the population the situation will get better in a very short amount of time. Otherwise, he’s going to face severe opposition in the streets, and his support from Parliament will be eroded (because the Parliament is already not completely loyal to his position).
This is a major time constraint. Temer spent a lot of money to make Rousseff’s impeachment proceedings go through. Now, he must make some decisions that will affect the population negatively, at least in the short-term. He has the majority in the Parliament to do that. But these measures must be sound, effective, and drive the country out of its economic crisis very fast.
TCB: Brazil spent quite a bit of money on the Games to build up infrastructure. When the athletes and tourists all leave Rio de Janeiro, who benefits in the city?
PE: In terms of the legacy, I think the Olympic Games were not what we expected in the beginning. The most important legacy that the Games could have given the city is the cleaning of the Guanabara Bay. But this was not done. The Guanabara Bay is still highly polluted – almost nothing has changed since Brazil won the bid for the Games.
There is a series of public works, in terms of transportation in the city, that I think will benefit a large number of citizens in Rio de Janeiro, especially the subway and all the corridors for buses and so on. These investments in infrastructure will definitely make the lives of citizens better.
At the same time, there was a huge project of urban reform for downtown Rio that was supposed to be based on public-private partnerships (PPPs). What this government did not expect was that the country would face a severe economic crisis. So the private investments are not there any longer, or at least not there in the quantity that was expected.
TCB: Often, countries want to host big sporting events in order to gain some sort of international prestige. Do you think this worked for Brazil? And will we see Brazil more engaged on the world stage, for example with more international trade deals?
PE: Let’s divide this into three points. First, I can agree that for certain countries, the Games provide the opportunity to present the country – especially emerging powers – to the world. In the Brazilian case, the Games were partially a need for restoration of reputation, visibility, and recognition and status; but at the same time, it was a project associated with a developmental goal. For the Brazilians, the Olympic Games – and also the World Cup – were an opportunity to mobilize public and private investment in infrastructure that the country needed for quite some time. So if we think about the World Cup, for instance, most of the airports in Brazil are entirely renewed. This was facilitated by the World Cup. In Rio de Janeiro, the transportation network is better than it was before because of all the investments that were mobilized in the city. So the first point is that for some countries – like China – the reason to host these Games is a matter of seeking status. For other countries – like Brazil – it is a matter of seeking status, but also to undertake developmental projects that mobilize public and private resources for infrastructure.
Second, I don’t think Brazil will actually get the recognition its elites wanted at the beginning of this process. But at the same time, the image of the country is not hurt either. So I would say the effect of the Olympics is almost null. This has to do with a few things. The first is the political crisis in the country. The second is the Zika epidemic right before the Games. The third is the economic situation in Brazil that made it especially difficult to put everything together to host these Games. The state of Rio de Janeiro is completely bankrupt. There is no money left in the state (not because of the Games, but because of the fiscal situation). So some of the works that were under the responsibility of Rio de Janeiro were not done for the Olympics. That may hurt the image of the city or the state abroad. At the same time, there is this contrast between negative images – like the green swimming pool – and positive ones, like beautiful pictures of the actually very dirty Guanabara Bay. So one thing balances out another. Brazil neither wins nor loses in terms of recognition.
Third, in terms of trade, following Temer and Serra’s leadership, Brazil will engage more effectively in trade negotiations, not only at the World Trade Organization (WTO), but particularly outside the multilateral environment. The interim Brazilian government (under Temer) has already shown some willingness to engage in trade negotiations with the United States and European Union. The problem is not in Brazil, though; the problem now is probably at the U.S and at the EU. As the presidential race unfolds in the U.S., everyone is becoming aware of the difficulties to create the transpacific and the transatlantic trade areas. Brazil might be willing to take part in this kind of trade arrangement, but the international environment is far from conducive to this kind of negotiation.
