Petrobras scandal lays bare Brazil’s political fragilities

March 11, 2015 8:58 am

Petrobras scandal lays bare Brazil’s political fragilities

Joe Leahy in São Paulo/FT

President Rousseff faces a bruising second term — if she makes it that far



Going by the first two months of her second term, Brazil’s President Dilma Rousseff is in for a brutal four years until her mandate ends in 2018. That is if she makes it that far.

Not only is the centre-left leader reeling from a mammoth corruption scandal at state-owned oil company Petrobras, for which senior members of her ruling coalition are being investigated, she is facing an increasingly angry upper middle-class in the nation’s large cities.

While she was giving a televised speech to the nation last Sunday — one of her first such appearances during her second term — people displayed their anger in cities in Brazil’s rich south and southeast by beating pots and pans in their apartments and setting off car and house alarms.

This Sunday, thousands of Brazilians are expected to descend on to streets around the country to mark their dissatisfaction with the president. Some are calling for the impeachment of the one-time Marxist guerrilla who has led Brazil’s economy from boom to stagnation.

Brazilians have a right to be angry. Even for a country inured to corruption and scandal, recent allegations surrounding the graft at Petrobras have been mind-blowing. Once a symbol of Brazilian technical prowess, Petrobras has become synonymous with sleaze and incompetence.

Former Petrobras executives-turned-prosecution witnesses allege they collaborated with politicians to squeeze bribes and kickbacks out of the company’s contractors. The money allegedly was laundered through Swiss bank accounts and used for personal enrichment and to finance political party campaigns.

Even though there are no allegations she was directly involved, Ms Rousseff headed Petrobras between 2003 and 2010 when much of the corruption is claimed to have occurred, drawing charges from critics that she was either a negligent manager or incompetent or both. She has denied any wrongdoing.

For all the disillusionment of Brazilian voters, there is one positive outcome from the scandal. It has proved the growing independence of Brazil’s institutions

Beyond the scandal, many Brazilians are also outraged about her government’s handling of their once resurgent economy. During its first mandate, her government suppressed energy and fuel prices and embarked on a prolonged fiscal stimulus programme coupled with lavish lending by state banks. This led to inflation but did little to encourage private sector investment.

In spite of dismissing the need for austerity during the election campaign last October, she is now implementing tough measures to restore public finances to a surplus. In her speech on Sunday, she called on everyone to “do their bit” to support the austerity programme — upsetting a middle class disgusted by the alleged political pilfering of Petrobras.

For all the disillusionment of Brazilian voters, there is one positive outcome from the scandal. It has proved the growing independence of Brazil’s institutions, particularly the federal police, the public prosecutors’ office and the courts, that might have once covered it up.

To her credit, Ms Rousseff never publicly sought to suppress the investigations. But probably she would not have been able to even if she had wanted to.

Brazilians, who are generally politically conservative, would be in two minds about trying to impeach Ms Rousseff because it could lead to instability.

If she was forced to step down and her vice-president, Michel Temer, was unable to take her place — his party is also embroiled in the scandal — the next in line to be president until elections could be held would be the heads of the upper and lower houses of Congress, Renan Calheiros and Eduardo Cunha. However, both of these men are also accused of involvement in the Petrobras case. In the event that no one from the Congress could serve as acting president, the job would pass to the head of the Supreme Court.

Brazil is likely to be spared this sort of confusion, however. A standing president can only be impeached for acts committed during his or her current term, lawyers say. As Ms Rousseff has only served two months of her present mandate, it is unlikely she has had time yet to become involved in any impeachable crimes.

Copyright The Financial Times Limited 2015.

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