Trauma in Brazil

The people of Brazil confront the impeachment of their President for the second time in 25 years. It is always a traumatic event. What does it mean? Is it true that President Dilma Rousseff is under attack because our elite can’t stand a popular government, as the members of her Workers’ Party (Partido dos Trabalhadores, or PT) say? Or is it a constitutional and necessary step to get rid of a thoroughly corrupt government?

To answer that question we need to go back in time. When the PT’s most famous politician, Luíz Inácio “Lula” da Silva, was elected in 2002 after three failed attempts, he changed his tune and image. From firebrand union organizer he became the Lula of “peace and love,” donning a coat and tie and promising, in an open letter to the Brazilian people, that he would govern as a pragmatist who would keep our institutions and market economy.

Indeed, he kept his promise initially, despite some measures aiming to control freedom of the press in Brazil. Lula kept up policies of the government that preceded him, that of Fernando Henrique Cardoso, a social democrat allied with neoliberals. While Argentina defaulted on its international loans in 2001, Brazil paid off its IMF debt ahead of schedule. The Brazilian economy thrived with responsible people in command, such as Henrique Meirelles and PT veteran Antonio Palocci. We also had a great help from China and the low cost of capital in developed countries, that’s for sure.

During that time, however, the PT had been bribing members of Congress from several political parties to vote in support of Lula’s program. When the scandal known as “the mensalão” (a nickname referring to lawmakers’ monthly stipend of political payoffs) became public in 2005, Lula almost lost it all, but Brazil’s healthy GDP rescued him as did a weak political opposition. Finance Minister Palocci was accused of corruption and abuse of power, and resigned. But Lula was reelected, and beyond that, he was able to pass the mantle of leadership to his protégé in the PT, Dilma Rousseff.

The former Regis Debray acolyte and political prisoner during Brazil’s military dictatorship in the early 1970s had served as Lula’s chief of staff. She proved to be a less than strong head of government; but again, the economic winds were at Dilma’s back, at least for a while. China’s economy kept growing fast and the Chinese kept buying our natural resources, which tripled in price. The cost of capital was still near zero in rich countries, and it was the origin of the “monetary tsunami” that loaded emerging countries with money.

Investors didn’t want to know about the underlying institutional and political problems. The Economist featured the Brazilian economic miracle on its cover. Everyone was drunk with such liquidity in place. It was a bubble that was bound to burst.

In 2014, with Dilma pursuing another term in power, our economy showed some signs of trouble. It was only the beginning of the depression we’re now in. Flush with cash—diverted from our state-owned companies—and using aggressive tactics against a stiff challenge from Aécio Neves, a center-right legislator and former governor, Dilma got reelected. But it was a Pyrrhic victory.

The year 2015 was our annus horribilus. Hit by the collapse of oil prices, the country could not continue hemorrhaging money on public spending. It became clear that the populist measures during the summer of 2015 were not sustainable, and the winter had come for the grasshopper, as in the fable. We were not prepared.

When the tide goes out you discover who’s been swimming naked. Brazil was naked, and everyone could see it now. The good days were gone and so was the money. Instead of accepting the new reality and humbly changing course—moving to rein in the vast bureaucracy, for example, or reforming entitlements to make social security sustainable, or giving the central bank greater independence so it could take action to curb runaway inflation—our government decided to double down on statist policies. President Rousseff used our state banks to lend even more, and public spending went through the roof.

Soon we lost our “investment grade” status. The “monetary tsunami” reversed its course, and foreign investors pulled money out of Brazil. The bond rating of Petrobras, the government-owned oil company, plunged. What had begun as stagnation became a full-on depression—the worst Brazilians have experienced since the 1930s—and we reached 10 million people unemployed.

Brazilians were angry at the newly reelected President. And it only got worse with “Operation Lava-Jato” (Portuguese for “car wash”), the federal investigation of corruption at Petrobras, which had been ongoing since November 2014. When the economy goes south, corruption charges (never in short supply in Brazil) begin to stick. As millions of people with no political connection began taking to the streets to protest, the politicians, usually so good at looking the other way, had to notice it.

But the government still has control over money and jobs in a country where the state is everywhere and is responsible for 40 percent of GDP. It’s not easy to declare yourself a state’s enemy; there is usually a high price to pay. Yet even with the risks involved, more and more people and institutions supported those millions out in the streets. Brazil under the PT was taking Venezuela’s path: Its answer to the economic crisis was to increase its control over our institutions.

In charge of “Operation Car Wash” is Sérgio Moro, a federal judge who has sentenced high-profile Brazilian businessmen to prison sentences. He is the hero of antigovernment protesters. When Moro’s investigation came close to Lula, Dilma tried to make her embattled mentor state minister, so that he would be beyond Moro’s reach. With that blatant move, there was no doubt anymore: The PT was capable of anything to stay in power and to protect its own.

As Simon Romero of the New York Times reported on April 3, 2016, Lula, who stands accused of taking illicit benefits from construction companies, “called on his comrades in the Workers’ Party to ratchet up pressure on prosecutors.” As Lula put it to one PT congressman: “Why can’t we intimidate them?” He laid out this scenario: “He [the investigator] needs to go to sleep knowing that the following day he’ll have 10 legislators irritating him at this house, irritating him at his office, facing a case at the Supreme Federal Tribunal.”

They have been trying to destroy our democracy in order to survive. Now a majority of Brazilians want to see President Rousseff and her vice president, Michel Temer, leave office, while a minority, made up of the intelligentsia and public servants, are stalwart in their support for the government.

Naturally, impeachment is always of a political nature. That was true when conservative President Fernando Collor de Mello was impeached in 1992. He went down on a corruption charge. But the legal part must be there also. With its “pedaladas fiscais” (fiscal fancy-footwork), the Rousseff administration trampled on Brazil’s Fiscal Responsibility Law. Specifically, Dilma disguised from the Congress her administration’s wild spending and forced state banks to lend money to the government. The amount was huge: more than $20 billion. This is malfeasance on a scale never seen in Brazil.

The consensus for impeachment is so strong that it extends to the Brazilian Supreme Court, almost all of whose members were appointed by Lula or Dilma. The Chamber of Deputies (the lower house of the legislature) approved the impeachment process with 367 votes in favor and only 137 against.

The PT knows that it will probably lose within the legal system, but the party needs its victim’s narrative to keep socialism alive as an idea. That’s why its members are now carping about an alleged coup d’état, as if we lived in the 1960s and the Brazilian military were still in charge. They conveniently forget that they have been at the helm for more than 13 years, that they appointed almost all members of the Supreme Court, that the “financial elite” was part of their government, and that legions of those demanding that Rousseff and Temer leave office live in the favelas in poverty.

There is much irony here. The Brazilian Left talks a lot about democracy and helping the poor but when populist politicos get in trouble, they recur to accusing their opponents of what they are guilty of: abuse of power and a hand in the till.

One thing, to be sure, helps the PT’s narrative: the president of the Chamber of Deputies is Eduardo Cunha, who has been implicated in the Petrobras scandal and is accused of having an undeclared, offshore bank account. Cunha is no saint and everybody knows it. So Dilma and her team say that the whole impeachment thing is only Cunha’s revenge, because he wanted help from the government and didn’t get it. But the impeachment was prepared by three well-known lawyers, one of them a founder of PT in the past.

So that’s what really is going on in Brazil right now: a government claiming to serve “the masses” is massively corrupt. It tried to get hold of the whole state, an effort that was succeeding as long as the economy flourished. When the downturn came, the government lost the support of ordinary Brazilians, and important members of the Rousseff administration have been accused of corruption.

Impeachment is the only remaining way to turn this crew out, because nobody expects Dilma Rousseff to voluntarily step aside as did Fernando Collor de Mello. Tribunes of “the people” hang on because their self-righteousness simply cannot be contradicted by facts and the law.