Is Brazil Collapsing Politically?

Henry Srebrnik, [Summerside, PEI] Journal Pioneer

Much of the world was glued to their television screens watching those modern spectacles, the Olympics and Paralympics, in Rio de Janeiro this past summer. Brazil was also in the spotlight two years ago, when it hosted soccer’s World Cup.

Some people probably recalled Michael Nesmith’s 1977 song “Rio.” Fewer, though, paid much attempt to the political train wreck ongoing in the largest country in the Western Hemisphere.

In the first decade of the century, Brazil seemed to bask in good economic news and investments flooded into the country. It even seemed to have withstood the financial crash of 2008 relatively unscathed.

But much of this was an illusion. To power through the financial crisis, then President Luiz Inacio Lula da Silva, the popular left-wing leader of the Partido dos Trabalhadores, or Workers’ Party, “had thrown open the spigots of credit and never tightened them,” according to Alex Cuadros, an American journalist who spent the last six years in Sao Paulo, Brazil’s financial capital, as a reporter for Bloomberg News.

The bill for Lula’s profligacy would come due under his successor Dilma Rousseff, who followed as president in 2011. And both are now paying a very stiff price.

The economy has now turned sour, China is no longer buying as much iron and soy. The prospect of oil wealth, based on the finds off the coasts of Rio and Espirito Santo states, has not panned out and tax revenues from the oil industry have failed to materialize.

Brazil has now suffered ten straight quarters of recession or near-zero growth. Its economy shrank by 3.8 per cent in 2015; unemployment is 11 per cent and rising. The International Monetary Fund expects the economy to contract by another eight per cent before 2017.

The country has always had an immense problem of corruption. There are kickbacks for government contracts. There are gigantic taxpayer subsidies: In 2009 alone, the state-run development bank, BNDES, lent out $76 billion, more than the World Bank lent out in the entire world.

As well, a scandal that has been named “Operation Carwash” has revealed an endemic network of graft and corruption in the public service that has uncovered has shaken the political class -- there are already 364 politicians under investigation.

The investigation reveals the scale and reach of a system that involved perhaps $3 billion channelled through the state-controlled giant oil company Petroleo Brasileiro (Petrobras) and big construction companies such as Construtora OAS into campaign funding and bribes in return for commercial contracts – a scheme that involved all the major parties and most of Brazil’s political elite. It caused an estimated $12.6 billion in losses to Petrobras shareholders and tax payers but had allowed the Workers’ Party to build coalitions in Congress.

Needless to say, preparations for the Olympics also proved an irresistible temptation. Fortunes were made and bribes handed out to politicians on the take, in relation to the various projects that transformed the Rio port area with museums, a tramline and residential tower blocks, as well as the construction of the various sporting facilities and stadiums.

On Aug. 31, President Rouseff was formally removed as Brazil’s head of state by the country’s Senate, charged with illegally relying on budget manipulation to falsify economic growth.

Rousseff and her allies have called it a coup by her right-wing opponents. Others have argued that she has been the target of misogynistic attacks in a male-dominated political system.

But Míriam Leitao, an economic historian and one of Brazil’s most influential columnists, disagreed. “Dilma didn’t fall because she is a woman,” she wrote in the newspaper O Globo. “She produced a surge in inflation, a recession of historical significance, and lost her job.”

On Sept. 20 prosecutors filed corruption charges against Lula, accusing him of bribery and kickback schemes involving Petrobras. He is also alleged to have personally received some $1.11 million in bribes from Construtora OAS.

Vice President Michel Temer, now the acting president, is the leader of the conservative Partido do Movimento Democratico Brasileiro, or Brazilian Democratic Movement Party.

He was the top ally of the government until he turned against Rousseff to head the impeachment process. But when it comes to corrupt practices, his party is no better.

I’ve been to Brazil, and it’s hard to find a more friendly or beautiful country on the planet. Unfortunately, the same cannot be said of its political elites.