On his twitter page, Brazilian congressman Eduardo Cunha quotes a line from the national anthem that says for a just cause, the patriotic Brazilian will not “flee from battle” nor “fear death”.
Late on Wednesday, the leader of the lower house showed that he too does not run from a fight by starting an impeachment process against President Dilma Rousseff for allegedly fiddling the public accounts.
In one step, the powerful evangelical lawmaker, who is himself facing moves for his removal from congress amid swirling corruption allegations, has heightened the already elevated political risk facing Latin America’s largest economy. His impeachment motion comes at a time when Brazil is facing its worst recession since the Great Depression of the 1930s.
“Our first reaction is that this event will bring more volatility and uncertainty, rather than alleviate market concerns,” said Bruno Rovai, economist with Barclays, in a note.
Elected last October with one of the narrowest margins in Brazil’s recent democratic history, Ms Rousseff and her left-leaning Workers’ Party, or PT, have faced a barrage of bad news over the past year that has boosted public support for her impeachment.
The economy has soured dramatically, with gross domestic product contracting 4.5 per cent year on year in the third quarter.
On the political front, a corruption investigation into the company she chaired before becoming president, state-owned oil group Petrobras, has implicated scores of politicians from her ruling coalition.
The indications are that if 2015 is a bad year, 2016 will be little better. Barclays is forecasting growth this year of negative 3.8 per cent and negative 2.8 per cent in 2016.
“The economic depression will not improve very much in 2016,” said David Fleischer, political scientist at the University of Brasília. “This means that there might be considerable . . . street demonstrations in 2016.”
Given this negative outlook, the timing of Mr Cunha’s attempt to impeach Ms Rousseff now rather than later might actually be a relief to the president, analysts say. Not only does this allow her to fight the impeachment question before the economy gets even worse but it comes as Mr Cunha himself is looking fatally weakened by his alleged involvement in the Petrobras investigation, analysts say.
The congress leader is accused of lying about the existence of secret accounts containing millions of dollars that he kept in Switzerland. He denies the accusations, which arose from the Petrobras probe, in which mostly ruling coalition politicians are alleged to have collaborated with former oil company executives to extract bribes from contractors.
Indeed, analysts say Mr Cunha’s decision to launch the impeachment process now was in retaliation for the PT’s backing of moves by the ethics committee in congress to consider stripping him of his seat over the Petrobras scandal.
“Cunha is [politically] toxic so he’s tainting the whole process and that helps the PT and her with casting this [the impeachment process] as a coup,” said João Augusto de Castro Neves, of Eurasia Group.
A confident Ms Rousseff, flanked by her senior ministers on Wednesday night, delivered a short statement in the presidential palace that sought to stress she is more honest than Mr Cunha.
“There are no suspicions hanging over me of stealing public money. I don’t have any accounts abroad,” she said. “The reasons behind this petition are inconsistent and without foundation.”
Part of Ms Rousseff’s confidence might also stem from the obstacles facing any impeachment process. The process will start with the selection of an all-party committee that will meet 10 times to hear the president’s defence and another five to formulate an opinion.
Not only is an actual impeachment far from a given, but it could be a very bumpy ride over the next few months as the process develops
- João Pedro Ribeiro, Nomura economist
The lower house of congress will then vote on whether to recommend to the senate to start the formal trial of the president. This will require a two-thirds majority of the 513-seat lower house, difficult given that the government and its coalition partners have more than 300 seats. While many ruling coalition lawmakers are not loyal to Ms Rousseff, the government needs to muster only 172 votes, or one-third of the house plus one, to scupper the process.
If the process did move to the senate or upper house, Ms Rousseff would step down for 180 days after which the matter would be put to a vote requiring a two-thirds majority to pass. If she was ousted, Michel Temer, her vice-president from the PT’s main coalition party, the PMDB, would most likely get the top job.
He is seen as market friendly, a fact that Nomura economist João Pedro Ribeiro noted might encourage markets to rally slightly on the impeachment news when they opened on Thursday.
But any ramp-up would be shortlived. “Not only is an actual impeachment far from a given, but it could be a very bumpy ride over the next few months as the process develops,” Mr Ribeiro said in a note.