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Brazilian senators will on Wednesday begin voting on whether to impeach President Dilma Rousseff, a move that would force her to stand down.
Contrary to popular perception, the president is on trial not for a vast corruption scandal at Petrobras, the state-run oil company she once led, or for the country’s terrible economy, which shrunk by 3.8 per cent last year.
Instead, she is under scrutiny over arcane fiscal manoeuvres her government allegedly used to pump up the economy and disguise a deficit in the public accounts.
This creative accounting, known as “pedaladas” — Portuguese for pedalling — and roundly condemned by the TCU, the country’s budget watchdog, allegedly helped her win the 2014 elections by disguising the true state of the economy.
What are the ‘pedaladas’?
Ms Rousseff’s government is accused of using state-run banks and funds to pay upfront its regular expenses, such as benefits payments. The TCU has argued these upfront payments amounted to loans to the federal government from the state-owned banks. Under Brazilian law, this is illegal.
A special report by the senate’s impeachment commission said the total of thepedaladas reached R$58.7bn late last year before the government finally repaid most of this amount except for R$11.3bn.
The institutions, state banks Caixa Econômica, Banco do Brasil and BNDES, and the FGTS workers’ guarantee fund, fronted payments for programmes including the Bolsa Família, a monthly stipend for the poor, and Minha Casa, Minha Vida, a low-cost housing programme.
Are fiscal tricks a ‘crime’?
Under Brazil’s fiscal responsibility laws, creative accounting is considered a crime in certain circumstances, such as when the federal government takes out unauthorised loans with state banks or performs certain budgetary operations without the permission of congress. Violating the budget law is an impeachable crime in Brazil.
But didn’t previous governments also do this?
One of the main arguments of Ms Rousseff and her ruling Workers’ Party, or PT, against the contention that the pedaladas constitute an impeachable crime is that her government “was not the only one”.
Her predecessors, former presidents Luiz Inácio Lula da Silva and Fernando Henrique Cardoso, did the same and were not reprimanded for it, they argue. But the pedaladas ballooned during her watch.
The senate report shows that between 2001, the second last year of Mr Cardoso’s government, and 2007, the third last year of Mr Lula da Silva’s two four-year terms in office, they were around R$1bn or less a year, a normal rounding error. Moreover, the two presidents seldom maintained deficits with the state banks for long periods, usually squaring payments up straight away.
During the final years of Mr Lula da Silva’s second government, the pedaladas did increase as he confronted the global financial crisis and inflated spending to get Ms Rousseff elected. But this was still nothing compared with Ms Rousseff, when thepedaladas hit R$52.2bn at the end of 2014.
A common argument against the pedaladas comprising an impeachable offence is that they relate more to Ms Rousseff’s first mandate between 2011 and 2014. Legal experts say a president can only be impeached for offences relating to his or her current mandate.
But the senate alleges in its report on the pedaladas that Ms Rousseff issued a series of special decrees in 2015 that illegally increased spending through borrowing without congress’ approval.
The overall outstanding balance of the federal government with state banks and the FGTS workers’ fund also increased during 2015 by about R$6.5bn.
After years of runaway inflation, one of Brazil’s greatest achievements in stabilising its economy and laying the foundations for prosperity was bringing federal and state budgets under tighter control during the 1990s.
Strict laws preventing federal and state governments from issuing debt without accountability are seen as the key to this. Runaway budget deficits blow out public sector debt and create inflation, which acts as a tax on the poor, undermining social gains.
But is Rousseff really being impeached for her alleged budgetary crimes?
Just as Chicago mobster Al Capone was caught for tax evasion, so Ms Rousseff is really being impeached not only for the alleged budgetary offences but also for the Petrobras scandal and the terrible state of the economy.
Impeachment is a political not a judicial trial. Although it has to have some legal basis, the process depends on congress’ discretion.
Ms Rousseff`s mistake was to allow herpopularity to fall to the lowest levels of any president. She also mishandled conflicts in congress with her coalition partner, the PMDB. This opened the way for her enemies to look for excuses to impeach her.
They found their opportunity in a decision by the accounts watchdog, the TCU, to reject her 2014 accounts, the first time it had done so in 80 years.
What’s next in the impeachment process?
If the 81-member senate votes by a simple majority on Wednesday to open an impeachment process against Ms Rousseff, she will be suspended for up to six months and her vice-president, Michel Temer of the PMDB, will take power as acting head of state.
If the senate then votes by a two-thirds majority in favour of her impeachment, she will be fired and Mr Temer will take over until the next elections in 2018.
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