Thursday, August 25, 2016

Brasil Set To Finalize Rousseff Impeachment

Brazil set to finalise Rousseff impeachment

Senate poised to vote on final phase of installing Michel Temer as president
© Reuters
Brazil’s senate is expected on Thursday to begin the final phase of impeachment proceedings against leftwing President Dilma Rousseff.
The senate will hold several days of debates with Ms Rousseff due to appear in person before a final vote next week that is expected to lead to the president’s replacement with her former deputy, centre-right politician Michel Temer.
“Mr Temer’s challenge is about restoring domestic and foreign investor confidence and citizens’ trust in the government, which is a very tall order,” said Paulo Sotero, director of the Brazil Institute at the Washington DC-based Wilson Center. “But there is no alternative.”
The final round of the impeachment process, in which Ms Rousseff has been accused of manipulating the budget, comes four days after Brazil closed the 2016 Olympics in Rio de Janeiro.
Ms Rousseff has attacked the process as a parliamentary coup and her Workers’ party has tried to generate opposition to it at home and abroad, but proponents of the impeachment say it is being conducted according to the constitution.
Mr Temer, a skilled insider in Brasília’s arcane political scene, will have been hoping for a boost to his low popularity rating from the feel-good atmosphere after the Olympics, in which Brazil won its first soccer gold medal.
The impeachment is expected to pass by more than the necessary two-thirds margin of the 81-seat senate, throwing Mr Temer into the hot seat, with business and markets expecting rapid advances on the economy once he takes over.
The benchmark Bovespa index has gained nearly 70 per cent in dollar terms since the opening of impeachment proceedings in April against Ms Rousseff, whose interventionist policies were seen as partly to blame for Brazil sinking into its deepest recession on record over the past two years.
In particular, markets want to see Mr Temer’s star finance minister, Henrique Meirelles, deliver reforms to rein in Brazil’s ballooning budget deficit and place public finances on a sustainable track.
The keystone reform is a new law that would rule out real increases in public spending for the foreseeable future.
Solid progress on reforms would coincide with a nascent economic recovery that economists predict will begin in Brazil next year.
Capital Economics forecast in a note that Brazil’s gross domestic product would grow 1.5 per cent next year after shrinking an expected 2.5 per cent in 2016 — a more optimistic forecast than many other economists, who are expecting a fall of 3 per cent or more this year.
“Brazil’s economy is bottoming out and, while the recovery will be slow going, our 2017 GDP forecast is slightly above the consensus,” said Capital Economics.
One of the biggest threats to Mr Temer is that his fiscal reforms could be watered down in congress with resistance already under way to efforts to include health and education in the budget cap.
While he has been able to use the impeachment as an excuse for his not getting reforms through until now, the clock will start ticking if Ms Rousseff is removed next week as expected and he is formally installed as president until the next elections in 2018, analysts said.
FT World
Mr Sotero of the Wilson Center said that whatever happens, Brazil will be forced to confront its problems over a lack of accountability in public finances and budget overspending.
Public spending in Brazil constantly rises no matter whether tax revenues increase or fall, with public debt on track to reach 90 per cent of GDP by 2018 — considered unsustainable given Brazil’s high interest rates.
“Now we are finally going to have the good debate and the necessary fight we have been postponing for years," said Mr Sotero.
Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from and redistribute by email or post to the web.