Brazil’s Uncertain Future: Is Impeachment Next for Dilma?

On August 16, thousands of Brazilians took to the streets to protest (once more) against corruption, a stagnant economy, and growing unemployment. President Dilma Rousseff’s government’s approval rating has sunk to a record low of 7.7 percent as the population demands drastic change. Though the months since President Rousseff began her second term have seen notable shifts in economic policy, it seems, at best, too little too late.

Meanwhile, the government appears to be standing in the path of an avalanche of corruption scandals. Public officials have been indicted and arrested. The owners of Brazil’s two biggest construction companies are behind bars. Two former presidents are being investigated: Fernando Collor de Mello and Luiz Inácio Lula da Silva. And rumors of Dilma’s impending impeachment are mounting daily.

Eduardo Cunha, the president of the Chamber of Deputies who recently broke with Dilma’s Worker’s Party (PT), has received 12 requests to open an impeachment process against Dilma. Cunha has requested legal arguments before deciding whether he will advance the requests, which are in and of themselves not critical unless he moves forward.

What unfolds in Brazil in the coming weeks and months will carry huge implications for the country—and have implications for the rest of the region. Many worry about the havoc that could ensue following Dilma’s possible removal from office. But even if she avoids that fate, Brazil’s future is murky.

What tools remain at Dilma’s disposal to tackle the many acute political and economic problems the country faces, all while regaining a measure of public support and confidence? Would Brazil be better off without Dilma? Who are the winners and losers?

Q1: What could knock Dilma out of power in the short term?

A1: At this point, there are basically two sparks that could light the fire of Dilma’s removal from power.

The first is corruption. Under the ongoing “Lava-Jato” investigation, some construction companies are alleged of having donated money to Dilma’s election campaign, fearing they would otherwise lose business with Petrobras, Brazil’s large state-run oil company. Other private campaign donations with possible ties to government contracts are being investigated, as well.

If information is revealed that supports the truth of these allegations, Dilma would likely face immediate impeachment for her involvement. But it wouldn’t stop there: though Vice President Michel Temmer would theoretically assume power, it’s possible that he may end up implicated by the investigation, too. And with both forced out, Brazil would have to hold new presidential elections.

The second scenario, Dilma could be impeached if the Federal Court of Accounts (TCU) disapproves of the government’s fiscal accounts.

Recently, Dilma’s government was accused of manipulating those accounts to meet year-end budget targets, by allegedly using money from state-run financial institutions to finance the Treasury. The decision on this case will come down in the next few days, and could be used to magnify calls to impeach the president.

Of course, Dilma could resign and preempt a long, drawn out, and very humiliating impeachment process if either of aforementioned sparks ignites. But President Rousseff has stated unconditionally that she will not resign.

Q2: Who wins and loses if Dilma is impeached or resigns? And if she holds onto power?

A2: If President Rousseff is forced out and Vice President Temmer remains above the fray, Temmer’s Brazilian Democratic Movement Party (PMDB) comes out as the biggest winner, gaining significant political power and taking the presidency for the first time since Jose Sarney left office in 1990.

The opposition party, the Brazilian Social Democracy Party (PSDB), also stands to gain, as Dilma’s impeachment would convince many Brazilians of the corrupt nature of Dilma’s PT.

And, of course, the PT would be the biggest loser. Its credibility shattered and president ousted.

If Temmer is forced out alongside Dilma, the PSDB is the only winner. A brand new round of presidential elections would doubtless benefit the sole party relatively untouched by scandal. And according to recent polls, if the elections happened right now, the PSDB’s Aécio Neves is best positioned to prevail.

The best-case scenario for the PT is for Dilma to weather the storm, hold on to the presidency until the end of her term in 2018.

By then, Brazi’s economy will likely be on the upswing. And the intervening years would allow the PT (especially if Lula were absolved of any wrongdoing, who is eligible to run for the presidency again) to regain the support and trust of the public. In this scenario, the PSDB loses, having failed to capitalize politically on the PT’s crisis.

Still, it’s possible that Brazil’s crisis will only deepen—particularly in the next 30 to 90 days. Much of this depends on Dilma’s ability to keep her party in line and Cunha’s willingness to brush off more motions to impeach the president.

Q3: What lays ahead for Brazil?

A3: Dilma’s potential impeachment has political significance. In addition to the catharsis it could provide for a Brazilian public who does not trust government. More importantly, regardless of who holds the presidency, the Brazilian economy is deeply mired in crisis, and any leader will face the same dire straits.

Brazil’s economy is unlikely to improve in the short term. The economy is expected to contract by just over two percent this year, and by another 0.15 percent in 2016. Meanwhile, inflation is at nine percent—higher than Brazilians’ approval of their government. The last time the economy shrank for two straight years was in 1930-31.

With that context in mind, Dilma—just like any leader that could replace her—will be lucky if she restores positive GDP growth by 2018. Ultimately, impeaching her is likely to increase the chaos—not ease it—making Brazil’s recovery still harder.

Conclusion: Brazil is facing an historic impasse. The country has never seen so many scandals arise at the same time, and it has never seen so many politicians put behind bars. And though the country has the biggest economy in Latin America and it will eventually recover, it won’t be fast.

One thing that could help get Brazil out of the economic distress is increasing foreign trade. And that’s part of Dilma’s new agenda. No matter how modest her efforts have been, they are in the right direction, especially given that, traditionally, PT governments have not been so successful upping Brazil’s trade.

Lula and Dilma largely focused their efforts on Mercosur and the BRICS, but these regional groups are not the solution to Brazil’s economic woes. Earlier this year, President Rousseff took steps toward rebuilding Brazil’s relationship with the United States, which had been on ice since 2013. With those steps in mind, perhaps the current economic crisis will help Brasilia understand that the country will remain mired in its predicament until meaningful economic reforms are implemented.

Ultimately, this all means that little is likely to change in the short term but that, because of the crisis, significant reforms could be put in place that could mean real growth and economic change for Brazil in the midterm. 
Dilma is unlikely to face impeachment under the current accusations, particularly given the power her party holds in the legislature. A combination of massive popular pressure and significant defections within the PT could push impeachment (or even resignation) forward—but it’s hard to envision this happening absent a major scandal directly implicating Dilma.

What is certain is that President Rousseff must regain Brazilians’ trust. The country needs her to level with them—she could even go so far as to  address the nation and acknowledge her party’s transgressions and her  implicit responsibility—if she hopes to gain needed support, to strengthen her legitimacy and bolster her ability to lead and get Brazil back on track. 

Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Carl Meacham