Can Brazil’s economy survive a Rousseff impeachment?
December 6, 2015, 2:29 pm

Rousseff has seen her popularity rapidly fall since her election in 2014. Opposition groups say her economic policies get a thumbs down [Xinhua]

Brazil’s economy, which shrunk by 1.7 per cent in the third quarter and is in a deepening recession, is becoming increasingly unstable as impeachment calls for the president gain momentum.

Brazil’s economy is forecast by the IMF to contract 3 per cent this year.

Last week, Eduardo Cunha, president of the Chamber of Deputies, the lower house of the National Congress, authorized impeachment proceedings against President Dilma Rousseff for her alleged involvement in a multi-billion dollar corruption scandal that has shaken her party.

A corruption scandal at Brazil’s state oil giant Petrobras, has implicated politicians in Rousseff’s party, although not the president herself.

Brazil’s state oil giant Petrobras estimates it paid out some 6 billion reals ($1.6 billion) in illegal “commissions” as part of a corruption scheme that operated for years.

The impeachment announcement was first welcomed by local markets which registered gains; the real gained against the dollar on Wednesday. But then the bottom dropped and the trend was back into negative territory by the close of markets on Friday.

The benchmark Ibovespa index closed 2.23 per cent lower.

While this is not the first time that she has faced impeachment calls, Dilma is likely to be investigated by a congressional committee in the weeks ahead.

At the 15th National Health Conference in Brasilia this past weekend, Rousseff reiterated what has always been her position – impeachment will derail Brazil’s

Rousseff denied her involvement in the corruption scandal.

“I will defend my mandate with all the instruments provided by a democratic state. I will show that this fight is not being waged in favor of a person or party. This is the fight for the democracy of our country,” added Rousseff.

In order for her to be impeached, the investigation must pass Congressional scrutiny followed by a 2/3rd vote in favor of the motion.

Rousseff is also facing a reversal of fortune in Brazil’s once bustling economy.

Government and central bank efforts to bring the inflation rate down to what economists say is a healthy 4.5 per cent have failed. Inflation stands at 9 per cent.

Although she was re-elected in presidential elections in 2014, Rousseff’s popularity has dwindled as she tried to impose unpopular austerity measures.

According to national pollster Datafolha, 67 per cent of surveyed respondents at the end of November said her governance was “bad” or “terrible”.

In October, Rousseff began implementing a major cabinet reshuffle saying her government will eliminate eight ministries and reduce remaining ministers’ salaries by 10 per cent, among other cuts.

The move appeared to express solidarity with less privileged sectors of the society that have seen social programs curtailed as the government reacted to an economic slowdown by implementing unpopular austerity measures.

The BRICS Post with inputs from Agencies