Brazil’s new president will have a chance to steady the ship

Michel Temer’s first task is to win over investor confidence and stabilise the economy
Michel Temer has been handed the task of rescuing Latin America’s largest economy © AFP

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In all likelihood, Brazil will shortly have a new head of state. The only reason the Senate may not initiate impeachment proceedings against President Dilma Rousseff this week is a supposed procedural glitch, announced on Monday, that could see the motion returned to the lower house first. Even if that happens, though, it is unlikely that the lower house will decide any differently than it did last month. Then the process will resume in the Senate and Michel Temer, the vice-president from the opposition PMDB party, will take Ms Rousseff’s place as interim president.

This is a highly-convoluted, almost revolutionary process. Indeed, Ms Rousseff and her defenders at home and abroad — such as Jeremy Corbyn, the UK Labour party leader — have called it a “coup”. Yet this is not the majority opinion in Brazil or the region.

On April 23, the Union of South American states, or UNASUR, rejected a motion, presented by Venezuela and Bolivia, that would have “repudiated” Brazil’s impeachment process. Two days later, the parliament that oversees the Mercosur trade block rejected a similar motion. So far, most of South America believes Brazil’s constitutional order is intact. 

So much for the immediate international ramifications of Ms Rousseff’s likely impeachment. In Brazil, Mr Temer faces four daunting challenges — although even these are not unique. In a case of parallel experiences for two countries grappling with the end of the commodity supercycle and the legacy of over a decade of populist rule, Mauricio Macri, Argentina’s new president, faces similar problems in neighbouring Argentina. 

Like Mr Macri, Mr Temer’s first challenge is to win over investor confidence and stabilise an economy gripped by recession. To do that, Mr Temer has begun to assemble a credible team of advisers. He has floated the names of Henrique Meirelles, a former central bank chief, for finance minister, and Ilan Goldfajn, the respected chief economist of Itau, South America’s biggest bank, to head the central bank. 

If they, or candidates of a similar stature, can inject a dose of positive expectations into Brazil’s battered private sector, the economy, which may have bottomed, could flicker with fresh life. 

Second, Mr Temer needs to prevent social upheaval while making an unpopular fiscal adjustment. Taxes will have to be raised and costs cut in order to stop Brazilian public debt from rising further. This is a difficult task, but not an impossible one. Nor need it be regressive. One obvious target for extra revenues is the dividends that private Brazilian companies can currently pay to their partners and owners, untaxed. 

Third, Mr Temer will hope he can avoid becoming caught up in the Petrobras corruption probe. This has already ensnared over half of Congress — including the head of the lower house, Eduardo Cunha, who triggered the impeachment process — and there is no telling if Mr Temer may face a similar fate. 

The two-year probe is led by an almost evangelically-independent judiciary: last week, federal prosecutors filed a $44bn damages claim against mining companies Vale and BHP Billiton. Still, even the Petrobras probe will not go on forever. Sergio Moro, the judge leading the process, said last month he expects the investigation will close by Christmas

Lastly, Mr Temer needs to build a Congressional majority. Although Mr Temer is a wily negotiator, this is perhaps his hardest task — especially as the Petrobras corruption scandal has fractured Congress into myriad whirlpools of seething factions, not only between parties but within them too. Mr Temer has already had to shelve earlier plans to reduce the number of ministers because such appointments are a traditional way of dealing out pork and thus building coalitions. 

It is a forbidding to-do list. Yet perhaps Mr Temer can take heart from Argentina’s experience. Five months into his own presidency, Mr Macri, who also lacks a Congressional majority, has launched a stiff macroeconomic adjustment programme, yet his approval ratings remain above 60 per cent. Meanwhile, Cristina Fernández, the former president, has become caught up in a corruption scandal, reducing her credibility as an adversary. 

One lesson here is that in both countries, most citizens care little for party politics, only want their country to be reasonably well-run and are willing to give fresh leaders a chance to do that — at least for a while. Against the odds, Mr Temer has a fair chance of stabilising Brazil’s rocky situation.

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