In a post-Rousseff Brazil, how to mend a broken system

Hope must be that the country seizes the moment for catharsis, writes John Paul Rathbone

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Amid an economic crisis, a political crisis and the country’s largest corruption scandal, Brazil was paralysed. The situation could not go on — so it did not.

Late on Sunday Brazil’s congress voted to open impeachment proceedings against President Dilma Rousseff. If the senate confirms the vote — as expected — Ms Rousseff will step down for 180 days while the case goes to trial, with Michel Temer, vice-president, assuming the presidency in the interim. The 75-year-old constitutional lawyer with a former beauty queen wife 43 years his junior faces a formidable task.

Mr Temer’s challenge is to right the listing ship of the Brazilian state — at least for a while. How might he do that? Mr Temer will probably proclaim a government of “national unity”. If he is wise, he will magnify that projection of disinterested statesmanship by adding that he will not run for president in the next election in 2018.

The country’s finances also need serious attention, not least a gaping fiscal deficit equivalent to 10 per cent of gross domestic product. Much of Mr Temer’s plans on how to deal with such problems are outlined in a document called “A Bridge to the Future”.

Published late last year by his centrist PMDB party, this calls for a more open economy, privatisation, more flexible labour laws and an end to inflation-indexed pensions. That is all music to investors’ ears. To fully convince markets, however, Mr Temer will need to appoint some heavyweight chiefs to the finance ministry and the central bank.

That is not all. To counter claims Ms Rousseff’s impeachment was a thinly disguised putsch, he will also need to appoint a heavyweight justice minister. This will reassure the country that the corruption probe at Petrobras, which has laid bare Brazil’s grubby nexus of politics and money, will continue.

Will Mr Temer succeed in even doing even half of this? His honeymoon period will be brief. He has no popular mandate to execute a sweeping economic reform programme. The Petrobras probe will probably continue to eye guilty politicians, keeping congress in a state of agitated near-paralysis. He also faces charges similar to those that led to Ms Rousseff’s impeachment, of cooking the budget.

It is a mess. Yet it may prove a providential moment of catharsis. The last time a Brazilian president was impeached, in 1992, the country — which had long tolerated relatively high inflation — was between two bouts of hyperinflation. But in time, the chaotic process of that impeachment led to the “real plan” — a stabilisation programme that laid the basis for Brazil’s prosperity of the early 2000s.

Today the country, which has long tolerated ordinary corruption, is disgusted by what has been called “hyper-corruption”. Purging that from the system, as Brazil did with hyperinflation two decades ago, would be a major and unequivocal advance.

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