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Let the Final Game begin

Let the Final Game begin

Brazil’s impeachment chance for recovery 

by David Smith in Rio de Janeiro

Wed 10 Aug 2016

In the middle of these Olympic games, Brazil has finally decided to impeach its president in a formal Senate process. Well away from triumphs in the swimming pool and on the volleyball court in Rio, the politicians in Brasilia have signalled that the country’s political crisis must end – and the country’s economic recovery begin.

The impeachment adds a powerful political backcloth to an Olympics so far mercifully free of forecast mayhem and chaos.

‘The two are so intertwined, the economics and the politics. We cry out for an end to the impeachment process so that we can confront our economic nightmare,’ said one centre-right senator who voted overnight to impeach suspended President Dilma Rousseff, on the grounds that she embellished economic statistics, and took unauthorised funds, to win re-election in 2014. ‘We can turn the country around, but only when we know who is president.’

The chances are overwhelming that Rousseff will be removed by final Senate vote at the end of this month. Not a day too soon for Henrique Meirelles, the finance minister appointed after Rousseff was suspended in May, and Michel Temer, her conservative vice president who was made interim president.

‘The consequences of any further delay in taking decisions will be grave,’ remarked Meirelles before the Olympics opening. ‘Brazil will pay a very high price, for years to come, in the face of more inaction.’

Meirelles, a former president of Bank Boston and head of the Brazilian central bank from 2003 to 2010, is forthright about what he wants to do – and what he needs Congress to pass, however distracted the political class may be by the impeachment process.

In the face of a budget deficit of 8% of GDP, with inflation nudging 10%, and unemployment 11%, Meirelles insists that there is no option but to assault the deficit that will reach almost $52bn this year, in an economy contracting by 3.7% at the same time.

Meirelles is fond of quoting former British Prime Minister Margaret Thatcher: ‘There’s no such thing as public money, just money from the taxpayers.’ His declared war on public spending appeals to Brazil’s financial sector and foreign investors who have been betting on change by driving up stock prices this year.

‘Once Dilma is removed, and Meirelles has the support of Congress, you will see Brazil rebound in 2017,’ to quote one leading banker in Sao Paulo. ‘The new government has its back to the wall, and there is no option but for them to cut spending, then cap spending indefinitely.’

Meirelles wants to eliminate any real increase in the public budget for 20 years, leading with pension reforms that will raise the minimum retirement age to 65, and to privatise state enterprises from hydroelectric dams to the postal service.

‘This new team is saying so much of what the markets, and the wider world, want to hear,’ according to a senior member of Rousseff’s Workers party. ‘They seem to have forgotten the majority of Brazilians who won’t take their medicine without a fight.’

Fighting words, but with Rousseff in the dock in the Senate from 25 August, and Luis Inacio da Silva Lula, her predecessor, charged with obstructing justice in a long-running corruption scandal, a sense of irresistible political change is growing.

Yes, Temer, as acting president, was booed loudly as he declared the Games open in the Maracana stadium. But if and when he formally becomes head of state later this month, he and his economic team will have their sought-after opportunity for action.

‘They know what they have to do, and the country is in desperate need of a pragmatic course, a calm direction, a plan,’ to quote the senator who voted for impeachment proceedings overnight. ‘There’s no time for a honeymoon, just time to change course, and kickstart recovery, whatever the pain.’

David Smith, OMFIF Advisory Board member, represented the UN Secretary-General in the Americas for a decade.

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