Brazil’s Fiscal Plan Could Falter Without Pension Reform

Anna Edgerton – Bloomberg, 08/16/2016

Acting President Michel Temer’s prized fiscal austerity proposal tocap public spending will only succeed if he can convince Brazil’s Congress to pass a controversial pension reform as well, according to a leading member of his economic team.

While Temer’s administration is confident it can win congressional approval this year of a constitutional amendment to limit federal spending, the inability to cut back on retirement benefits would put public finances at risk, said Mansueto Almeida, the Finance Ministry’s secretary of economic monitoring. A spending cap with growing pension obligations would squeeze other areas in the budget such as health care, he said.

“With the constitutional amendment, spending will be limited, and without pension reform, those costs are going to just grow and grow and grow,” said Almeida, who studied public policy at the Massachusetts Institute of Technology and ran a popular blog on public finance before joining the ministry.

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Rousseff Appeals to Senators Before Brazil Impeachment Trial

Anna Edgerton – Bloomberg, 08/16/2016

Dilma Rousseff appealed to Brazilian voters and legislators less than 10 days before her impeachment trial starts in the Senate, pledging to hold a plebiscite on new elections if she survives in office.

Rousseff presented her case in a four-page letter to the Brazilian people and Senate on Tuesday, reading the text to reporters in Brasilia without taking any questions. She was flanked by some of her former ministers.

 “The solution to the political and economic crisis we face is through the popular vote,” she said. “Democracy is the only way to build a partnership for national unity.”

Brazil justice authorizes probe on Rousseff, TV says

 Maria Pia Palermo and Guillermo Parra – Reuters, 08/16/2016

A Brazilian Federal Supreme Court justice has authorized the opening of an investigation into President Dilma Rousseff and her predecessor Luiz Inácio Lula da Silva for allegedly working to obstruct the course of a sweeping corruption probe, GloboNews news channel said on Tuesday.

According to GloboNews, Justice Teori Zavascki’s ruling has given Prosecutor General Rodrigo Janot permission to look for additional evidence that Rousseff sought to name Lula to a cabinet post to help him avoid prosecution. In June, Zavascki barred the use of some wiretaps that showed Rousseff and Lula negotiating the cabinet appointment.

The news channel, without saying how it obtained the information, also said Zavascki authorized the opening of separate investigations against Aloizio Mercadante and Jose Eduardo Cardozo, two former Rousseff ministers, for similar allegations.

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Bernie Sanders Fails To Influence Vote, In Brazil

Kenneth Rapoza – Forbes, 08/16/2016

It’s all the rage to try and influence votesin another nation. Everybody’s doing it, so why not Bernie?

Last week, Sanders put out a statement against the pending impeachment of Brazil’s suspended first lady president Dilma Rousseff. He noted that “many observers” continue to say that her ouster resembles a coup d’état. His statement made the rounds on social media, thrown about by Dilma supporters looking for some affirmation from afar that they’re in the right. His statement was perfectly timed, too. That night, the Senate was voting on whether or not to actually hold the impeachment trial after gathering all the evidence needed against her. They needed 54 votes. They got 59. Bernie backed the wrong horse. Dilma is a goner.

Where Sanders got these ideas about Brazil is unknown. After seven days, five emails and phone calls to their press office, no one returns requests for comments. So something that was supposed to be a mere news article, is now going to be an op-ed.

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Brazil’s Uplifting Olympics

Roger Cohen – The New York Times, 08/15/2016

When I was a correspondent in Brazil 30 years ago inflation was rampant. It ran at an average of 707.4 percent a year from 1985 to 1989. The salaries of the poor were wiped out within hours of being paid. The country went through three currencies — cruzeiro, cruzado and cruzado novo — while I lived in Rio. The only way out for Brazilians, people joked, was Galeão, the international airport.

 Antônio Carlos (“Tom”) Jobim, the composer of “The Girl from Ipanema” (whose name is now affixed to that airport), famously observed that, “Brazil is not for beginners.” It was not then and it’s not now. It’s a vast diverse country, a tropical United States, whose rich and poor are divided by a chasm. High crime rates are in part a reflection of this divide. Flexibility is at a premium in a culture fashioned by heat, sensuality, samba and rule bending. Life can be cheap. You adapt or you perish.

Edmar Bacha, a friend and economist, had coined the term “Belindia” to describe Brazil — a prosperous Belgium perched atop a teeming India. I wrote a story about the poor kids from north Rio, far from the beaches of Ipanema and Leblon, who would get their kicks as “train surfers” — riding the tops of fast-moving trains — rather than surf Atlantic waves. Often they died, electrocuted. I will never forget the twisted corpse of one in the city morgue.

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BNDES Helped Save the Olympics. But Is it Hurting Brazil?

Olivia Arguinzoni- Americas Quarterly, 08/09/2016

New leadership atop Brazil’s massive national development bank is unwinding a decade of rampant lending that fed large conglomerates and strained the country’s finances.

Over the past half-century, Brazil’s Banco Nacional de Desenvolvimento Economico e Social (BNDES) built huge power plants and highways through the industrial southeast, aided social programs in the drought-ridden northeast, and helped create some of today’s world-leading companies like airplane-maker Embraer and pulp producer Fibria. More recently, it helped save the Rio Olympics with an emergency loan.

Such mega-investment projects played a central role in Brazil’s economy over the last ten years of Workers’ Party rule, during which former President Luiz Inácio Lula da Silva and suspended President Dilma Rousseff showed a particular penchant for state-sponsored development.

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Brazil’s Senate Votes to Move Ahead with Dilma Rousseff’s Trial

Vinod Sreeharsha – The New York Times, 08/10/2016

RIO DE JANEIRO — Brazil’s Senate voted in the early hours of Wednesday to push forward with the impeachment trial of Dilma Rousseff, the president who was suspended in May, an important step that could result in her final removal from office.

The trial in the Senate, which will be overseen by the chief justice of the Supreme Court, is expected to take place this month. After hours of debate in the capital, Brasília, senators voted 59 to 21 to indict her on charges of budgetary manipulation, formally making her a defendant.

 Although only a simple majority was needed in Wednesday’s vote, the number of senators that went against Ms. Rousseff exceeded the two-thirds that would be needed to oust her permanently when a final vote is held after the trial ends.

Brazil’s Dilma Rousseff on Her Impeachment Trial, the Olympics and Zika

Matt Sandy – Times, 07/27/2016

As Rio de Janeiro prepares to host the Olympic Games, beginning on Aug.5, one person won’t be at the opening ceremony—President Dilma Rousseff. Rousseff has been suspended from her office amid charges that she manipulated government accounts, and her impeachment trial is scheduled to take place during the Olympics. She spoke with TIME’s Matt Sandy from the Brazilian capital of Brasilia, where she defended herself against accusations of corruption and promised that Rio would be able to pull off the Games despite a league of doubters.

Read the interview…

 

Having already failed, the Rio Olympics may now succeed

Paulo Sotero – The Financial Times, 07/25/2016

Desfile olímpico de alunos da rede municipal do Rio

A um ano dos Jogos Rio 2016, alunos e professores da rede municipal, participam de desfile olímpico no Parque Madureira, na zona norte da cidade (Tânia Rêgo/Agência Brasil)

Judging by media reports and official statements, this year’s Summer Olympics in Rio de Janeiro were a flop well before the August 5 opening ceremony. But if history is any guide, the games stand a reasonable chance of being seeing as satisfactory by the time the estimated 10,000 participating athletes return home. Whether it’s the Olympics in Athens, Beijing, London and Sochi or the soccer World Cup in South Africa and Brazil, a disaster-to-success reversal has been the standard narrative of all recent major global sporting events.

The Rio Olympics, the first to take place in South America, may yet turn out to be a special case. With the threat of a terrorist attack seen as a real possibility after the July 21 arrests of 10 Brazilians identified by local authorities as sympathisers of the so-called Islamic State, the only catastrophes that can be discarded are hurricanes, earthquakes and tsunamis, which are rare on the Atlantic coast of South America.

Most forms of man-made disaster, including pollution, pestilence, engineering failure, crime, massive corruption, recession and political meltdown have hit Rio and Brazil as city and country raced against the clock to make final preparation for the games. Ample and mostly fair coverage of bad news by the local press was, as expected, amplified by the international media.

The foul state of the waters in parts of Guanabara Bay and Lagoa Rodrigo de Freitas, where some of the nautical events are scheduled to take place, and the Zika virus epidemic, have led doctors from around the world to call for a suspension of the games. A few renowned Olympians said they would stay away. In June, Rio’s acting governor declared a state of “public calamity” in order to free $800m in federal funds urgently needed to complete public works connecting Olympic venues, finish construction of housing for athletes and pay late salaries to public servants, including policemen. To dramatise the situation, some police officers staged a demonstration at Rio’s international airport welcoming visitors to “hell”.

Although violence in general and violence against women have trended down in recent years, the group rape of a young woman and the invasion of a public hospital by a narco gang to free a traffic boss have kept crime in the headlines. In mid-June, Rio’s mayor, Eduardo Paes, said in an interview with CNN that Rio’s police, controlled by the state government and not by him, were doing a “terrible” job. A few days later he said, quite accurately, that “the Rio Olympics are a missed opportunity” for Brazil to showcase itself on the global stage as a rising power.

That is what former president Luiz Inácio Lula da Silva had in mind when he travelled to London in 2009 to lobby the International Olympic Committee to award this year’s games to Brazil. Today Lula is a diminished if not disgraced politician. He faces two federal criminal investigations and is manoeuvring to stay out of jail. In mid July, the former president was indicted by the attorney general for attempting to obstruct a federal investigation on a massive corruption scandal involving state oil giant Petrobras, which is headquartered in Rio. Exposed in 2014, the Petrobras case has added fuel to a governance crisis that has crippled Brazil’s public finances, compromised investors and public confidence in the economy and thrown the country into its worst recession in a century. Seen as the economic disaster’s architect, Lula’s successor and protégée, Dilma Rousseff, was suspended in April by the House of Representatives and will likely be removed from office at the conclusion of her impeachment trial in the Senate in the weeks following the Olympics closing ceremony.

The scandal led to the arrests of more than a hundred businesses executives, senior bureaucrats and shady political operatives. A slew of former and current elected officials are under investigation or have been indicted, among them a former speaker of the House of Representatives, the current president of the Senate, two dozen members of Congress and ministers appointed by both Rousseff and her former ally and vice-president, Michel Temer, who took office as acting president in May pending the resolution of the impeachment process.

Against this depressing backdrop, Brazilians are not exactly looking forward to hosting the world’s greatest sporting festival. Support for the games has dropped from 92 per cent in 2009 to less than half of that today. Among cariocas, as the 6.5m inhabitants of Rio are known, barely 40 per cent say they are interested in the games. Tens of thousands of Brazilians from other parts of the country who had planned to attend have opted out because of the economic crisis, which has left more than 11m people jobless. Likewise, the number of foreign visitors will probably be much lower than the half a million that were once expected in Rio during the Olympics.

Ironically, such abysmally low expectations may help create a positive perception once the games get under way. With a security apparatus of 85,000 in place, Rio will probably be one of the safest places on the planet in August – in the absence of a terrorist attack. The myriad problems facing Brazilians will not prevent them from welcoming visitors and making sure they enjoy the music, the dance, the beaches and the nightlife Rio offers in abundance. With the first signs of investors’ confidence on the horizon and economists predicting a return to economic growth in 2017, a disaster-free Olympics could even help the country restore some of its lost self-esteem and project virtues the Brazilian people and some of their institutions have displayed in the face of unprecedented crisis and chaos.

Such efforts could start with the show that will precede the opening ceremony and the parade of athletes marching behind their countries’ flags before the lighting of the Olympic torch. Stealing a page from the London Olympics, which opened with a memorable display on the UK’s challenges and achievements, producers could add a scene featuring cars of the Federal Police and actors representing federal law enforcement officers, prosecutors and judges to symbolise the country’s ongoing offensive against systemic corruption and the impunity of criminals in high places, which is supported by nine out of ten Brazilians. The scene would certainly be well received.

So should peaceful rallies that both sympathisers and critics of Rousseff say they will organise to amplify their views before international audiences watching the Olympics. Compared with the scenes of hatred and violence from around the world seen daily on television, the civil manner in which Brazilians have been demonstrating their frustrations and dealing with their differences has been quite refreshing. It should be celebrated along with the Olympians who will gather in Rio to, once again, show humanity’s better face.

Paulo Sotero is director of the Brazil Institute at the Woodrow Wilson International Center of Scholars in Washington, DC.

Political Crisis Opens Up Space for Dialog With the United States – Crise Amplia Espaços de Diálogo com os EUA

Paulo Sotero –  Revista Interesse Nacional, 06/06/2016

The impeachment of Dilma Rousseff and the crisis that it generated was not a surprise to Washington. The interim government of Michel Temer and its foreign policy emphasis were well received and opens space for a renewal of bilateral dialogue and cooperation at a time when Latin America is changing and opening  up, as shown by the election of President Macri in Argentina, the normalization of US-Cuban relations and the breakdown of the Chavez regime in Venezuela. Washington does not underestimate the challenges the political crises for Brazilians, such as the exhaustion of state capitalism and the failure of its corrupt political class and of the system that produced it.  Add to the mix the uncertainties generated  by rise of populist candidates, from both the right and the left, in the presidential campaign in the Unite States. The desire of the Obama administration to invest in  a  deeper relations with Brazil remains, but won’t be acted on before  the impeachment of Dilma Rousseff is concluded, the  Temer administration consolidates its position and the outcome of the  November 8th elections in the United States is known. The good news is that the difficulties open time and political space for government officials and other interested parties to  prepare the way for productive initiatives.

Read the Article in Portuguese…