By Allison Fedirka

Geopolitical Futures identified Brazil, along with Mexico, as one of the potential regional leaders in Latin America. It remains the largest country by GDP and population in the region. However, the country is now in political and economic crisis with initial impeachment proceedings for President Dilma Rousseff to start by the end of this week. In just over one year, Brazil has gone from being the seventh largest economy in the world to the ninth. Corruption scandals and political infighting have led to paralysis in the federal government, making it nearly impossible to execute any policies aimed at economic recovery. There is mounting pressure on all fronts to find a solution to the political crisis sooner rather than later. The most publicized potential solution is the impeachment of the president. Other options include her resignation, new elections and introducing a parliamentary system. With so many available paths, it is likely that Brazilian politicians will figure out a solution to the country’s political crisis in coming months. Political stability and an end to gridlock in Brazil will depend on the government’s ability to win public support for one of these options.

How We Got Here

In order to understand the potential ways to end the political crisis, we must first understand how the country got to this point. Large-scale, nationwide protests against the current government began in June 2013. At this time, the protesters demonstrated against government priorities, the mismanagement of public funds and corruption. There was a lull in protests during 2014 largely due to the World Cup and the promise of elections in October. Rousseff won the October 2014 presidential elections in a runoff, with just over 50 percent of the popular vote. By this time, Brazil was already experiencing a slowing economy, which grew a mere 0.1 percent in 2014. Just after the elections, the Lava Jato corruption scandal and its impact on major companies began to make headlines. The scandal involves state-owned companies and government officials accepting bribes in exchange for contracts on major oil and infrastructure projects. The environment was ripe for the opposition to make moves against Rousseff.

Lava Jato investigators have used leniency agreements to further the investigation. Over time, testimonies revealed more participants and related corruption charges across the political spectrum. In April 2015, the Federal Court of Accounts (TCU) began investigating irregularities in public accounts. By Oct. 7, 2015, the TCU ruled that under Rousseff the government doctored accounts and manipulated the budget to cover up a growing fiscal deficit. This ruling opened grounds for potential impeachment. Throughout 2015, opposition figures had been preparing and submitting multiple motions calling for impeachment. On Dec. 2, Brazil’s lower house Speaker Eduardo Cunha from the Brazilian Democratic Movement Party (PMDB), officially accepted a request to commence impeachment proceedings against Rousseff on the grounds that she allegedly doctored fiscal accounts in 2014 and 2015 and illegally financed her re-election. Initial impeachment proceedings are expected to start by the end of this week.

The lapse in time between accepting an impeachment motion and the start of the proceedings is not indicative of a lack of political or social support. Rather, three main factors – legal, political and social – explain why it has taken so long to move forward with an impeachment. In the legal realm, the Brazilian Constitution states that in the event of impeachment charges, the alleged crimes shall be defined in a special law, which shall establish the rules of procedure and trial. Furthermore, Brazil does not observe legal precedent in the same way as the United States. While impeachments have been carried out previously in Brazil, the process is not set in stone. For these reasons, drafting a procedure is necessary and takes time. Diverging opinions on how to proceed have also slowed down the process. Anti-impeachment legislators challenged the initial structure for proceedings in the Supreme Federal Court saying the original parameters were skewed to encourage impeachment. The ensuing court battle, which was not resolved until March 16, also delayed the start of proceedings. Finally, this all happened during the summer, when federal bodies are in recess. Culturally speaking, the Brazilian calendar does not start until after the end of Carnival, which was in early February this year.

Since assuming her second term on Jan. 1, 2015, Rousseff has faced mounting governance challenges exacerbated by an atrophying economy. Her attempts to make fiscal adjustments were not supported by her base in the ruling Workers’ Party (PT). Members of this party come from lower economic classes and unions that advocate pro-labor and aggressive social welfare policies. As a result, they have been pressuring the current government not to cut spending and shift back towards more popular policies. Meanwhile the opposition saw this as an opportunity to blame Rousseff for the economic problems. Simultaneously, the government has faced a battle royale in Congress against opposition members seeking to follow alternative polices. This is how we have arrived at a deteriorating political environment and stalemate. Political parties across the spectrum are now recognizing the detrimental effects of this stalemate and the need for some semblance of a plan for economic growth. For this reason, we are seeing several potential solutions being pursued in parallel.

Options for Ending the Political Crisis

There are at least four possible exits to this current political crisis of varying degrees of likelihood and complexity. The most widely discussed course of action is impeachment, which consists of three stages. First, a special committee composed of members from all political parties decide whether to move forward with impeachment proceedings. Cunha estimates this will take approximately 45 days. Next, the motion goes to the lower house where a two-thirds majority is necessary to move forward. Presently, there is doubt about whether the government will be able to get the necessary 171 votes out of 513 to block the motion. Finally, the motion will reach the Senate. The Supreme Federal Court’s ruling on March 16 allows Rousseff to stay in office while the Senate reviews the case and decides by a simple majority if it will pursue impeachment or not. In the event the Senate decides to move forward, Rousseff will be suspended from office until a decision has been reached or 180 days passed. If at any point a body rejects the impeachment motion, the process stops.

Right now, it is believed that Rousseff has enough Senate support to survive an impeachment. The key party to watch in this event is the PMDB. Tenuously allied with the PT, the PMDB – which has acted as a swing party – has been and will be vital to the government staying in power. On March 12, the PMDB held its party meeting. Two items of note came from this. First, the party decided to postpone any decision to split with the government by at least 30 days. Second, the party is studying the possibility of freeing members to vote individually in impeachment proceedings rather than follow a party line. Such a decision could help swing the impeachment vote while still enabling the party to stay in government – a valuable option given Vice President Michel Temer of the PMDB would become president if Rousseff is ousted. In the event an impeachment fails, the PMDB’s support will help a battered Rousseff be able to continue governing, since a failed impeachment would be very difficult for certain sectors of the public to accept.

The most straightforward solution is for Rousseff to resign. The main opposition party, Brazilian Social Democracy Party (PSDB), and the opposition-aligned public fault her for the country’s economic decline. They want her out. In this case, the vice president would assume office. This would put him in an interesting position since his PMDB took the role of a swing party under the current government. The PMDB would need to ally with other parties, such as the PSDB, or continue working with the PT to be able to govern. There are reports that the PMDB and PSDB have already held discussions over what a post-Rousseff government might look like.

Rousseff has repeatedly said over the last year that she will not resign. Her actions to date indicate that this decision still stands. Many of the more militant members of the PT remain loyal to party poster child and former President Luíz Inácio Lula da Silva, known simply as Lula. Rousseff has lost favor with this political base and therefore relied heavily on Lula throughout her presidency to keep the support of the PT behind the government. Additionally, recent corruption investigations that drew in Lula raised concerns over the political legitimacy of the party and by default Rousseff. After a week of negotiations, Lula accepted the chief of cabinet post in Rousseff’s government. This will allow Rousseff to shore up her political support in the PT and help protect Lula in the event of further investigation or judiciary pursuit. That said, those opposed to Lula filed a case on March 17 with the Supreme Federal Court seeking his suspension from the post.

There is also talk of possibly holding general elections. This option is most fiercely advocated by the PSDB since it would be the most likely victorious party. One way to do this would be to ask the Supreme Electoral Court to nullify the result of the 2014 elections because of the illegal financing of Rousseff’s campaign. New elections would subsequently be called. This option is the most likely to bring political change.

Lastly, there have also been discussions among some senators about the possibility of adopting a parliamentary system. Brazil adopted a parliamentary system in 1961 as a compromise solution to a debate over who should assume the office when the president resigned, although it reverted back to a presidential system following a referendum two years later. A similar proposal exists now. Rousseff would remain official head of state, while parliament would elect a prime minister who would take charge over the government. Then, in a few years, a public referendum would be held to decide the fate of the system. The inherent challenge in this solution is that Rousseff would still occupy a government post, which would not meet protesters’ demand for her removal from office.

Obstacles Ahead

Perhaps the biggest – and least mentioned – hurdle to finding an exit from the political crisis is the difficulty in contriving a solution palatable to the Brazilian people. The two critical factors influencing this are the underlying issue driving protests – corruption – and the polarization in society. In particular, the Lava Jato scandal breathed new life into the marches and the anti-corruption sentiment. This is no surprise given many high-level officials from across the spectrum – including Rousseff, Lula, lower house Speaker Eduardo Cunha, senator and former presidential candidate from the PSDB Aécio Neves – have in recent months been suspected of corruption. Corruption makes it difficult for the public to respect politicians in general and for any candidate to win the favor of the people. For example, even though Neves is the leader of the opposition party and strong opponent of Rousseff, there were reports that when he arrived at a recent anti-Rousseff, pro-impeachment protest, members of the crowd cursed at him and said he was no better than other politicians.

The problem with protesting against corruption is the aims are often vague. The more tangible a demand, the easier it is for the government to address the demand and satisfy the people. But there are limited ways of addressing corruption. While anti-corruption legislation can be passed, its effectiveness depends entirely on implementation, which, once again, is vague. The protests in 2015, as well as a demonstration on March 13, went beyond the general rejection of corruption and made specific calls for impeachment and an end to the PT government. These are tangible demands meaning there are concrete potential solutions. However, any solution must inspire the protesters to have confidence in the next government. Without this, social grievances over corruption and disillusionment with politicians will continue to fester.

In addition, a political solution must take into account the potential for backlash from current PT and government supporters. The current public demonstrations are still generally in line with political party affiliations. Those favoring impeachment tend to have an affinity towards PSDB-style policies. But not everyone in Brazil supports an end to the PT-run government. In addition to anti-government gatherings on March 13, there were pro-PT/Lula manifestations in Recife, Fortaleza, Porto Alegre, São Bernardo do Campo, Vitória, Monte Claros, Coronel Fabriciano and São Luís. Additional pro-government rallies have been called by Frente Popular Brasil, an umbrella group of over 60 organizations, for March 18 and March 31. So far, the PT website says there are 39 confirmed locations for the March 18 event. A change in government would very likely quell the current pro-impeachment protesters in the short-term. However, it would also likely result in the new government being pitted against pro-PT groups like Frente Popular Brasil. The PT still has a significant following consisting of major labor groups and social movements. These groups have a strong history of effective mobilization and staging social demonstrations that can exert pressure on the government to achieve their demands.

Conclusion

Markets and many political analysts remain optimistic that a change in government will quell the social unrest and help return growth to the country’s economy. However, having a new government does not guarantee these outcomes. If politicians hope to avoid further social unrest and political stalemate, any political solution must also find a way to reassure all Brazilians, whether they support the government or not. The pro-impeachment camp will need to know that the new government is capable of governing and reviving the economy, while pro-PT members of society need to be assured they will not be marginalized for the sake of economic reform.

Allison Fedirka
Allison Fedirka is a senior analyst for Geopolitical Futures. In addition to writing analyses, she helps train new analysts, oversees the intellectual quality of analyst work and helps guide the forecasting process. Prior to joining Geopolitical Futures, Ms. Fedirka worked for Stratfor as a Latin America specialist and subsequently as the Latin America regional director. She lived in South America – primarily Argentina and Brazil – for more than seven years and, in addition to English, fluently speaks Spanish and Portuguese. Ms. Fedirka has a bachelor’s degree in Spanish and international studies from Washington University in St. Louis and a master’s degree in international relations and affairs from the University of Belgrano, Argentina. Her thesis was on Brazil and Angola and south-south cooperation.