Brazil's Political and Economic Crisis Threatens Its Democracy

On April 17, the Brazilian lower house of Congress voted to impeach President Dilma Rousseff, who was elected in 2010 and reelected at the end of 2014. It was a garish spectacle, with one right-wing deputy dedicating his vote to the colonel who headed a torture unit during the dictatorship. One of its torture victims was the president herself.

The deputy's dedication was a grim reminder that Brazil emerged from dictatorship just 30 years ago, and that its democracy is perhaps less developed than many people assume. More reminders would soon spring forth like mushrooms in a rain-soaked field. Leaked telephone transcripts revealed that leaders of the impeachment effort were trying to remove Rousseff in order to stop the investigation into their own corruption. This led to the resignation of three ministers in the new Cabinet appointed by the interim president, Michel Temer; but 15 of the original 23 ministers he appointed were reportedly under investigation, as well as the majority of the Congress itself.

Then on June 2, Temer himself was convicted of campaign finance violations and banned from seeking office for eight years. New scandals involving interim and pro-impeachment officials emerged nearly every week.

Although there is corruption within all the parties, including Rousseff's Workers' Party (PT), the deep irony is that the corrupt officials trying to topple her presidency have not presented any charges or evidence of corrupt practices on her part. Rather, she is being impeached for an accounting practice that other presidents, and many governors, have used. And on July 14, the federal prosecutor assigned to the case concluded that it was not even a crime.

But the prosecutor's conclusion appears to have been ignored, and a final vote by the Senate on Rousseff's presidency is expected within the coming days. No wonder many Brazilians consider the whole process a coup d'etat -- and not just against a president, but against democracy itself. There have been continuing protests since the impeachment, with some spilling over into the Rio de Janeiro Olympics.

One of the first acts of the interim government was to appoint a Cabinet of all rich white males, in a country where the majority are women and more than half identify as black or mixed race. Then, the government abolished the ministry of women, racial equality, and human rights.

Rousseff would probably never have been vulnerable to this attack if not for the economy being immersed in its worst recession in more than 25 years. The PT was first elected in 2002, with President Lula da Silva, and from 2003 to 2013 poverty was reduced by 55 percent, and extreme poverty by 65 percent. Growth in income per person was three times the size as during the previous government, the real (inflation-adjusted) minimum wage doubled and income inequality was reduced. Unemployment hit record lows.

But toward the end of 2010, Rousseff's government began a series of measures that slowed the economy, just as the global economy was running into headwinds. Budget tightening, sharp cuts in public investment and increases in interest rates over the next few years would eventually push the economy into recession by the beginning of 2015. Under pressure from big banks and most of the media (which have long been staunch opponents of the PT), she adopted further austerity measures after her reelection in October 2015. The recession deepened.

Rousseff has offered a constitutional way out of the political crisis: a plebiscite on whether to hold early presidential elections. If six of the senators who voted last week to move forward with her trial were to agree, and vote against convicting Rousseff for something that was not a crime, this could be arranged. This is what needs to happen.

Then Rousseff should get to work in reviving the economy. The austerity was a mistake. For a country like Brazil, the binding constraint on any stimulus program is the balance of payments: they must have enough foreign exchange reserves to be able to pay for rising imports as the economy returns to growth. But Brazil has about $370 billion in international reserves, which is much more than enough.

The crowning irony is that the interim government intends to double down on austerity and cuts in social spending and public investment. The rationale, as usual, is that this will inspire investor confidence, despite its negative impact on economic growth. We have seen this movie a lot in recent years: e.g., in the eurozone since 2010.

And we have seen much worse in Brazil before the first Workers' Party president, da Silva, took office in 2003. In the 22 years prior (1980 to 2002), income per person barely grew, at just 4.3 percent over the whole period. It was an unprecedented economic failure, especially as compared to the prior 20 years (1960 to 1980), which had cumulative growth of more than 120 percent. If Rousseff is ousted and the new, unelected government commits itself to the failed economic strategy of the "lost decades," it could be a long time before the majority of Brazilians recover the living standards that they reached a couple of years ago.