Brazil after the Olympics

A piece notes the problems of Brazil after the end of the Olympics, “The Olympic torch was extinguished Sunday night in a carnival of song and dance, the good times rolled. But it is too early to determine whether or not the games were a success or just a muddling through difficult days. Swimming pools turned green. Some 85,000 soldiers and police were mobilised to provide security, but instances of muggings,stray bullets, and petty theft made headlines. The pollution in Guanabara Bay sickened at least one athlete. And, of course, six-time Olympic gold medalist Ryan Lochte and three of his fellow swimmers embarrassedthemselves. But the enthusiasm of many Cariocas — as Rio de Janeiro’s residents are called — partially compensated for the long lines to enter venues, food shortages, and challenging transportation delays. However the games will be remembered, it has at least been a temporary respite for Brazilians from the ongoing political and economic crises that have gripped the nation”.

More importantly it mentions “As the games end, the impeachment of President Dilma Rousseff will move to closure with Aug. 25 cited as the day the last phase of the process will open. Rousseff faces charges of violating budget laws by authorizing credit lines without congressional approval. That is the formal indictment. But there are many other elements involved in the accounting of her very public national downfall. Rousseff, by most accounts, was a terrible politician. Brazil is a multiparty political system, and the only way to get legislation approved is to constantly build short-term coalitions in Congress; instead, she refused and played to her base. Even worse, she was often petty: In particular, she sought to prevent the re-election of Eduardo Cunha as the speaker of the lower house. In retaliation, it is said, he initiated the impeachment process. Many blame her government for the economic and financial crises that now plague the country. By most accounts, she appointed mediocre functionaries to important cabinet posts. And her Workers’ Party (PT) never encountered a welfare program it didn’t like. As a result of massive public sector spending, the economy overheated. Inflation increased, as did unemployment. Foreign direct investment fell”.

It adds importantly, “the hallmark of the current crisis was the discovery that the state oil company, Petrobras, had become a major source of bribes and kickbacks that were used to finance party politics. Most of the country’s major construction companies were involved, and a host of political leaders across the party spectrum have been implicated in the scandal. It did not help Rousseff’s credibility that she served as the minister of mines and energy and chair of Petrobras while many of the crimes were committed. Of course, she denies any knowledge of what occurred. But the scandal is so large as to deem that defense laughable. A new generation of federal prosecutors have arrested or indicted many of the alleged participants of the conspiracy. Dozens of senior politicians and private sector officials sit in jail. Some are involved in plea bargains; most will serve some time in prison. For economic and political elites who believed they could act with impunity, the new reality that crimes will be punished is a shock — but one that will serve Brazil well in the future. The cozy, often crooked ties between the private sector and the huge, inefficient public sector have been dealt a serious blow”.

It goes on to point out that “though the sins of an economic giant are being laid bare, the country’s finances are still in great distress. A decade ago, Brazil was seen as a rapidly emerging economy — one of the skyrocketing BRICS (Brazil, Russia, India, China, and South Africa) that would own the future. Those were heady days, especially for Brazil. A sharp increase in demand for Brazilian raw materials and commodities, particularly from China, provided an ever-increasing amount of foreign exchange. Investment flowed in. Brazil was upgraded by all the rating agencies. But the PT didn’t understand that the economy was actually neither productive nor competitive globally. Priorities such as physical infrastructure were overlooked. Rigid labour laws, many on the books since the 1930s, made it difficult to fire unproductive workers and hire new ones. Skills were subpar; both technical training and general education languished. Public health, while universal, was substandard. Social security coverage extended benefits to both public sector employees and the private sector, but deficits ballooned and reform was postponed. Brazil’s tax collection was in disarray — leveed at the union, federal district, state, and municipal level, the burden surpassed 33 percent of the country’s GDP. Meanwhile, government grew bigger and bigger as the PT sought to employ as many of its party members as possible, often with little thought to their competence”.

The author mentions that “The acting president, Michel Temer, if confirmed at the end of August as the new chief executive, apparently wants to undertake a reform program. The first priority is to rein in government spending, cutting pensions and workers’ benefits. As might be imagined, the unions are outraged; there will be massive protests if the government decides to move forward”.

He points out its rising debt, partly due to an aging population, “Compounding the problem of a stable social safety net is Brazil’s profound inequality. There is a tremendous gap between the very rich, a struggling middle class, and the poor. The Olympics captured that disparity: As sweeping aerial shots panned from the beachfront condos of Ipanema to the mountainside favelas, or slums, the media didn’t shy from reports on the inability of the favelados to afford tickets for the events. Many of the favelas lack sanitation — a major cause of the pollution in Guanabara Bay, since raw sewage runs directly into the water. Promises to install processing plants have been on hold for decades. Security was frequently highlighted in the media coverage. While tourists and middle- and upper-class Brazilians cheered in the Maracanã Stadium, the favelas were home to the ongoing drug war between the gangs and the security forces”.

It concludes “As the games end and the impeachment process terminates, probably with the dismissal of Rousseff, the grim questions that mark Brazil’s present predicament will resurface. Can public education and health facilities be reformed to give security and opportunity to those in need? Can a corrupt, inefficient, and immense federal government be downsized? After decades of out-of-control growth, are there too many political interests at play to allow for meaningful reform? Can Brazil reinvigorate industry to provide new export products in a world where commodity prices will probably be flat for some time? The short answer is that changes are possible — but not without government reforms first. Most observers agree that much of the gridlock in Brasília is due to the dysfunctional political party system. Remarkably, ideology isn’t the problem: Politicians move from party to party with little regard for loyalty. But changing the system — creating electoral districts and reducing the number of political parties — will require congressional approval. Few analysts believe that there is a broad enough coalition in Brasília that will forgo perks and patronage to make selfless decisions for the good of the state”.

It ends “Local elections are scheduled for October of this year; the results may provide some insight into the impact of the current situation on the average voter. The expectation is that Rousseff’s PT will do poorly at the expense ofpersonalist parties. National elections will take place at the end of 2018. Temer has already said he will not be a candidate. The PT’s former two-term president, Luiz Inácio Lula da Silva, looks increasingly like a liability — and he may well be indicted as part of the ongoing scandal. Will new reform-minded candidates emerge? That is the hope — but there is no guarantee that fresh faces will be able to successfully address the reform agenda. Some argue that economic growth will begin to return in late 2017 or in 2018. If Temer becomes president after the impeachment, he has promised to work with Congress to approve much needed fiscal reforms. Brazil would also be helped if global commodity and raw material prices recover. Surely, Brazil’s working and lower classes will cheer, but the welcome relief may only delay the inevitable reckoning with the painful realities that need to be addressed”.

 

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