Brazil | Impeachment process opened against President Rousseff

The speaker of the lower house of the Brazilian congress announced on Wednesday that he had opened impeachment proceedings against President Dilma Rousseff. Two-thirds of the lower house of congress need to approve the process for a formal investigation to begin. We doubt that the required 342 deputies will support the move. But given that the process could take six months to conclude, it is impossible to know with certainty how deputies will vote at this early stage.

The development further reflects a sense of crisis hanging over Brazilian politics, and will further impede the government’s ability to deal with a seemingly worsening economic situation. We assess that the combination of these factors will also fuel further frequent protests countrywide in the coming weeks and months, by both pro and anti-government activists.

The Brazilian press reported that Cunha had accepted a request filed by three opposition MPs in October over accusations that the president broke fiscal responsibility rules and manipulated government finances last year. The lower house will now convene a committee to examine the request and decide whether it should proceed.

A vote in the lower house is unlikely to take place until February. President Rousseff is entitled to ten congressional sessions to defend her position, and the Brazilian congress is due to enter recess on 22 December. Rousseff’s Workers’ Party has also said that it will appeal to the Supreme Court to stop the proceedings. It is unclear how the Court will rule on this point, but this judicial process will almost certainly slow down proceedings further.

If the motion receives the required support in the lower house, Rousseff will hand over power to the vice president while the Senate conducts an investigation. This cannot last more than 180 days. A final decision to dismiss Rousseff would then require the support of two-thirds of the Senate. In this situation, Vice President Michel Temer would see out the remainder of Rousseff’s term.

Impeachment lacks support among deputies
On current indications, we have doubts that the impeachment attempt will be successful. Based on recent votes in congress over the past month, Rousseff appeared to have improved her relationship with members of the PMDB. This party is her main coalition partner and, as the second largest party in the lower house, will be highly influential in deciding the outcome of the vote.

On 18 November, the lower house supported Rousseff’s veto of a bill that would have raised government spending. Around the same time, the PMDB also said that it would not leave the ruling coalition until at least 2018. And on Wednesday, the leader of the PMDB criticised Cunha’s move, describing it as a mistake because ‘there is no legal reason’. One party deputy added that around 200 MPs would vote against impeachment, enough to halt the process.

That said, the mood within the PMDB reportedly remains volatile and divided. This makes it difficult to assess with confidence which way the party’s deputies are likely to vote. Despite the party’s recent voting record, a journalist that covers the government’s economic agenda told us yesterday that some PMDB members are likely to take the opportunity to vote against Rousseff.

Cunha is isolated
In our view, Cunha’s decision yesterday reflects the weakness of his own position. The speaker claimed that he had ‘listened to the streets’ and the demands of anti-government protests this year. However, the last large-scale countrywide demonstrations were in August. Rather, his announcement seems more closely tied to a congressional ethics committee ruling that it would seek to remove Cunha from his post over allegations that he lied to a parliamentary commission about his assets. The committee’s announcement came just hours before Cunha’s statement.

Cunha has also come under increasing pressure over the past few months amid evidence that he was involved in kickback payments at Petrobras. Investigators have revealed that Cunha kept Swiss bank accounts, in which he had allegedly kept bribe payments. He previously denied the existence of these accounts. Reports in the Brazilian press have described Cunha as being increasingly isolated.

Sense of crisis set to continue
Regardless of the outcome of the upcoming vote, it will do little to allay investors’ concerns about Brazil’s political outlook into the coming year and probably perpetuate Brazil’s worsening economic performance. Although the government appears to have gained congressional support for its austerity measures over the past few months, key economic indicators remain negative. The international media reported on Tuesday that GDP dropped by 1.7% in Q3, worse than previously forecast. Unemployment is now up to nearly 8%, inflation is running at over 10%, and the government’s budget deficit stands at 9.5% of GDP, sustaining the risk of demonstrations in areas countrywide.