The Telegraph
Monday , June 19 , 2017

Trial by fire

- Brazil's domestic crisis and its international fallout

Brazil, the B in the BRICS group of Brazil, Russia, India, China and South Africa, has been in continuous turmoil since the process leading to the impeachment of the then president, Dilma Rousseff, last year. It is unlikely to stabilize for another couple of years at the earliest. President Michel Temer, Rousseff's deputy, who took over from her, was himself under judicial examination for corruption. Although Brazil's economy grew by one per cent in the first quarter of this year, it is lower than it was in 2014, with more than 13 per cent of the population, or some 14 million people, unemployed. The downturn in Brazil's fortunes matters to India because the former was a key partner in various post-Cold War intercontinental groupings, such as BRICS, that signalled the arrival in economic and political influence on the world stage of a few non-Western third world countries.

There are many aspects to the Brazilian crisis; political, economic and societal, each without quick or easy solution. The political crisis began with the impeachment of Rousseff in what her supporters in the Workers' Party describe as a constitutional coup. She was accused of manipulating funds to make the public accounts look good in the run-up to her election in 2014; other presidents had done likewise on a lesser scale, and her real disability was to have become deeply unpopular during a serious recession.

Her successor, now the president, belongs to a party without scruples, Brazilian Democratic Movement. It originated as an opposition to military dictatorship in the 1980s, but opportunistically gravitated to wherever power lay. Eight members of Temer's conservative cabinet are under investigation for corruption in an expanding judicial inquiry called 'Car Wash'. This corruption probe started with the alleged misuse of funds from Petrobras, the national oil company, for bribery and to provide campaign funds for politicians across the spectrum, and now includes other big enterprises such as a meat firm and a construction company.

The ongoing political struggle has led to sharp conflicts in an inequitable society, with its serious levels of discrimination against the black and mixed race majority. Corruption accusations have been made against former president, Lula da Silva, whom the Workers' Party has just renominated to run in the elections for president next year. He remains hugely popular, though both the football World Cup and the Rio Olympics have left poor legacies, and his redistribution formula to create a new middle class broke down when the commodities boom collapsed. Temer and his allies now hope that Lula will be in prison by the time of the presidential elections in October next year.

In dealing with Brazil's economic crisis, Temer and his minister of finance, Henrique Meirelles, are trying to cap public expenditure and state pensions through measures which attract fierce unpopularity. Currently, persons in the civil service can retire at 54 with full benefits, and the new proposal would set a minimum of 65 years for men and 62 for women. The present pensions structure dates back to the 1930s, when only a few people were in public service. It is clearly outdated and unaffordable with the rise of life expectancy - now 71 years for men and 79 for women.

Markets for Brazil's exports are subdued. Brazil has become too dependent on trade with China and its efforts to build Latin American political and economic solidarity have stumbled because products and services in neighbouring countries are too similar to be complementary. The bulk of Brazil's exports remain basic commodities like oil, soya, fruit juice, coffee, iron ore and other metals, with weakening markets like China, the United States of America and Europe as the main destinations. During his eight-year term which ended in 2011, Lula made many overtures to Africa that paid off in support for international sporting events and the appointment of Brazilian nationals to head the Food and Agriculture Organization and the World Trade Organization. But this kind of support from the third world could not help rebalance existing international trade flows to Brazil's advantage.

The Brazilian political class is doing its best to nobble the federal prosecutors in charge of the corruption enquiries. These are led by Sérgio Moro, who is based in the southern city of Curitiba, the most Europeanized part of a country that elsewhere boasts of its African and Amerindian heritage. Moro has won public acclaim although almost every politician detests him. Overall, the Brazilian judiciary has shown itself to be independent, and the Supreme Court nominees of Lula and Rousseff have themselves approved the impeachment of Rousseff, though they have just recently cleared Temer, at least for the time being. The autonomy and energy of the judiciary are products of Lula's presidency, and are the gains of Brazil's still insecure democracy.

The presidential election is a two-stage poll in which everyone's vote counts, but the arrangements for congressional elections are less transparent. The cost of elections to the Congress is enormous, and rural areas have a disproportionate number of seats. Proportional representation makes for little accountability and puts a premium on name recognition and the exchange of favours and patronage. There are too many parties, often venal, lacking ideological or representative quality, cobbled together by leaders who wish to make money from the political game. A third of the Congress is now being investigated for corruption, and six of Temer's ministers have already resigned. As in the US and Europe, there is an anti-politics mood in Brazil that makes election-forecasting impossible.

The corruption in the Workers' Party, which had begun life in the 1980s as an idealistic crusade, is one of the many tragedies in Brazil. It took Lula four attempts before he won the presidency in 2002, and by then he had to make compromises on what had originally been a socialist programme, including the repudiation of international debt. Yet another compromise was to buy the support of some small parties in the horse-trading atmosphere of Brasilia. Whether he was, in fact, the originator of the corruption network centred on Petrobras remains to be determined in the courts.

The race for the next elections has already started. The question is whether the law courts can knock out candidate Lula, now 71, prior to next year's poll before Temer, now 76, is himself implicated by association with others in his cabinet. Key personalities involved in the impeachment of Rousseff have themselves been caught in the corruption net through US-style plea bargains and Temer's party members in the Congress have begun considering a successor to him in the context of the prevailing distrust of the political class.

What is clear is that there will be further twists and turns over the next 17 months, even before a bitter presidential election. The outlook for the B in BRICS is therefore most uncertain, at least until a new president has taken office and Brazil has regained some of its erstwhile economic growth and social stability. These doubts, together with the cooling of relations between New Delhi and Beijing, cast a long shadow over the durability and efficacy of aggregations like BRICS, India-Brazil-South Africa (IBSA), Brazil-South Africa-India-China (BASIC), and the Shanghai Cooperation Organization, which have not served to create any new pole around which elements in discord with US supremacy could find comfort; at best these have proved to be issue-based gatherings. For India, building a new relationship with Washington, in spite of the unpredictability of President Donald Trump, apparently remains the highest priority for economic and strategic reasons, together with close ties with second-tier countries like Russia, France and Germany.

R. Bourne is the author of Lula of Brazil. K. Srinivasan is a former foreign secretary of India