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| Caribbean-Latin America |
| Bribes For Votes In Brazil |
| 2005-08-16 |
| Impeachment proceedings started yesterday against former Brazilian Cabinet Chief José Dirceu. A series of interrelated corruption and political scandals have led to growing rumors that President Luiz Inácio Lula da Silva might be impeached or forced to resign in the near future. There has thus far been no evidence directly implicating Da Silva in the bribes-for-votes scandal. The governing Workers' Party (PT) is charged with irregular election campaign funding and funneling public funds through an advertising firm's bank accounts to buy support for key votes in Congress. The main uncertainties arising from the scandal are the likelihood of evidence emerging that could directly implicate Lula and trigger moves toward impeachment and the implications of the political crisis for economic performance and credibility. Thus far, both the media and opposition parties in Congress have evinced restraint in not encouraging an emotional and chaotic response to the scandal. This has allowed the government to contain the political crisis and avoid spillover into the economic arena. At first sight, this bodes well for continued prudent economic policy and acceptable economic performance. Notwithstanding the evidence of corruption and the resulting political crisis, international financial markets have remained sanguine to date, accepting the government's position that the economy will remain decoupled from the political crisis. However, it is not unprecedented for nervous investors to bolt at the slightest indication of a change in mood, thereby triggering a genuine financial crisis. The outcome of the political crisis lies in part with the business and financial community. It is precisely the well-managed economic policies and good economic performance that have kept the population and markets complacent. Lula has also been fortunate in the lack of external crises during his term. However, should economic fortunes suffer a sudden downturn, calls for actions against Lula could certainly intensify. There are at least three possible outcomes to the scandal. Best-Case Scenario: Even if Lula is not implicated, the threat remains that the political fallout of the final Parliamentary Investigation Committee reports will confirm the erosion of the government's parliamentary base. This would paralyze Congress for the rest of its term, stall enactment of urgent reforms and erode governability. It eventually could even destroy Lula's electoral base. However, short-term economic performance could remain largely unaffected if policy continuity is maintained. Middling Scenario: The opposition parties and the media could abandon their restrained attitude, possibly due to dissatisfaction with the progress and/or outcome of investigations in the Parliamentary Investigation Committee and Congressional Ethics Committee. Alternatively, a complete discrediting of the PT and Lula could serve the future electoral and political interests of sectors of the political class. Should this lead to the resurrection of accusations and revelations, Brazil could experience a long period of political instability and declining economic prospects. Worst-Case Scenario: If evidence emerges to allow for impeachment proceedings to be initiated against Lula, it will be difficult to ensure policy continuity. This is exacerbated by the fact that Vice President José Alencar, who would automatically take over as president, has been an outspoken critic of the economic team's austere monetary and fiscal policies. Lula's impeachment would represent complete disillusionment of the expectations placed upon him by the Latin American Left, giving greater weight to other "new Left" leaders, such as Venezuelan President Hugo Chavez. Moreover, impeachment would represent a grave setback for the Brazilian economy, as well as the dilution of painstaking efforts at democratic consolidation and institutional development over the past 15 years. The outcome of the political crisis and the resulting fate of the economy is still unclear. Much will depend upon how political elites interpret the situation so as to secure their own best (electoral) interests and upon whether or not international financial markets remain calm. |
| Posted by:anonymous5089 |
| #2 Moreover, impeachment would represent a grave setback for the Brazilian economy, That's counterintuitive; I'm not sure how getting rid of a socialist makes an economy worse. That, and I don't recall Nixon's or Clinton's impeachments affecting our economy at the time (yes, apples & oranges, I know). Maybe Paul Krugman can help with that one. |
| Posted by: Raj 2005-08-16 10:57 |
| #1 Lula is finished. If it will be by impeachment or not i dont know. But he and his party are in shambles. Lots of leftist tears (mainly journalists) here in Portugal... |
| Posted by: Hupomoque Spoluter7949 2005-08-16 09:33 |