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The Brazilian Crisis in 10 Points

What you need to know about Brazil’s current situation.

Tre Kwon

March 20, 2016
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The Petrobras corruption scandal and the unfolding Operação Lava Jato (“Operation Car Wash”) investigation has the country reeling. After recent developments, the corporate media and analysts are shrieking about an impending “government collapse” and “constitutional crisis.” For some time now, the streets have been overflowing with protesters calling for President Dilma Rousseff (Workers’ Party – PT) to step down. On the other hand, in 20 states throughout the country, hundreds of thousands demonstrated on Friday with the slogan, “There will be no coup!” — referring to the impeachment process against Dilma. In São Paulo, ex-president Lula attended a rally of about 150 thousand people crowding the avenue, mainly university students, PT militants and sympathizers. The protesters called less for the “defense of the government” and more for a halt to the government hijacking by rightwing forces. Numerous clashes between anti-government and pro-PT (or anti-coup) protesters signal the increasing polarization of Brazilian society.

The following is a rundown of key aspects of the current state of affairs in Brazil.

1. Dilma makes Lula “Super Minister”

After a series of injunctions and appeals, the Supreme Court decided to freeze his appointment. If Lula takes power, will this save the PT or heighten tensions?

The highly publicized corruption probe around the Brazilian Petroleum Corporation (Petrobas) scandal has stretched on now for two years. On March 4, it went into hyperdrive when authorities raided ex-president Luiz Inácio Lula da Silva’s home and took him in for three hours of questioning. Several days later, Dilma announced plans to make Lula her cabinet minister (chief of staff). What followed: Judge Sergio Moro, Lava Jato’s leading prosecutor, released 50 audio recordings including a secretly-taped phone conversation between the president and her predecessor. The media had a blast, painting a picture of foul play and fueling the notion that Dilma was rushing Lula’s appointment in order to protect him from the investigation proceedings.

The media, judges, and rightwing opposition leaders pushing for Dilma’s impeachment (or resignation, whichever comes first) claim the appointment will grant Lula immunity in all courts save the Supreme Court, which they say will act in his favor because many of its justices were appointed by Dilma and Lula himself. As rightwing forces converged on this story, protesters took the streets in fury.

Thursday morning, Dilma crowned Lula her chief of staff amid riotous scenes at the presidential palace. The appointment was blocked by a lower-court judge, whose injunction was squashed and then replaced by yet another injunction barring Lula from taking over the position. The decision ended up in the hands of the Supreme Court, which ultimately [suspended Lula’s appointment until Lava Jato resolves.

The PT today finds itself in a tough spot. If Lula takes his new position as “Super Minister,” the beloved former president may manage to breathe life back into the government. However, this scenario brings with it many risks and contradictions. First, it’s not a given that Lula will successfully implement a new economic policy — lighter on the austerity attacks, but with the desired effect of reversing the recession — even if he tries to woo finance capital by proposing neoliberal reforms and the elimination of pension and labor rights.

Can Lula circumvent blackmail by finance capital and prevent capital flight? And what will he do about the national and foreign corporations that refuse to invest? The PT has racked up an undeniable record of assaults on the working class and poor in the form of cuts to education and healthcare, racist police repression, and partnerships with members of the former military regime as well as the most rotten elements of the business and political elite. This should leave no room for illusions: Lula, like the rest of the PT, would continue to force the Brazilian working class to pay for the economic crisis.

Lula, like the rest of the PT, would continue to force the Brazilian working class to pay for the economic crisis.

Will his political prestige be enough to keep the balance of government in the PT’s favor, secure the support of the PMDB and prevent it from joining the opposition? Lula’s status as revered national symbol may quickly disappear as he takes the helm of a burning ship. The anger of the popular base driving last Sunday’s demonstrations will only burn hotter, further polarizing the country and pushing the government to the right.

On the other hand, if Lula does not assume power, Dilma, whose mandate to govern is now in shambles, may be forced to resign. At the cost of watching Dilma’s government go down in flames, Lula may preserve his chances for re-election. In the meantime, the PT may try to regain its composure by presenting itself as an opposition party that fell victim to a siege from the right.

Lula is likely making these calculations now. Contrary to what the press howls — that the ex-president is petrified at the thought of being detained by Judge Moro, that he’ll take the seat as cabinet minister only to escape prosecution — Lula sees the opportunities that may come out of being locked up by prosecutors who can not prove his direct involvement in the corruption cases; he would be honored with a “Mandela badge,” transformed into a hero who was once targeted by the right.

2. This crisis runs deep

The corruption probe has implicated 100 of 513 representatives of the Chamber of Deputies (lower house), 22 of whom are under active investigation, including Chamber Speaker Eduardo Cunha (Brazilian Democratic Movement Party, PMDB). Twelve representatives of the Senate have also been caught in the inquiry, most notably Senate President Renan Calheiros. So far, Lava Jato has led to 40 indictments on racketeering, bribery and money laundering. Charges have been brought against two Petrobras senior managers and 23 executives from six of Brazil’s leading construction and engineering firms.

Dilma is facing fire from all sides. She was board chair of Petrobras from 2003 to 2010, when much of the alleged corruption occurred, which leaves her in a compromised position. She has a standing case in federal electoral court for suspicions that she directed illicit funds from the corruption scandal into her campaign accounts.

In addition to the Petrobras scandal, she is dealing with impeachment proceedings in the legislature, propelled by the rightwing PMDB (in particular House Speaker Eduardo Cunha). The process was stalled for some months, but on Thursday, the Chamber restarted the process and formed a special committee to investigate allegations that Dilma illegally tampered with the federal budget to conceal the widening deficit. The committee will vote on whether to advance the impeachment, which will move on to the Senate if two-thirds of the Chamber are in favor.

3. Mobilizations on both sides

Anti- and pro-government protests have touched all corners of the country and have grown significantly since last year. During Last Sunday’s anti-government protests, an estimated one million people rallied in all 26 states. The largest gathering took place in São Paulo, with an estimated 350 thousand people . While not as big as the police and rightwing media predicted, these mobilizations have still stirred enough attention to alter the relation of forces.

The ongoing protests have dealt Dilma a heavy blow and elevated the “Judiciary Party” (see below, #7) as the principal arbiter of the current crisis. At the same time, the protests show that the crisis goes beyond the interests of the oppositional leaders, throwing the entire political establishment into the fray. Far from easing the situation, Lula’s appointment as “Super Minister” may only make the situation hotter.

4. Economic recession

This all comes at a time when the country is facing its worst recession in over 25 years, with no signs of relief on the horizon. Inflation is up, unemployment has risen to 7.9% — the lowest labor force participation rate in nearly 13 years. Last week, the Brazilian currency fell 7 percent to 3.05 per dollar and stocks fell more than 3 percent — due at least in part to investor concerns that the political maelstrom will interfere with fiscal adjustments and cause Brazil to lose its investment-grade status.

Inflation is up, unemployment has risen to 7.9% — the lowest labor force participation rate in nearly 13 years.

Case in point: in early March, Finance Minister Levy’s budget-cutting plan took a hit when Senate President Calheiros blocked an austerity measure for “procedural reasons”: most likely retribution for not keeping his name clear of the corruption probe.

Zoom out, and we see an economic recession sweeping the southern cone after decades of “post-neoliberal” governments. Always betting on imperialism’s prospects, analysts are tsk-tsking and calling the region “toxic territory” for foreign investors. “Progressive” populist governments are being forced to turn in the carrot for the stick — or are being altogether supplanted by the Right — in order to fend off an economic slowdown and keep the machine going for the national and international bourgeoisie (for more, read “South America’s Conservative Turn” ).

5. This is just the beginning of austerity

All sectors of the ruling class are singing the same tune: the austerity attacks implemented by Dilma’s government are not enough to recuperate the rate of growth and secure corporate investments. They are calling for more, to go further than the sale of the giant “pre-salt” oil reservoir negotiated between Dilma, Senator José Serra (Brazilian Social Democracy Party, PSDB), and Senate President Renan Calheiros (PMDB); the privatization of Petrobras; the elimination of 1.5 million jobs, pension cuts, reduction of wages.

All this is still not enough. The economic situation and Brazilian bourgeoisie are calling for more cuts to social spending, more privatization, a moratorium on holiday bonuses and paid vacation, and the handing-off of national resources to finance capital.

6. No more wiggle room for class collaboration

Dilma’s government will continue to implement as many attacks as the relation of forces allow. The PT rose to power on a program of “class collaboration” during a cycle of exceptional economic growth, whereby President Lula fashioned his popularity. However, the national economy’s subsequent downward spiral has sharply reduced the possibilty for populist programs and concessions. From Dilma’s perspective, the only viable option is a swing to the right, which means the gradual escalation of confrontations with the same social base that brought her to power.

Over the last couple years, the PT party establishment and Lula in particular have exploited the bad cop, good cop strategy to the fullest to preserve themselves for future elections (2016 and 2018): Dilma did the dirty work of passing unpopular policies while Lula and the PT-dominated unions sat back and shook their heads. But now, the combined actions of the right oppositional figures, the “Judiciary Party” and the conservative media have pushed Dilma against the ropes.

From Dilma’s perspective, the only viable option is a swing to the right, which means the gradual escalation of confrontations with the same social base that brought her to power.

7. The “Judiciary Party”: A new political actor takes stage

The economic crisis and the wearing-down of the dominant parties have proven to be major obstacles to the implementation of the solutions put forward by the traditional political actors.

The “Judiciary Party” (a term used to describe the composite power of the judiciary system that has emerged as an influential player in the current landscape) is ostensibly taking on “corruption” with the aim of renewing the image of the political system to legitimize the government’s attacks on living conditions and Brazil’s national resources.

This isn’t to say that bribery, money laundering, and kickbacks don’t happen all the time, on all levels. Nor are we implying that the PT and scores of business elite are not tied up in the gutting of public assets. But today’s scenario and its main protagonists (courts, media, and rightwing politicians) have more to do with a rising opposition from the right and the continuation of austerity and privatization — and less to do with “corruption-busting.”

8. Two strategies to oust Dilma

The Brazilian Social Democratic Party (PSDB) also faces problems of its own. Let’s say the oppositional forces behind Lava Jato and the impeachment process are successful in pinning down Dilma for the crime of failing to carry out the fiscal aims voted by Congress. While they would gain the advantage of winning over Michel Temer (Dilma’s Vice President and member of the PMDB) and his wing within the PMDB, they would still be left to deal with a glaring contradiction: that they sacked Dilma on charges that could be brought against most federal and state officials, which brings the legitimacy of the process into question. Also, if the PSDB continues to push for legal challenges against Dilma-Temer for corrupt campaign financing, it would need to come up with plenty of evidence and the process would likely push Temer and his supporting base into Dilma’s camp.

The Brazilian Social Democratic Party (PSDB) also faces problems of its own.

In the case of a Temer-PSDB government, the PT-led unions and social movements could form a strong opposition to austerity policies and serve as a springboard for a presidential bid by Lula in 2018. If the 2014 elections are deemed invalid and new elections are called in 90 days, PSDB candidates are a far cry from an easy victory.

The PSDB is dealing with fratricidal disputes for the presidential candidacy among Alckmin, Aécio and Serra, beating back bribery allegations against Aécio Neves and accusations against São Paulo Governor Geraldo Alckmin’s for the robbery of school cafeterias. An alliance with the PMDB would be of little help, since the PMDB’s own Renan Calheiros, José Sarney Michel Temer are far from models of honesty.

9. Will this be a Brazilian “Mani Pulite”?

Though taking a primary role in the current stage of the crisis, the “Judiciary Party” has no easy alternatives at its disposal. If it continues to act in a blatantly partial manner, targeting the PT and protecting the opposition, it may lead to an erosion of the courts’ image. If instead it levels a “balanced” attack against both sides in order to maintain legitimacy — carrying out its vows to “clean house”– and in the process Brazil’s main public figures and ruling political parties go up in smoke, the panorama of the political system may get worse.

We can consider the case of Italy during Mani Pulite (“Clean Hands”), nationwide judicial inquiries that took place in the 1990s and brought thousands of public figures and half of Italian Parliament under suspicion of corruption. The vast investigation led to a major political crisis which eventually forced most leading politicians to resign or go into exile. The main political parties disintegrated. The Italian Community Party (PCI) at the time managed to stay outside the scandal and eventually transformed itself into a new reform party. It gained newfound hegemony in the vacuum left by a gutted political system. Its consolidation in the trade unions allowed the PCI to play a key role in the creation of a new regime and a national consensus around the neoliberal governments to follow.

Will it be possible for the PT to build a “great national consensus”? If we take the Italian example as a blueprint, the PT’s position as central subject of the Lava Jato operation forecloses any chance of this. It will be difficult for any kind of stable government to emerge from this crisis.

In the same instance, Delcídio Amaral has brought charges against Aécio Neves (President of the PSDB), Lula, and Dilma; could this a sign that the “Judiciary Party” is willing to wage a battle on all fronts? Is it a sign that the courts will reign in the opposition’s more radical wings in order to fortify a broad agreement, or could this mean that the judge’s party is willing to go beyond, to make way for a new political system with a new set of players?

10. For an independent working class movement.

Against the ruling PT’s cuts, privatization and repression, as well as the rising rightwing opposition, which is taking offensives measures through the media, the courts, and government offices.

The political situation in Brazil is at a strategic impasse in which none of the dominant political forces are capable of constituting a minimally stable government.

The political situation in Brazil is at a strategic impasse in which none of the dominant political forces are capable of constituting a minimally stable government.

So far the interventions “from below” have not charted an independent course for the masses and working class. Regardless, the current and future governing forces will face all kinds of political and economic barriers and find great difficulty in securing stability and implementing austerity policies that the bourgeoisie requires.

These crises can give way to favorable conditions for the development of processes of class struggle (as we see taking place today in Rio de Janeiro) and the independent intervention of certain sectors, for example, among high school students in São Paulo last year and in June 2013 as well as in numerous strikes by garbage collectors and drivers.

This is an adaptation of an article written in La Izquierda Diario.

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Tre Kwon

Tre is a writer and editor for Left Voice. She is a nurse and member of NYSNA.

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