BRAZIL-Still talking but not acting

Still trying to figure it out?

With 2016 threatening to look much like (or worse than) 2015 I am constantly asking myself what they might be smoking up there in Brasilia.

As I wrote early in 2015, Brazil has a rather generous indemnity policy when an employee is dismissed. The dismissal indemnities are usually enough to allow the employee to survice financially from 3 months to up to a year (or more depending on length of service and salary level). However, since job loss has started and is increasing, the delays in enacting some sort of fiscal adjustment program suggest that job-loss indemnities might be running out or have already run out. With the economy continuing to decline, this is a most cruel situation for the growing ranks of unemployed.

Added to the misery are the effects of El Niño that have led to heavy rains and flooding in the South of Brazil where 28 municipalities have declared emergency conditions. Most of the flooding occurs in the poorer neighborhoods where many residents are part of that newly arrived middle class of Class C consumers live. They were the consumers that Dilma encouraged to consume and purchase new appliances that have now been destroyed by floodwaters and for which they are still making payments. It’s downright ugly!!

But that is not the reason for this blog post.

You probably remember the protests of 2013 when millions of Brazilians took to the streets to demand an end to corruption and the impeachment of Dilma Rousseff.

In response to the demands of an angry electorate, the Congress rushed to pass bills that had been pending, some for as long as 10 years. That done, the Legislature once again sat back and hoped the demonstrators would be placated.

The question of whether Dilma Rousseff can or cannot be impeached is still a matter of discussion. The 1988 Constitution contains a long list of impeachable offenses. You would think that over two years, legislators would have had time to check the list to see if anything Dilma did is on it.

Just to make sure the Congress knew what it was doing, the Supreme Court, on December 18^thcame out with its own version of the “protocols” for impeachment and changed a couple of things. But there was still no mention of whether Dilma had or had not committed any impeachable offense. Now we won’t know the answer to that until February or March, 2016.

Fiscal adjustment programs that were drawn up to correct the current and worsening fiscal imbalance were scuttled and a new one has emerged. Dilma is now in the throes of proposing yet another Accelerated Growth Program (PAC in Portuguese). This, I presume, would be PAC3.

The “new” program will emphasize civil construction projects that usually are quick to hire workers once approved. This may or may not be what the doctor ordered, but it might help the government in the mid-term elections this year. (Assuming, of course, that the government is concerned about that!).

Maybe PAC3 is the reason why Dilma has proposed “leniency” agreements for some of the construction companies that were accused and found guilty of financial malfeasance in the Petrobrás financial scandal. The agreements, if approved, would allow them to return to bidding on public tenders. On the other hand, Dilma has so often announced her antipathy for corruption that there may be some other reason for proposing the agreements, or no?

Dilma also announced plans to resurrect the National Council for Development, a.k.a. the Chamber of Management, Performance, and Competitiveness (killed and buried in 2014), with some “notable notables” from the private sector. It will be interesting to see who shows up!

Meanwhile, and until Carnaval arrives in the first week of February, the effort to protect Dilma from impeachment will continue to occupy the hearts and minds of the administration while simultaneously trying to get the economy moving again.

Analysis:

One quick way to show positive news would be to turn all the graphs of last year’s economic indicators upside down. They would all wind up pointing in the right direction!

Another would be to hope for continued problems in China that could be used to justify yet another “international crisis”. Dilma’s mentor (no, not Lula, rather Leonel Brizola, who, it has been reported, taught Dilma everything she knows about politics) was noted for his constant references to “international losses” (“perdas internacionais” in Portuguese) as the main cause of all of Brazil’s problems.

Unfortunately, Brizola passed away before he could tell anyone what he meant by “international losses”. (It might have helped if we had known what he was talking about!)

Dilma’s more recent mentor (this one is Lula) is reported to have suggested she take US$130 billion of Brazil’s hard currency reserves to finance a “vigorous” infrastructure and investment drive. (Maybe that’s what Brizola was referring to as “international losses”!)

So, for the next couple of months, you can be prepared for continued discussion of what caused Brazil’s current malaise and lots of TV appearances and photo-ops of Dilma and her inner circle telling us that help is on the way.

But, don’t expect anyone to actually DO anything!

Meanwhile, I’ll be looking behind the scenes to see what might really be going on! I’ll keep you posted.