BRAZIL-Get ready!

One down, 342 to go!

The PT has lost its first skirmish in the War of the Kleptocrats. Thirty-eight members of the Special Commission voted to send its report to the Lower Chamber for consideration in a plenary session versus 27 against. In the plenary session 342 votes will be required for impeachment.

Today’s press reported the impeachment scorecard in the plenary session as follows:

• In favor: 299
• Against: 123
• Undecided: 48
• Undeclared: 43

Both sides are disputing the remaining votes in a neck-and-neck, no-holds-barred race to the finish line. Pundits suggest that the odds favor impeachment.

The voting in the Special Commission was an example of raucous democracy – some chanting, some singing and a lot of catcalls. A good time was had by most!

The next steps will at least be interesting. It dawned on many who opposed sending the report to the Lower Chamber that the person who will lead the process in the Chamber will be Eduardo Cunha who is under investigation in Lava-Jato and also facing a Congressional Inquiry that could cause him to lose his mandate.

Seventy-five percent of the interviewees in a recent poll want to see Cunha “out”. Sixty-one percent want to see Dilma impeached and fifty-eight percent don’t want to see Michel Temer in the presidency. That pits the antagonists against the preferences of the public-at-large as well as against each other.

If Dilma loses in the plenary session she has to step down for 180 days and the Senate will conduct her trial. Senate President Renan Calheiros is also under investigation by Lava-Jato and is hoping to get out from under the charges. He has been courting Dilma, calling for new elections, and setting little traps for Temer, whose impeachment has also been solicited. However, I expect Calheiros to try to wind up on the side that is winning.

It’s a plot worthy of the most convoluted closed societies anywhere. When “putsch” comes to shove, Lava-Jato will be the referee. 

I am reminded of the mob wars in New Jersey in the 50s; the big elaborate funerals with the biggest floral arrangements sent by the guys who ordered the “hit”, the “mourners” in their large, dark sunglasses, and the FBI running around in grey fedoras taking pictures of those present.

The US authorities quickly learned that while the “wise guys” were engaged in an internal power struggle, it was best to leave them alone. They were killing each other and at the end of the day, there would be a smaller number of “wise guys” to deal with.

The PT is now in a war with the PMDB (and others) that at the end of the day will result in only one kleptocratic group to deal with. As long as Lava-Jato can survive in the background, neither group of kleptocrats can assume total control.

As I mentioned in previous posts, this is a two-phase process. First, let the kleptocrats do as much damage as possible to each other, then move in to clean up the rest.

Your dominant strategy is to rise above the fray. Protect the enterprise, prepare for the final outcome, and be prepared to “work in the gaps” that develop as they appear. A robust compliance program and a good management team is sufficient to “armor” the enterprise against crisis.

Power abhors a vacuum and if it cannot be filled with “more of the same” power, youwill realize opportunities.

Power struggles, whether in legitimate business, warfare, or crime invariably develop “gaps” that can be occupied. While the US mob engaged in internecine warfare and fought the FBI at the same time, Mexican and Colombian drug cartels entered the market. While Polaroid continued to develop and promote self-processing instant photographs, digital cameras invaded the market.

You can pretty well count on a PT reaction in the form of union activities such as work stoppages, factory occupations, increased product rejection rates, slowdowns, threats against employees and the enterprise and violent street protests etc. if Dilma is impeached.

If she is not impeached in the Senate, she will return to office and economic policy will be chaotic. Tax increases, excessive public spending, rising inflation in response to a growing public deficit and even direct interventions such as price controls, penalties for dismissals will be increasingly likely as 2018 approaches.

Consider the following actions:

• If you are in the manufacturing sector, you might want to consider engaging with your first-line supervision to keep you informed as to the work-place environment on the factory floor.
• You should use your HR personnel to encourage any employees that have received threats to report them to management (or use a company “hotline”).
• Check your inventory levels to make sure actual physical product matches recorded levels
• Monitor product rejection rates and waste closely to identify abnormal increases
• Set up cost control groups and reward employees who provide suggestions or solutions to make operations more efficient
• Engage with employees to encourage and reward any contributions to recovery and emphasize their value as participants in a recovery process