Emerging Markets

Brazil’s Impeachment Saga: Assessing A Potential Temer Administration

By Darli Magioni

Rousseff, TemerWith the Brazil’s Senate likely to put President Dilma Rousseff on trial, South America’s biggest economy may well see its political leadership shift into the hands of current vice president Michel Temer. What, thus, is to be expected from a potential Temer Administration?

A vote in the Senate that could force embattled president Dilma Rousseff to step aside will likely come in the second week of May, after a special senatorial commission decides whether to admit her impeachment process and put her on trial. As the vote approaches, her chances of surviving are increasingly diminishing.

Most Brazilians don’t want the president to remain in power, a fact that has underpinned the political movement against her thus far. Yet they are also highly averse to her immediate substitute, VP Michel Temer, who would stay in power for up to six months until the trial was over.

Temer — who hails from a different political party than President Rousseff — has been recognized as one of the major forces behind her impeachment. Until recently most people didn’t even know who was their VP was at all, as the position has typically not attracted much attention from Brazilian voters. His relatively unfavorable political status is undermined further by investigations regarding alleged connections with the Petrobras bribery scandal.


Tolerance to any mistakes made by an interim administration will be very low and any leader will struggle for confidence and legitimacy. As such, it will take a more broadly agreeable and consensus-forging political figure than Temer to break the political deadlock.

Removing President Rousseff is a difficult and politically risky task, and may also set an unwelcome precedent of placing blame for deeper structural on a single political figure. For now, her most bitter foes appear unwilling to rest until the presidency has been vacated, thus risking political paralysis nationwide. However, while Brazil’s underlying structural problems won’t be fixed in months, there is still room for improvement.

Parliamentary Politics

If the president is forced to step aside, the Party of the Brazilian Democratic Movement (PMDB) will be represented by the speakers of both houses of Congress and the new interim president, and will stand as country’s biggest party. At the same time, it is far from being able to govern by itself.

Ultimately, the deciding factor will be how well a possible Temer administration manages to remap the government in the next few months, especially in redistributing ministries. Unlike the ruling Worker’s Party (PT), which is somewhat an ideologically-oriented party, the PMDB is a party whose members belong to all parts of the political spectrum, giving it more flexibility to negotiate a coalition. Moreover, Temer is inherently more of a politician than President Rousseff. In a political system with 25 parties represented in the lower house, that kind of political maneuvering is a clear advantage.

The PT and its allies will continue a fierce campaign to delegitimize an interim administration, especially focusing on labeling the whole impeachment process as a coup. The party may even voice support for new elections (something that has the backing of 62 per cent of the population), counting on the possibility of a comeback for popular former PT President Lula. Nonetheless, greater risks come from elsewhere.

Three factors may undermine the work a possible governing coalition. First, there is little other than the goal of impeachment to hold those opposed to President Rousseff together. A closer look at last week’s vote  in the lower house shows that most of the necessary votes to approve the motion against the president came from a group of centrist parties with no clear natural alignments.

Second, there is disagreement in Congress over the fate of lower house speaker Eduardo Cunha, who is under intense pressure from charges of corruption. This debate may gridlock Congress further, and stifle the odds of a functioning government. Finally, it is not yet clear if the Senate will work to discuss any piece of legislation when and if the President goes on trial.

Fight Against Corruption

One of the worst fears among the population is that a new administration will attempt to stop investigations that might compromise their newly acquired power. While this may be attempted, the truth is that investigations by the Federal Police and the judicial proceeding for the Petrobras’s probe are too visible to be halted without consequence. Law enforcers, despite allegations of ignoring due process, are increasingly viewed as heroes in the prevailing situation, and the investigations can be expected to continue regardless of who is in power.

This is clearly a positive for the long-term development of Brazil, but these investigations also signal an unpredictable political environment in the short-term.

More key politicians will likely be implicated in the coming months, should the court find evidence of irregularities in the financing of the Rousseff-Temer ticket in 2014. The VP has already been mentioned in two different plea bargains.

Temer and Economic Policy

Turning towards finance, the PMDB is deemed to be more business friendly than the PT. Change in domestic economic policy is not without barriers, however. With an already delicate situation and an interim government likely to also face initially low popular support, reform is not to be expected.

Significant taxation would be political suicide, so any increase will be less than that necessary to reverse the fiscal deficit. On the other hand, other fiscal measures are complicated by the amount of mandatory federal spending, which can only be modified by Congress and will require many months of intense negotiations.

Taking history as example, the future strategy will likely consist of summoning technocrats into the government in a move to inspire confidence in financial markets, particularly regarding the finance and development ministries.

A key change would be the likely return of a more autonomous position for the central bank, since VP Temer, unlike president Rousseff, is far less fond of directly managing economic policy.

Courtesy of Global Risk Insights © 2016


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