BRAZIL-ECONOMY/INFLATION Many in Brazil contemplate a Rousseff exit amid economic crisis

Record ID: 147905

  • Title: BRAZIL-ECONOMY/INFLATION Many in Brazil contemplate a Rousseff exit amid economic crisis
  • Date: 10th July 2015
  • Summary: RIO DE JANEIRO, BRAZIL (JUNE 8, 2015) (REUTERS) VARIOUS OF ECONOMIST, MAURO ROCHLIN, SITTING IN HIS OFFICE (SOUNDBITE) (Portuguese) ECONOMIST, MAURO ROCHLIN, SAYING: "Inflation was much higher this quarter than during previous quarters, we are talking about record rates for some years, and the principle factors that contributed to these record rates were, in first instance
  • Embargoed: 25th July 2015 13:00
  • Keywords:
  • Location: Brazil
  • Country: Brazil
  • Topics: General
  • Reuters ID: LVA7782CBZUH68YHQKT1Q4BOVVP6
  • Aspect Ratio: 16:9
  • Story Text: The predecessor and mentor to Brazil's president Dilma Rousseff says she is running on empty. The chief opposition party says it is ready to take over. And the leader of the lower house of Congress says Brazil should reconsider the role and power of the presidency.
    This is not the usual jockeying of Brazil's noisy, multi-party democracy.
    Rather, the economic and political crisis now engulfing Latin America's biggest economy is prompting politicians, economists and ordinary Brazilians to consider what once seemed unthinkable: that Rousseff, re-elected less than nine months ago, might not finish her second term, which runs to 2018.
    Brazil's economy is edging towards recession, unemployment is climbing and inflation is galloping at nearly 9 percent, or double the official target rate, eroding purchasing power for the working-class most buoyed by the boom.
    Pensioner Maria Eduardo Lourenco in Rio de Janeiro said her fortnightly grocery shopping has doubled in price since one year ago.
    "I come to the market once a fortnight and a year ago I used to spend 70 reales. Today I spent 142. It has doubled in one year. Some prices have dropped in the market but most prices have gone up," Lourenco told Reuters on Thursday (July 9).
    Though Brazil's economy stagnated soon after Rousseff began her first term, she retained enough blue-collar support to clinch re-election last October. Campaigning on a promise to expand social welfare programs, she vowed to improve education, health and other precarious services.
    Because of the eroding economy, though, she changed course soon after, scrambling for ways to slash spending. Not only would few new investments be made, but some social programs, like a student loan mechanism, lost funding.
    The leftist party opposes her ongoing efforts to impose austerity measures, seen by most economists as essential after a prior term of bloated budgets and interventionist policies. Some party legislators have even voted to increase spending.
    Efforts by the central bank to meet the 4.5 percent inflation target next year will help consumer price inflation in Brazil converge to international standards, Rousseff told Folha de Sao Paulo newspaper on Tuesday (July 7).
    Although she urged the bank to remain attentive to any potential deflation signals. Rousseff said that the intensity of Brazil's downturn caught her by surprise and that she would do "whatever it takes" to attenuate it.
    Economist Mauro Rochlin explains that the inflation levels she must take control over have reached record rates.
    "Inflation was much higher this quarter than during previous quarters, we are talking about record rates for some years, and the principle factors that contributed to these record rates were, in first instance, energy, which increased by around 40 percent, fuel, the prices of which were very significant at the start of the year, gasoline and diesel in particular, and in third place, foodstuffs," Rochlin said.
    No one expects Rousseff, a 68-year-old former bureaucrat turned energy minister, to step down tomorrow.
    She has repeatedly said she will not resign. Impeachment would require proof, none of which exists so far, that she is connected to a bribery scandal involving state-run energy company Petroleo Brasileiro SA, or Petrobras.
    But the mere notion of political instability illustrates how far Brazil has fallen from its zenith just five years ago.
    Back then, as Rousseff rode the coattails of her predecessor into office, Brazil was aloft a commodities boom and considered a star among developing nations, posting annual economic growth of 7.5 percent even as the developed world staggered.
    Now the Petrobras scandal edges uncomfortably close to top aides . federal auditor may soon reject the government's 2014 bookkeeping and her approval ratings have plummeted to single digits, lower than any president in a quarter century.
    On Tuesday, the Eurasia Group, a consultancy, raised the probability of Rousseff leaving office early from 20 percent to 30 percent.
    The probability of this happening through impeachment, however, is currently very low explains political analyst Marcia Ribeiro Dias.
    "For a process of such type (impeachment) to happen, there first have to be juridical foundations, the situation has to fit into place with the constitution, and then the leader's own support base has to truly abandon her, which hasn't been the case so far. So we are speaking about impeachment when we don't even have the elements which could lead to an investigation which could then open the case for impeachment. The will is certainly coming from the political opposition, but this is not sufficient in order to open up a cause for impeachment, which is something very serious," Dias said on Thursday.
    Rousseff remains defiant amid the criticism and even recent rumours that suggested she attempted suicide, a claim she vigourously denied.
    Still, even members of her ruling Workers' Party are rebelling.
    Former President Luiz Inacio Lula da Silva, the party's biggest star and a possible candidate in 2018, has increasingly distanced himself from Rousseff, whom he plucked from obscurity and named the party standard bearer when he faced a constitutional term limit.
    Recently, he compared Rousseff's standing to near-empty reservoirs of drought-plagued Sao Paulo.
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