Political Scandals Push Brazil to The Brink

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Demonstrators protest against Brazilian President Dilma Rousseff and the ruling Workers Party (PT), at Paulista Avenue in Sao Paulo, Brazil on August 16, 2015.
From and

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Many hoped the year 2000 would usher in the “century of Brazil”—the nation's fast growing economy was supposed to lift millions of Brazilians out of poverty and into the middle class. But it appears that the opposite has happened as the nation of 200 million battles a full blown political and economic crisis.

“The economy is the worst [it’s been] in the lifetime of many Brazilians,” says Juliana Barbassa, author of "Dancing with The Devil in The City of God: Rio de Janeiro on the Brink.” “Brazilians are notoriously impatient with a government that fails to control the economy. People have in their living memory hyperinflation, living within conditions that don’t allow you to plan for the end of the month. They have very little patience for presidents that lose control of the economy.”

Unemployment in Brazil just hit 7.5 percent, and the nation could be facing its worst recession in 25 years. Though the government is putting in place a number of belt-tightening measures—including raising taxes, increasing the cost of gas, and hiking interest rates—Barbassa says that it’s up to markets to decide Brazil’s economic future.

“[These measures] are likely to leave the population hurting even more,” she says. “They might improve the economy in the medium run, maybe in the long run, but it’s a very difficult moment because things are going to feel worse for the population before they feel better. Politically, the government may not survive to see the benefits of this.”

Amid the economic uncertainty, protesters have begun calling for the impeachment of President Dilma Rousseff. She's embroiled in a massive corruption scandal involving multi-million dollar bribes and the state-owned oil company Petrobras.

“The scandal that we have unfolding now is definitely of a magnitude that many people have never known,” says Barbassa. “This is something they’re willing to be patient with—we’re seeing investigations of a caliber that we’ve never seen, so that’s very promising.”

In March, government prosecutors asked the Brazilian Supreme Court to investigate 34 sitting politicians accused of soliciting hundreds of millions of dollars in kickbacks from Petrobras executives. President Rousseff, who was chairwoman of the Petrobras board when the alleged wrongdoing occurred, denied knowledge of it.

The situation took a turn for the worse this weekend, with a judge ordering an investigation into Petrobras donations going to President Rousseff's 2014 re-election campaign.

“Very powerful people are being named,” says Barbassa. “The speaker of the House, the head of the Senate, the heads of some of the most powerful companies in Brazil, they’re all involved—they’re either charged or under suspicion. Novel things are happening here, things that could possibly have a very positive result, but it’s also very possible that Brazil may face tremendous turmoil and the knocking down of some very powerful people before we’re able to move forward as a country and see things improve.”

Petrobras is also fighting to stay solvent. The state-run oil giant is currently drowning in more than $119 billion in debt, and with oil prices falling, the company is selling assets to reduce its debt burden.

“This is a pivotal moment for Brazil—for the government of Brazil, for the statist approach to managing the economy, and Petrobras is part of that,” says Barbassa. “But I believe this corruption scandal involves much more than Petrobras. It involves the big construction companies, it involves politicians of both governing parties and the opposition parties, but Petrobras has become a symbol of it.”

The summer Olympics, one of the biggest sporting events on the planet, is coming to Rio de Janeiro in 2016. And Barbassa says that the companies responsible for building the infrastructure for the summer games are among those facing corruption charges.

“I do believe that when the Olympics comes to Rio, the main event will be sports and the city,” she says. “The bigger question is, at what cost are we going to pull this off—as a nation, as a city, and as a people? What are going to be the legacies of these events during this very pivotal moment with the economy and politics?”