Brazil’s Drama Of Unpredictability


*This article was originally published by Fair Observer.

Manuela Andreoni | As Brazil braces for its most important election in decades, hopes of stabilization are dwindling. The country is slowly stepping out of an almost three year-long recession, but uncertainty over what will happen at the ballot boxes later on this year is pushing debate on how to resume growth into a distant future. The main reason lies in the wide-ranging corruption investigation, which has sent over 100 officials to the political equivalent of a guillotine. The possibility of a conviction for corruption might bar even the leading presidential candidate, former President Luiz Inácio Lula da Silva, the leader of the Worker’s Party (Partido dos Trabalhadores, PT), from running for office.

Lula was sentenced to more than nine years imprisonment for corruption and money laundering in July last year, and a federal court will hear his appeal on January 24, 2018. An unfavorable decision would stop his campaign short. The divide over his fate evidences how polarized Brazil has become. The judiciary itself is playing a prominent role in this process of fragmentation. An analysis by Bertelsmann Stiftung’s Transformation Index (BTI), a project that evaluates the quality of democracy, market economy and governance in 129 developing and transition countries, points to the fact that the lead prosecutor, Federal Judge Sérgio Moro, was accused of unilaterally investigating members of the PT. Meanwhile, acting President Michel Temer already indicated that the battle against corruption is not a focus of his presidency. For good reason, as the forthcoming 2018 BTI country report states, “Various corruption allegations have threatened to destabilize his government, implicating at least half a dozen members of his cabinet and even the president himself.”

According to early opinion polls, over 30% of voters would vote for Lula, putting him around 20 percentage points ahead of the second most popular candidate in multiple scenarios. At the same time, 54% of the country would like to see him behind bars. “He is obviously the candidate with the best chances to face the elections, if it depends on the inclination of voters,” says Fabio Wanderley Reis, a political scientist and emeritus professor at the Federal University of Minas Gerais. “The obstruction of his candidacy could have dramatic consequences.”

The overwhelming impact of the corruption investigations, which started with Operation Car Wash in 2014, came with drastic reforms in the Brazilian electoral system. Now it is illegal to receive donations from corporations, traditionally the main funders of presidential campaigns, and online campaigning through social media has been made legal, making way for new electoral strategies.

Possible Outcomes 

Professor Nara Pavão, a political scientist with the Federal University of Pernambuco, sees two contradicting options about what might happen after polling stations close this October. The first one is that, in possession of information about corruption allegations against traditional politicians, Brazilians will choose newcomers. The scenario could favor candidate Jair Bolsonaro, a radical right-winger who supported Brazil’s military dictatorship and its practices of torture. He ranks second in most early opinion polls.

The other scenario, Pavão says, is that, amid chaos and knowing that most of the politicians they have ever known are somehow involved in corruption scams, those issues will cease to be a deterring factor, and voters will go back to what they know. This scenario favors candidates from the two big parties that have run the political establishment for the last 20 years, the PT and the Social Democratic Party (Partido da Social Democracia Brasileira, PSDB), which will run with São Paulo State Governor Geraldo Alckmin. While Alckmin’s popularity in the country is in the single digits, some analysts believe a familiar face might appeal to voters in a scenario of chaos, even though Alckmin is grappling with his own corruption scandal.

The Impacts of Instability

The unpredictability of politics fuels anxiety surrounding the country’s future. “The expectation that things might settle down is precarious,” says Wanderley Reis. “There are multiple possibilities that would mean even more intense drama.”

The reluctance of Brazil’s congress to approve President Michel Temer’s much promised pension reform is the latest example of the impact the instability has for policymaking. Those were some of the conclusions the rating agency Standard & Poor’s came to as it downgraded Brazil further into junk-status territory, from BB to BB-. “The uncertainties surrounding the election outcome, in our view, make it less likely that a new president with solid political capital could be able to quickly pass constitutional changes to meaningfully alleviate spending and revenue bottlenecks,” its report said.

As Brazil pushes debate over reforms to give way to its contentious elections, challenges to lifting the country are mounting. With more than 30 political parties, the country needs to find a way to stop political fragmentation in order to construct more stable administrations. Coming out of a persistent recession that depleted Brazil’s ability to invest, the next administration will have to concentrate on recovering the state finances while making social programs more efficient. “The right mix of intervention and laissez faire will be of crucial importance,” the 2018 BTI country report on Brazil concludes.

There is a possibility that the thirst for stability necessary for these reforms might overcome uncertainties. Some share hope for a more predictable country after the 2018 elections. “Elections have this function of restoring the political pact in a country,” Pavão says. But the reaction to Lula’s fate could drag an already exhausted society to the peak of drama, demolishing the possibility that the elections could pave a way to solving the country’s many conflicts.

*This article was originally published by Fair Observer.

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The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.