To dig the country out of a deep recession

Brazilian business leaders back impeachment to revive growth

GMT 09:09 2016 Tuesday ,19 April

Arab Today, arab today Brazilian business leaders back impeachment to revive growth

Opponents of the Brazilian government take part in a protest demanding the resignation of President Dilma Rousseff
Brasília - Arab Today

Brazilian business leaders and the opposition are banking on President Dilma Rousseff's looming impeachment to dig the country out of a deep recession.

But her potential successor would have to take tough measures that could prove unpopular amid a tense political environment in Latin America's economic powerhouse.

The prospect of the unpopular leftist leader losing her job increased on Sunday when the lower house of Congress voted to send her impeachment case to the Senate.

Vice President Michel Temer, who broke ties with Rousseff, could take over by mid-May if senators agree to open a trial and suspend her for six months until a final vote on her ouster.

Temer, of the centrist PMDB party, would face abysmal economic figures that have worsened during the political standoff.

The economy shrank 3.8 percent in 2015, the worst single annual fall in GDP since 1990, and the International Monetary Fund is forecasting the same drop this year and zero growth in 2017.

Last year, unemployment rose to 6.8 percent, inflation reached 10.67 percent (its worst level in three years) and industrial output contracted by 8.3 percent.

Temer has warned that the country will have to make "sacrifices" to kickstart the economy and fix public finances.

The opposition is seeking Rousseff's impeachment on charges that she illegally manipulated public accounts in order to conceal a budget deficit during an election year. She counters that other presidents have done the same.

Public debt soared to 66.2 percent of gross domestic product last year, a 10 percentage point jump from the previous year. The fiscal deficit more than tripled to 1.88 percent of GPD in 2015.

Three international ratings agencies have downgraded Brazil's debt to junk status.

- Pro-business Temer -

Trade associations like the CNA agriculture confederation and the Sao Paulo industrial federation publicly voiced support for Rousseff's impeachment, blaming her for the country's economic ills.

"We call on the Senate to continue the actions undertaken until now to move toward the changes demanded by society," the CNA said in a statement.

Analysts expect Temer to pursue market-friendly policies if he becomes interim president.

"Temer is likely to embark upon an ambitious economic reform agenda that puts pension and fiscal overhaul on the table," international consultancy Eurasia wrote in a note on Monday.

"We are skeptical over Temer's ability to approve measures that have a short-term impact on spending, but his team is clearly of the view that putting structural economic reforms on the table is the only way to generate a positive shock of expectations," it wrote.

While Temer would have a friendlier Congress on his side to seek reforms, the left would likely do everything to make his life more difficult.

Rousseff's administration tried in 2015 to pass cuts in social programs and new taxes through Congress, but lawmakers did not approve them and the crisis deepened.

Temer, who would finish out Rousseff's term in December 2018, could compromise his chances at being elected if his economic plan is too radical.

Unions and leftist groups that have traditionally supported Rousseff's Workers' Party held protests against her own bid to make cuts in social programs last year.

"A readjustment through neoliberal means is expected, such as a reduction of the state's participation (in economic activity) or a relaxation of labor laws," independent economist Felipe Queiroz told AFP.

But, he said, "such measures would fuel recession and loss of popularity."
Source :AFP

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