Economy struggles as Rousseff begins second term

GMT 21:24 2014 Wednesday ,31 December

Arab Today, arab today Economy struggles as Rousseff begins second term

Brazilian President Dilma Rousseff
Brasília - AFP

Brazil's President Dilma Rousseff will be sworn in for her second term Thursday before thousands of cheering supporters, but any moment of triumph will surely be short lived.
The world's seventh-biggest economy -- once booming -- has barely grown during the left-wing former urban guerrilla's first term, and she begins her next with her government dogged by scandal.
The ongoing probe investigation into a huge network of corruption at Petrobras, the state oil firm she used to chair, has tainted many of her allies and weakened her as she turns to the economy.
Rousseff won October's hard-fought election thanks to voters reliant on the extensive social welfare programs put in place a decade ago by her Workers Party predecessor Luiz Inacio Lula da Silva.
Her own term in office, however, saw mass street demonstrations that threatened to take the shine off even set-piece spectacles like the 2014 football World Cup.
She nevertheless defeated her right-wing rival Aecio Neves, who won over the business community but failed to convince workers that he could revive growth without drastic cuts.
Around 32,000 Workers Party faithful are en route to Brasilia in around 800 coaches to attend her investiture, seeking to drown out potential anti-Rousseff demonstrations.
She will be driven in a Rolls Royce down the Ministries Esplanade to Congress, where she will take the oath of office before heading to her presidential palace to make a national address.
- Credibility crisis -
"Rousseff starts the year laboring under a crisis of credibility -- not just because of the mess with Petrobras but because the country has lost international credibility," analyst Andre Leite of TAG Investments told AFP.
The Petrobras scandal and the ongoing police investigation -- dubbed "Operation Car Wash" -- erupted just a few months before Rousseff won re-election.
So far suspicion has fallen on 39 people, including former Petrobras directors and pro-government politicians, a network which allegedly laundered around $3.8 billion creamed off from inflated contracts.
Petrobras is facing legal action in the United States over investor losses emanating from a scandal that has seen the firm's stock plunge, and hit its creditworthiness and ambitious investment plans.
Aside from dealing with the crisis at the firm, Rousseff's priority will be to revive economic growth -- although economists expect 2015 to bring little cheer.
"One of the first steps has to be to regain budgetary credibility, to make adjustments for growth," says Leite.
A new economic team led by orthodox pro-market Finance Minister Joaquim Levy has set in motion moves designed to make savings, including a reduction in unemployment insurance.
The government also wants to attract more private investment to underpin investment in the country's crumbling infrastructure.
- Ministerial merry-go-round -
In forming her new cabinet team, Rousseff has been careful to offer positions to coalition allies, but that has already caused displeasure within her own party.
To the horror of greens, the landless and indigenous groups, she named as minister of agriculture Senator Katia Abreu, a supporter of agrobusiness dubbed the "chainsaw queen" by Greenpeace.
Rousseff opponents accuse her of wanting to expand agrobusiness to the detriment of small-scale farming and the environment.
"Now the agro-foodstuffs sector has support at the heart of the executive and will put more pressure on indigenous peoples," said Clever Buzatto, director of the Indigenous Missionary Council.
"They feel betrayed."
Another controversy arose with the nomination of new sports minister George Hilton, an evangelical priest from a small conservative party within the broad coalition.
Linked to the Universal Church of the Kingdom of God, Hilton replaces communist Aldo Rebelo.
Several of Rousseff's leftist colleagues as well as members of the Athletes of Brazil organization, including footballers Kaka and Cafu and national coach Dunga, have protested.
Hilton, who will oversee preparations for the 2016 Olympics in Rio, South America's first, was arrested in 2007 in possession of several suitcases containing $220,000 in cash -- allegedly donations from his congregation.
His arrest saw him expelled from his former party.

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