Brazil After Dilma: Temer’s Turn

After more than nine months of paralysis over President Dilma Rousseff’s impeachment process, Brazil can finally move on. Rousseff was impeached last week, and despite her claims that this was a political coup and a step back for democracy, her removal from office was legal under Brazil’s constitution.

Rousseff’s government used funds from state-run banks to pay regular expenses, such as the praised Bolsa Família program that provides a monthly stipend to Brazil’s poor. These upfront payments were considered loans to the federal government, which require congressional approval. But she didn’t seek approval and disguised a deficit in the public accounts. Under Brazil’s fiscal responsibility laws, this is not only illegal but also an impeachable crime.

Would former President Luiz Inácio Lula da Silva have run into the same fate if he had broken this law to the extent Rousseff did? Probably not. Rousseff’s misfortune was Brazil’s conditions for a perfect storm: the worst economic crisis in the past 100 years; a massive corruption scandal, Lava Jato (car wash), involving the state-run oil company Petrobras; a fallout with members of Congress, including those of her own party; and the lowest popularity levels of any president. Corruption scandals under Lula’s administration did not reach the magnitude of Lava Jato, and he weathered the global financial crisis just fine. Furthermore, Lula enjoyed an 82 percent popularity level before leaving office, while Rousseff’s had plunged to 8 percent.

Rousseff’s inability to govern the country had become so damaging that Congress looked for an excuse to fire her and found one.

It is now Michel Temer’s turn. He was Rousseff’s vice president and had been interim president since May when Rousseff was suspended. He is now the official president of Brazil until the end of the term in 2018. Temer is no one’s favorite. Despite his wide unpopularity, most Brazilians seemed to believe that anyone would be better than Rousseff.

Nevertheless, back in May, two ministers in Temer’s newly appointed cabinet, including the minister of transparency, supervision and control, had to resign almost immediately over allegations of their involvement in the Lava Jato corruption scandal. Furthermore, Temer was convicted of breaking campaign finance rules and thus banned from running for office.

As a career politician and skillful negotiator, Temer should be able to push forward some of the unpopular measures Brazil desperately needs. Those reforms include decreasing public spending — a proposal that will require a constitutional amendment — and pension reform to reduce growing retirement spending. The latter would involve revising the minimum retirement age, which has and will continue to cause great resistance among unions. After all, Temer has nothing to lose; he is already widely unpopular and can’t run for president after this term.

Investors seem to favor the change in the commander in chief. Temer’s assembly of an impressive economic team, which includes Finance Minister Henrique Meirelles and Ilan Goldfajn as head of the central bank, boosted the market’s confidence in the country. The real has strengthened against the dollar, and the country’s Bovespa Index has risen by about 35 percent.

To maintain market confidence, Temer will need to send a strong signal showing he can push through the constitutional amendment to curb growth in public spending. As a key member of Brazil’s largest political party, Partido do Movimento Democrático Brasileiro (PMDB), Temer is expected to have the clout to summon the necessary support in Congress to pass some of these politically sensitive and unpopular reforms.

Tensions between Temer and Rousseff were no secret, especially after the leaked recordings that helped oust two of Temer’s ministers. Temer’s ability to implement the difficult reforms Brazil needs will determine whether his legacy will be as the person who reconciled the country or as the usurper of Rousseff’s presidency.

Erika de la Garza is the program director of the Latin America Initiative at the Baker Institute. Her chief areas of interest include U.S.-Latin America relations; emerging leadership; coalition building between public, private and civil society actors; and trade and business development in Latin America.

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