Brazil : Temer wins again

With 251 votes in favor and 233 against, in the evening of 25 October 2017, the Brazilian Chamber of Deputies decided to dismiss the denunciations of obstruction of justice and criminal organization against the President of the Republic, Michel Temer.

Protesters calling for the ousting of Temer.

As in the case of the first complaint, filed in August, these will not be analyzed by the Supreme Tribunal Federal (STF) at least until Temer is in office (January 2019).

Temer saves, but at what price?

With this victory, Temer is likely to arrive until the end of the presidential term (end 2018), unless new and well-founded denunciations.

But at what price and under what political conditions? In order to obtain the consent of the majority of congressmen against the allegations, the government not only had to shell out billions of reais but virtually had to delegate to Parliament the management of the reform agenda and the conversion of some important decree-law into law. Despite this, the number of congressmen (251) who voted in favor of filing new complaints is lower than in August (263) and does not even represent the absolute majority of votes, since the House is made up of 513 deputies .

With this result, Temer‘s political force has been reduced: having received the presidency without being elected, with less than one year in front of the mandate, three complaints and only 4% approval in the polls, Temer can not ignore Parliament’s consent and the support of its chairman, Rodrigo Maia.

Rodrigo Maia strengthens

The President of the Chamber of Deputies was very skilled in handling the negotiations that preceded the vote on the two charges against Temer. With a weakened president, Maia is almost like a “prime minister” (a non-existent figure in Brazilian presidencialism), promoting the discussion and approval of fundamental laws and reforms for Brazil.

It remains to be seen whether Temer, released from “Damocles’ sword” of denunciations, will “bring into line” Maia and recover part of the credibility and power lost.

32.1 billion reais went away …

… in concessions and amendments to meet the demands of congressmen and carry favour with them in view of the vote. This is almost 19% of the state deficit expected for 2017.

As journalist Vera Magalhães brilliantly (and tragicomically) wrote yesterday, “the forecast of the result by which the Chamber of Deputies will file complaints against Michel Temer oscillates like stock exchange quotes, which depends on the price change of commodities, in this case the deputies. “

Games for the upcoming elections are open

It is known, and not only in Brazil, that the primary objective of the politicians in office is their own re-election. Considering that almost half of the Brazilian congressmen are being investigated for corruption-related crimes and public opinion is not exactly alongside them, there is a climate of strong concern in Brasilia.

In this situation, no one is interested, one year before the elections, to vote in favor of necessary but unpopular laws or reforms.

And now Maia appears as a “small-coaster ferryman”, capable of forming a parliamentary majority for urgent measures in the economic area and tackling delicate issues such as tax reform and pensions; but also to speed up the vote of popular (or rather, populist) law projects  in areas of public safety and health.

And now?

After the filing of the denunciations is likely a tightening of the battle between executive and legislative power, an “arm-wrestling” to decide on the agenda of reforms. Times are very tight, and there is a risk that reforms will be delegated to the government that will emerge from the polls in October 2018.

Rating agencies have already stated that the failure to reform pensions could lead to a downgrade of Brazil’s credit risk (today BB for S & P and Fitch, Ba2 for Moody’s), but the biggest risk is to stop the already timid economic recovery.

But who would be willing to take this responsibility and pay the political price? The most predictable scenario is the approval of “mini-reforms” (pensions and taxation), that will address only targeted issues, such as the increase in retirement age and the contribution period.

Article previously published on the excellent  “Update Brazil” and is available here.


Mauro Mantica

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