July 8, 2015 / 11:26 AM / in 2 years

Clouds gathering, many in Brazil contemplate a Rousseff exit

RIO DE JANEIRO (Reuters) - The predecessor and mentor to Brazil’s president says she is running on empty.

Brazil's President Dilma Rousseff arrives to tour the NASA Advanced Supercomputing Facility at NASA's Ames Research Center at Moffett Field in Mountain View, California July 1, 2015. REUTERS/Stephen Lam

The chief opposition party says it is ready to take over.

And the leader of the lower house of Congress says Brazil should reconsider the role and power of the presidency.

This is not the usual jockeying of Brazil’s noisy, multiparty democracy.

Rather, the economic and political crisis now engulfing Latin America’s biggest economy is prompting politicians, economists and ordinary Brazilians to consider what once seemed unthinkable: that President Dilma Rousseff, re-elected less than nine months ago, might not finish her second term, which runs to 2018.

“It’s a real possibility,” says Carlos Melo, a political scientist at Insper, a São Paulo business school. “Bad policies and political stagnation have grown into something more urgent.”

No one expects Rousseff, a 68-year-old former bureaucrat turned energy minister, to step down tomorrow.

She has repeatedly said she will not resign. Impeachment would require proof, none of which exists so far, that she committed crimes or other wrongdoing, particularly with regards to a bribery scandal involving state-run energy company Petroleo Brasileiro SA, or Petrobras (PETR4.SA).

But the mere notion of political instability illustrates how far Brazil has fallen from its zenith just five years ago. Back then, as Rousseff rode the coattails of her predecessor into office, Brazil was aloft a commodities boom and considered a star among developing nations, posting annual economic growth of 7.5 percent even as the developed world staggered.

Now, Brazil’s economy is likely in recession, unemployment is climbing and inflation is galloping at nearly 9 percent, or double the official target rate, eroding purchasing power for the working-class most buoyed by the boom.

Meanwhile, the Petrobras scandal edges uncomfortably close to top aides, a federal auditor may soon reject the government’s 2014 bookkeeping and her approval ratings have plummeted to single digits, lower than any president in a quarter century.

On Tuesday, the Eurasia Group, a consultancy, raised the probability of Rousseff leaving office early from 20 percent to 30 percent.

“There is political risk beyond what anyone expected,” said Neil Shearing, senior economist at Capital Economics in London. “It’s not good for anyone trying to make investments or plans.”

Rousseff remains defiant amid the criticism and even recent rumors that suggested she attempted suicide, a claim she vigorously denied. “Don’t bet on that, people,” she said in an interview published Tuesday in the Folha de S. Paulo newspaper.

“I will not fall,” she told the paper, calling talk of her exit as “golpista,” or putschist.

Still, even members of her ruling Workers’ Party are rebelling.

The leftist party opposes her ongoing efforts to impose austerity measures, seen by most economists as essential after a prior term of bloated budgets and interventionist policies. Some party legislators have even voted to increase spending.

Former President Luiz Inácio Lula da Silva, the party’s biggest star and a possible candidate in 2018, has increasingly distanced himself from Rousseff, whom he plucked from obscurity and named the party standard bearer when he faced a constitutional term limit. Recently, he compared Rousseff’s standing to near-empty reservoirs of drought-plagued São Paulo.

A second term was not supposed to go like this.

Though Brazil’s economy stagnated soon after Rousseff began her first term, she retained enough blue-collar support to clinch re-election last October. Campaigning on a promise to expand social welfare programs, she vowed to improve education, health and other precarious services.

Because of the eroding economy, though, she changed course soon after, scrambling for ways to slash spending. Not only would few new investments be made, but some social programs, like a student loan mechanism, lost funding.

“It was really damaging to the base,” says one official who managed Rousseff’s response to a student backlash.

Support in Congress collapsed, too.

In February, the lower house elected Eduardo Cunha, an Evangelical Congressman, to head the chamber, with twice as many votes as those cast for Rousseff’s candidate. Although Cunha’s party in theory is allied with Rousseff, he has slowed her legislative agenda and recently said she was so weak that Brazil should switch to a parliamentary system.

Few are as emboldened as the centrist Social Democracy party, which last weekend re-elected as its leader Aécio Neves, the senator Rousseff defeated last October. The administration, Neves told reporters, was headed toward an “an interruption.”

His party, Neves said, is ready to govern.

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