Brazil’s Supreme Electoral Tribunal, or TSE, has agreed to open an investigation into allegations that President Dilma Rousseff inappropriately used state funds to finance her re-election campaign, while another judicial body, Brazil’s federal accounts court, or TCU, ruled that Rousseff’s government manipulated its books last year to conceal a widening fiscal deficit as she campaigned for re-election. The decisions were hailed by opposition leaders who have been calling for Rousseff’s impeachment. Do the rulings increase the likelihood Rousseff will be impeached? Was Rousseff’s cabinet shake-up on Oct. 2 enough to bolster her favor with the opposition and stave off impeachment? What is the state of the Rousseff administration’s relations with Congress, and how is that affecting the outlook for her fiscal agenda? How are global markets perceiving these latest twists in Brazil’s political turmoil?
David Fleischer, emeritus professor at the University of Brasília and editor of the Brazil Focus newsletter: "After two negative decisions last week—first, that the National Election Court (TSE) decided to re-examine the campaign contributions the Rousseff-Temer ticket in 2014 may have received illicitly as part of the Petrobras bribery scandal, and second that, the Federal Court of Accounts (TCU) recommended the president’s 2014 public accounts be rejected by Congress because of ‘creative’ accounting used to ‘mask’ public deficits—the likelihood of an impeachment process in the Chamber of Deputies has increased. Also, TCU auditors have discovered that the Rousseff government has been using the same ‘creative accounting’ tactics in 2015. In addition, the TCU is investigating officials involved in the 2014 manipulations, namely the planning and finance ministers and the national treasury secretary. The recent cabinet shake-up was counterproductive. Only three new names were involved and two from the PMDB. However, the PMDB Chamber delegation was not consulted, and other coalition parties were dissatisfied. Thus, Dilma’s relations with Congress got even worse. As a result, two joint sessions of Congress to override or uphold important presidential vetoes were canceled for a lack of a minimum quorum of deputies. The 2015 fiscal austerity adjustment is threatened, as is the closing of the 30 billion real deficit in the 2016 budget. Because Congress will not approve the proposed Tax of Financial Transactions (CPMF), apparently the alternative will be to make deep cuts in social programs. The global financial community is concerned and further downgrades are possible."
Carlos Eduardo Lins da Silva, global fellow at the Woodrow Wilson International Center for Scholars: "The TCU and the TSE’s decisions were clearly very hard hits against President Rousseff and do increase the chances of an impeachment process against her. However, Rousseff still has the support of important unions and social movements that are traditionally loyal to her party (PT) and still controls enough votes in Congress to reject the request to start an impeachment process, if such a decision were called for right now. Nevertheless, the president is ostensibly in defense mode, with her closest allies and highest-level counsels already at work preparing strategies for her to combat the impeachment request. Her attempt to reconvene her coalition with a cabinet reshuffle has failed. The government was not able to achieve the minimal quorum in Congress to vote on the president’s vetoes of increased spending bills. Sustaining the vetoes is essential to maintaining credibility for the proposed fiscal adjustment. If a credible fiscal plan is not on the table by Nov. 4, the whole situation will deteriorate further. Rousseff’s nemesis, Speaker of the House Eduardo Cunha, is on the verge of being formally indicted on corruption charges. This is good news for the president, who may soon get rid of a strong enemy. However, Cunha might wish to perform a final dramatic gesture against Rousseff by accepting one of the impeachment requests that are on his desk waiting for his decision. Anyway, the decision by Congress will follow voters’ moods, which may be better assessed in protests scheduled for Nov. 15."
Roberto Teixeira da Costa, board member of SulAmérica in São Paulo: "The fact that the Federal Court of Accounts, or TCU, rejected the 2014 accounts of President Dilma Rousseff due to so-called ‘tax peddling’ was not a surprise. Regardless, there are doubts as to whether actions taken by the president in her first term could effectively constitute the basis for impeachment in her second term. In the event of an impeachment based on the TCU’s findings, the vice president would assume the role of president. In the case of a Superior Electoral Court indictment, the Dilma and Michel Temer administration would fall from power and a new election would have to take place. This being said, the fact is that so far, one cannot say that there’s a ‘smoking gun’ pointing to the president. What is more worrying in the short term, in my opinion, is the fact that the ministerial reform, which was meant to consolidate the support base in the House and would give the government a majority, did not obtain the desired results. In both efforts to assemble the necessary bases needed in order to agree on the president’s vetoes and two projects that would have had strong fiscal implications, it was not possible to obtain the necessary quorum for confirmation. So the picture is still difficult to predict and filled with many uncertainties. The president’s attempts to re-acquire control of the political situation have shown themselves to be unsatisfactory or insufficient, and the opposition continues to move forward with efforts to impeach, even independently from the process in the Chamber of Deputies. This uncertainty paralyzes the most important business decisions and creates an environment of uneasiness both inside and outside of Brazil."
Cameron Combs, Latin America researcher at the Eurasia Group: "Rousseff’s ouster remains remote, though the persistent speculation regarding her permanency undermines the administration’s agenda. The TSE is months away from making a final decision regarding irregularities in the 2014 campaign and is unlikely to invalidate the contest, barring the emergence of a blatant violation. The most difficult scenario to handicap is Rousseff’s resignation due to an intractable economic and political situation, though individuals close to her vehemently dismiss the possibility of the notoriously obstinate president stepping down. That leaves the legislature. Recently, the TCU issued a recommendation to Congress to ‘reject’ last year’s fiscal result—a vote that would theoretically serve as the basis for impeachment. Yet some scholars assert that Rousseff can only stand trial for administrative impropriety committed after her re-election, while procedural hurdles preclude a vote on the TCU opinion until 2016. In the meantime, Lower House President Eduardo Cunha appears increasingly likely to initiate an impeachment proceeding absent a strong legal case, perhaps as early as this week. Cunha is desperate to shift attention away from him in light of mounting evidence that he laundered Petrobras’ kickbacks through Swiss banks. Pro-impeachment forces lack the necessary two-thirds of Congress to impeach Rousseff, meaning the effort will ultimately fail. But as long as the conversation is focused on whether the president will finish her term, Rousseff’s legislative priorities—notably a sorely needed fiscal adjustment package—will stall."
Guilherme Casarões, lecturer in international relations at Fundação Getulio Vargas: "The recent ruling of Brazil’s Federal Accounts Court increases the odds of Rousseff being impeached, because it provides some legal basis for the opening of the impeachment proceedings in the Chamber of Deputies. But we have to put the ruling in perspective: the Federal Accounts Court is a constitutionally established institution of external control, theoretically independent but in practice linked to the legislative branch. Most of its ministers are politicians who were appointed by their peers from Congress. Therefore, its decisions are non-binding and several government officials have questioned its legitimacy. Even former Justice Joaquim Barbosa–who used to be considered the champion of opposition–recently criticized the court by describing it as ‘a playground for failed politicians.’ Ultimately, President Rousseff’s impeachment will not be about legal arguments, but rather political conditions. Until two weeks ago, the PMDB had the government in its hands and even threatened the president in a prime-time ad that showed how united the party was—and how it was willing to ‘reunify’ Brazil. The recent cabinet reshuffle reflected the growing power of the party and of its most ambitious politician, Chamber President Eduardo Cunha, who appointed the ministers of health and science & technology. After the discovery of several bank accounts he has in Switzerland and growing calls for his resignation, however, Cunha has already said he won’t step down without dragging the government with him. The upcoming week will be critical as Cunha struggles for his own political survival, and he may well fuel the impeachment debate to ease the pressure on him. Whoever thought the storm was about to pass will have to wait for the next moves."