There was a time when the Dilma Rousseff administration’s main problem was controlling inflation or trying to explain that a technical recession in this year’s second trimester would not become a real recession. Now the Brazilian president has returned from the G-20 summit in Brisbane to face a country perplexed over the Operation Lava Jato investigation after 10 business executives were arrested and authorities seized documents from several business partners of state oil company Petrobras on Friday.
This is an unprecedented situation in a country where not long ago, according to Prosecutor General Rodrigo Janot’s comments to Folha de São Paulo newspaper on Monday, only “blacks, the poor and prostitutes” got arrested. Brazil is putting its institutions to the test as it adjusts to this new phase in the investigation.
Meanwhile, Rousseff is trying to look calm as news of corruption within Petrobras surfaces. The state-owned oil company has offered to publish its financial records to combat the lack of confidence within the organization after federal investigators brought reports of fraud to light.
Rousseff is trying to look calm as news of corruption within Petrobras surfaces
Until now, the Petrobras investigation has focused on the president’s own Workers’ Party (PT). “Rousseff has little room to maneuver,” says political scientist Rudá Ricci. Yet there is evidence that the case also involves other parties.
President Rousseff is also facing pressure to make Cabinet changes and a lack of confidence in her leadership. Last week, Culture Minister Marta Suplicy resigned and published an open letter in which she asked Rousseff to form a new working group, including an “independent” economic team. This incident is not just about the disgust of one Cabinet member; Suplicy’s comments reveal a schism within the administration as the president nears the end of her first term. Suplicy will now return to her seat in the Senate. The problems within the country’s largest company are tormenting the PT.
The administration is also confronting another challenge. As well as an increase in interest rates by the Central Bank of Brazil a few days after Rousseff’s reelection last month, the government has proposed a new measure to change the way the budgetary surplus – the difference between what the government collects and spends – in order to comply with the Fiscal Responsibility Law. The administration spent more than it raised and it will not be able to balance its accounts unless Congress allows it to remove the cost of public spending on infrastructure and subsidies to industry from its accounting.
The problems within the country’s largest company are tormenting the Workers’ Party
Last week, Chief of Staff Aloizio Mercadante said if Congress did not approve the changes, the administration would meet the target, even though that course of action would bring public works to a standstill and create unemployment. A responsibility, Mercadante says, legislators should shoulder.
All of this comes with an opposition that came out of the elections stronger than before. According to various experts, some opposition members have fostered an atmosphere of instability by trying to put the legal responsibility on the president in case the administration fails to meet the target for the budget as set out in the law.
Translation: Dyane Jean François