Dilma Must Choose: A New Economic Paradigm Or Prolonged Economic War and Downfall

Dilma Must Choose: A New Economic Paradigm Or Prolonged Economic War and Downfall

By Joshua Tartakovsky, 18 April 2016

Dilma may have a last chance to save her own skin and her country, and she must focus on reviving the economy, investing in industries, and protecting the Real from international speculation.

From 2010, after becoming the President of the Republic of Brazil following her position as Lula’s chief of staff, Dilma Rousseff sought to continue the massive growth the country enjoyed by attracting international investment. Indeed, the country grows also during to the massive purchase of its raw goods by China and due to the availability of free credit, putting many householders who rushed to buy electronics and cars into debt. But in her second term in 2014, following slow economic growth due to a slowdown in China’s need for Brazil’s goods, Dilma moved to impose austerity on the Brazilian public and appointed a neoliberal finance minister, Joaquin Levy. The idea was that he would halt inflation since the economy was overheating due to the massive investment coming into the country from Western investors seeking higher returns, but the high-interest rates imposed in Brazil only resulted in a widespread recession, and no matter how hard Dilma’s government tried, the economic situation became worse, with growth becoming minuscule and GDP wildly contracting. Dilma, the former guerrilla fighter, tried to follow the traditional economic path and heed the advice of her advisors, and failed.

Now, due to the contracting economy and an accompanying growing public frustration, a well-coordinated campaign against Dilma and PT which encompasses various politicians who turned against her, judges who took a partisan side, and the corporate Brazilian media owned by several families, Dilma faced impeachment on Sunday in the lower house, if two-thirds vote for it.

But impeachment has no basis. Not only has Dilma not been convicted, but the action itself she is accused of taking, which is borrowing from bank accounts to cover a hole in the deficit with the goal of paying it back later, is a common governmental practice in Brazil and not a crime.  What’s equally important to mention is that the speaker of the lower house Eduardo Cunha (of Brazilian Democratic Movement Party (PMDB)) who is leading the impeachment effort, the vice president Michael Temer (PMDB) who just resigned and is hoping to replace to Dilma, Senate leader Renan Calheiros and Congressman Paulo Maluf – all strongly anti-Dilma and pushing for her impeachment, are themselves deeply embroiled in various corruption schemes and are facing far more severe accusations. Aecio Neves, the leader of the Brazilian Social Democracy Party (PSDB), is also involved in high scale corruption. In the same vein, it should be mentioned that the Brazilian media giant Globo TV, actively pushing for Dilma’s ouster, is reportedly tied to the Panama Papers.

When it comes to the west, there seems to be a contradiction. On the one hand, oil giants have an active interest in Dilma’s removal so Petrobras can be bought out and the pre-salt fields exploited. On the other hand, smaller-scale investors would lose from Dilma’s impeachment as Brazil’s economy would continue to decline as a result. Perhaps this conflicting of interests is also reflected in how the corporate media has been covering this issue. Forbes, however, took a positive line towards Dilma, while the Economist has been aggressively and unabashedly pushing for her impeachment.[1]

While the Brazilian public is largely split into even lines, and while there have been almost as many pro-Dilma protests as there have been against her, BBC, for example, chose to depict in one article only photos of anti-Dilma demonstrations. However, this past Friday, many pro-Dilma protesters took to the streets.

It is also important to mention that just as in Venezuela, the elite and upper middle class tend to despise the poor majority. In the case of Brazil, the country seems to be geographically split between the poorer northeast and the wealthier southeast.

On Sunday, the lower house will vote on Dilma’s impeachment.

Truth be told, there is a significant chance that even if the lower House votes for impeachment, the Supreme Court will rule against it. Dilma is a seasoned fighter and will probably find a way to hang on.

However, what we are likely to see if Dilma is not impeached, is a prolonged economic war and a repeat of the Venezuelan scenario. Massive speculation against the real, the western press presenting Dilma as a dictator who refuses to accept the wishes of the people, growing violence and chaos in the streets of Brazil, (even ISIS threatened to attack it recently), a defamation of the country and attempting to present it as unsuitable for tourism, and an attempt to buy off judges and politicians so that they will speed Dilma’s impeachment.

Dilma, who has found herself at odds with Washington after Obama and Hillary spied on her private calls, will become the enemy of the US, perhaps as much as Nicolas Maduro.

If Dilma hopes for the survival of Brazil, and if she survives the unconstitutional impeachment attempt, she must ensure a secure future for Brazil. For this, she must do what is good for Brazilians and not for international investors. She must develop Brazil’s industries and educate workers, she must stop the sell-off of Petrobras, she must develop the country irrespective of the global turmoil.

Having lived in Brazil over a period of three years, I noticed to my astonishment how in the supermarkets, the vast majority of the products were Made in Brazil. Truth be told, Brazil has such a wealth of raw materials, minerals and agricultural goods, that it could survive fine on its own. But for this is has to isolate itself from the international market, protect its currency from the fluctuations of trade and from speculation but not to put it on the market, and make an all-out effort in becoming entirely self-reliant.

Brazil can already be self-reliant had it wished to, but it has been lazy and sought cheap credit and financial investment. Now that it’s clear that the western and local elites don’t have Brazil’s good in mind and with Dilma facing the abyss, perhaps she has a last chance to become a true fighter and save her economy. After all, one should have no doubt that if the right-wing takes over, the majority of Brazilians will face a financial ruin and the cost of life will become unbearable while the country will be sold off and the ultra-wealthy politicians will live in well-guarded villas in Rio or Sao Paulo and travel from one place to another with helicopters.

It is true, however, that the south and southeast of the country are more pro-business and the north and north-east is poorer, that many of Brazil’s elite will seek to bring down the country economically if Dilma works on isolating it from international circuits of capital, and that determined steps will result in growing polarisation at home, quite possibly even leading to secession. But Dilma tried for a long time to please the elites of the country, and her pro-austerity, pro-investment steps have been bad for Brazil and bad for career. There is a point when one must take action, and each passing day this is becoming more clear.

Dilma may have a last chance to save her own skin and her country, and she must focus on reviving the economy, investing in industries, and protecting the Real from international speculation. She has been trying to please others for too long, even selling off parts of Petrobras. Now she may as well do what is right for her country.


[1] This conflict of interest between wealthy middle-class investors and the global elite may be presenting itself more and more. For example, the Financial Times noted a few months ago how more and more companies now do not even bother to go to the stock market and prefer to sell to individual buyers.