The U.S. Section of the Brazil-US Business Council is closely monitoring the current political crisis in Brazil. The seriousness of the facts and their potential impact on the resumption of the country’s economic growth are a matter of concern to the Council and its associated companies that have a long-term commitment to the country and for decades have been producing, investing and employing in Brazil.
The Council understands that Brazil’s political and economic stability depends on the progress of the structural reforms that have been promoted in recent months and that their success should not be threatened by delays or uncertainties. Reassured by the strength of Brazilian institutions, the Council reaffirms its commitment to Brazil and calls for a swift constitutional solution to this challenging moment.
Paralysis on Economic Policy and Recovery Plans
Very serious political crisis to be dealt with under constitutional framework.
According to leaks revealed by the press, President Temer was allegedly taped endorsing bribes to buy the silence of a former coalition ally in corruption investigations. The video and audio records also supposedly show Aecio Neves, president of the largest party in the Government’s coalition (PSDB) and former candidate for the presidency in 2016, directly requesting bribery from the owner of meatpacker JBS, who recorded his talks with both leaders a few weeks ago.
The revelations are claimed to come from video and audio record made with court authorization in Operation Car Wash. This is the first event in the Operation that directly affects Michel Temer.
Just short after the revelations, Congress made the first move indicating what might happen in the coming weeks: the schedule of voting was canceled. The country tends to live some weeks in a state of political paralysis, until it becomes clear to society what will be the best institutional solution.
The revelations generated a backlash in the confidence of the productive sectors, as negotiations and political agreements for voting the reforms will likely be suspended. Political instability may also affect the interest rate cut that was long awaited, as well as the exchange rate. Stocks have plunged this morning as a result of the crisis.
If the President resigns or is removed through an impeachment process, the constitutional ruling is that there should be an indirect election (as the vacancy of power happened in the last two years of mandate).
If the election is revoked by the Supreme Electoral Court (TSE) the judges may call for direct election; except if the vote is cast in the last 6 months of mandate (from July until December of 2018), in which case it will have to be an indirect election. The judicial process has no relation to the recent events, but instability may cause the court to expedite taking a vote on the matter.
There is also a possibility of a change in the Constitution (PEC) to set direct elections before 2018. This is, so far, the least likely solution. Even so, revelations will lead opposition leaders in expanding their efforts in this direction. The pressure from people on street demonstrations might also push lawmakers to hurry up the passing of a constitutional amendment to anticipate the elections scheduled for October 2018.
In all cases, the size of the political crisis will better provide on what path is the most likely ahead.More Testimonials