Center for Economic and Policy Research
Brazilian President Dilma Rousseff is now threatened with impeachment, but there is no evidence that she is linked to the “Lava Jato“ scandal, or any other corruption. Rather, she is accused of an accounting manipulation that somewhat misrepresented the fiscal position of the government — something that prior presidents have done. To borrow an analogy from the United States, when the Republicans refused to raise the debt ceiling in the U.S. in 2013, the Obama administration used a number of accounting tricks to postpone the deadline at which the limit was reached. Nobody cared.
The impeachment campaign — which the government has correctly labelled a coup — is an effort by Brazil’s traditional elite to obtain by other means what they have not been able to win at the ballot box for the past 12 years. Former president Lula is accused of receiving money from corporations for speeches, and for renovations to a property that he claims he did not own. But even if these accusations are true, there is no evidence of a crime or even a link to corruption. The alleged events took place after Lula left the presidency — and again, as in the U.S., former officials can legally get paid for speeches. Yet Judge Sergio Moro, who is leading the investigation, has led a well-executed smear campaign against Lula. He had to apologize to the Supreme Court for releasing wiretapped phone conversations between Lula and Dilma, Lula and his attorney, and even Lula’s wife and their children.
Of course the Workers’ Party would not be vulnerable to this coup attempt if the economy were not mired in a deep recession. But here too, the media is patently wrong, agitating for further spending cuts and high interest rates that only worsen and prolong the downturn. To the contrary, Brazil needs a serious stimulus to jump-start the economy. Fortunately, the country has about $353 billion in international reserves, and is therefore not constrained by the balance of payments.
The main obstacle to recovery is the power of the big banks, which are like Wall Street in the U.S., but on steroids. Brazil is paying nearly seven percent of GDP in interest on its public debt — more than Greece at the height of its debt crisis. But Brazil has no debt crisis, nor any significant threat of default. Its usurious interest payments are a result of the political power of its own banks, who currently enjoy a record-breaking 34 percent spread between their borrowing and lending rates. Just reducing Brazil’s public debt service to its level of a few years ago would allow for a major stimulus — about 3.5 percent of GDP — that could pull the country out of recession.
The U.S. government has been quiet about this coup attempt but there is little doubt here about where it stands. It has always supported coups against left governments in the hemisphere, including — in just the 21st century — Paraguay in 2012, Haiti in 2011 and 2004, Honduras in 2009, and Venezuela in 2002. President Obama went to Argentina to lavish praise on the new right-wing, pro-U.S. government there, and the administration reversed its prior policy of blocking multilateral loans to Argentina. It could be a coincidence that the scandal at Petrobras followed a major NSA spying operation that targeted the company — or not. And within Brazil today, the opposition is dominated by politicians who favor Washington. It would be an added shame if Brazil lost much of its national sovereignty, as well as democracy, from this sordid coup.