Brazil’s Clouded Political Horizons

Brazil is in a confusing place, with unprecedented voter dissatisfaction but no clear path out of crisis. Markets cheered last week when Congress voted 51 percent to 45 percent not to permit President Temer’s trial on corruption charges. But it was a pyrrhic victory, coming only because of a large number of expensive concessions to deputies, which raised the price of all future votes. The economic reforms that Temer promised as a way to justify his presidency seem as far away as ever, and the government is virtually guaranteed to miss its already unambitious fiscal goals for the year. Meanwhile, outgoing prosecutor general Rodrigo Janot has been hinting that he could file further charges against Temer before departing office in late September, suggesting that there is no end in sight for the political drama that has been consuming Brasília.

Even as Temer faces these headwinds, however, the situation is no better for the Workers’ Party (PT) standard-bearer, former President Lula. Sympathetic noises coming out of the appeals court suggest that trial court judge Sérgio Moro’s conviction of Lula will in all likelihood be upheld when Lula’s appeal goes to judgement next year. Under the terms of the Clean Slate Law, conviction by the appeals court means that Lula will be ineligible to run for the presidency; even if by some miracle he were to survive, another five corruption investigations are pending against him.

In Brazil this month, nobody has been able to give me a convincing explanation of what all this means for the 2018 election. Many Brazilians seem to be holding out hope for an outsider who will be able to change politics as usual. But given the ban imposed by the Supreme Court on corporate campaign contributions in the 2018 campaign, political parties—with their access to massive public funding, on the order of more than $1 billion—may be more important than ever, limiting the likelihood that a true outsider can emerge (a partial exception is João Doria, the São Paulo mayor, a relative newcomer on the political scene who has a slim but seemingly growing chance of capturing the Brazilian Social Democratic Party’s (PSDB) presidential nomination, and later, its public campaign funds).

Even an outsider, though, would have a hard time meeting Brazilians’ demands. Polls show that Brazilians believe that the dire economic situation and corruption are the two leading problems facing the country. Yet a quick look at two recent votes in Congress show that representatives will have great difficulty simultaneously delivering on both the anticorruption reforms and the economic reforms that Brazilians are demanding.  As the table below illustrates, in recent votes on the two issues, deputies in favor of labor reform tended to support Temer against the rule of law, while deputies who had voted against labor reform tended to be more anti-Temer. Although the PT voted as a bloc against Temer, the congressional divide on Temer’s trial was not only a Temer vs. PT dynamic: indeed, given that 40 percent of legislators are under judicial investigation, many deputies who voted against Temer were hoping to burnish their imperfect anti-corruption credentials, while even parties within the Temer coalition, such as the PSDB, split down the middle.

In sum, although Brazilians seem eager to see change, there is no cohesive coalition in Congress in favor of both rule of law reforms and economic reforms. Nor are there signs that a strong consensus has emerged among the public that would lead to the election of such a Congress next year. Brazilians are too tired to go into the streets to demand change, as they did between 2013 and 2016. But they may also be passive and uncertain because there is little agreement on which reforms would be most effective, and there are few leaders who have been able to offer credible solutions on the best path forward out of Brazil’s combined economic and rule of law malaise.