Regime Change in Brazil is Imminent

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 16, 2016:

More than three million Brazilians, fed up with corruption that goes all the way to the top, went to the streets last Sunday to protest Dilma Rousseff’s regime and to demand her removal. This is likely to signal the end of Rousseff, who has steadfastly declared her innocence in the Petrobras scandal that has rocked the country for years.

Dubbed “Operation Car Wash” and driven by Judge Sergio Fernando Moro, the first break in the case came with a phone call two years ago from a local car wash and currency exchange business owner to police that he thought some officials from Petrobras, the government-owned oil company, were using his business to launder bribes and payoffs and forwarding them on to foreign banks.

Moro is a man on a mission. He helped prosecute corruption at Brazil’s state bank Banestado in 2001, which led to the sentencing of 97 bankers. He weighed in on Operation Farol Da Colina, where more than 100 players in money laundering, tax evasion, and other schemes were sent up.

At last count, Operation Car Wash has investigated 232 individuals, with 179 of them being indicted and 84 of them being convicted, including the CEOs of two of Brazil’s largest private companies. Just last week Moro sentenced Marcelo Odebrecht, former CEO of the Odebrecht conglomerate, to 19 years in jail for his role in the money-laundering scheme.

The scandal has spread like a cancerous network across the country and around the world, with at least four criminal enterprises involved in it. Sixteen Brazilian companies are involved, and the investigation is even touching the most highly regarded politician in the land: former President Luiz Inácio Lula da Silva, known as Lula. On March 6, more than 200 police officers and 30 tax auditors raided offices and homes of executives and politicians suspected of ties to the Petrobras scandal, including Lula himself.

This was touted as historic, a “tipping point” in the investigation since it was Lula who trained up and mentored and then sponsored his pupil, Dilma Rousseff, to replace him in office. Jimena Blanco, head of the Latin American department for the political risk advisory firm Maplecroft, said the investigation had reached its climax:

Brazil’s perfect storm has reached its climax and the likelihood of a sudden change in government, either through judicial or legislative means, has skyrocketed. [Lula’s] involvement … [increases the] social and political pressure for Rousseff to leave office.

Impeachment proceedings have been pending in Brazil’s lower house for months, but have been stalled thanks to a constitutional requirement that the house can proceed only if more than two-thirds of those 513 federal deputies agree. Rousseff has successfully held off those proceedings, until Sunday.

Following the informal raucus “vote” of those millions on Sunday, opposition parties are now working together to speed up the impeachment vote, and, in addition, are making plans on how to run the country post-Rousseff.

The new president will be Michel Temer, Rousseff’s vice-president and president of one of those opposition parties, the PMDB (Brazilian Democratic Movement Party). It’s a “centrist” party, as is the PSDB (Brazilian Social Democracy Party).

Brazil’s economy is in tatters: its bonds are junk, it unemployment is in double-digits, essential foodstuffs are missing from the shelves thanks to price controls, its GDP shrank last year by four percent, and no rebound is expected for the foreseeable future.

What’s really missing is any assurance that things will substantially change for the better with a new regime. Senator Ricardo Ferraco, a member of the PSDB, said Brazil “needs a major fiscal reform to fix the government’s finances. This cannot be achieved without a broad coalition.”

Unfortunately, much more than that is needed, and neither party is likely to provide it. A political cleansing is a start, but only a start. What is needed, and most difficult to achieve, is a cleansing of the spirit of entitlement infesting the body politic. For decades Rousseff’s Workers Party, working alongside Brazil’s Communist Party, has so infested and debilitated public morality that the chance for a real fresh start with a new suit at the helm is essentially nil.

Sources:

The Wall Street Journal: Calls Mount for Brazil President Dilma Rousseff’s Exit

The New American: Brazil’s “Prince of Contractors” Sentenced to 19 Years for Corruption and Bribery

The New American: Investigators Circling Brazil’s President; “Sudden” Regime Change Likely

The McAlvany Intelligence Advisor: Brazil’s Bovespa Index Jumps 32 Percent in five days: Better days Ahead for Brazil?

Background on PMDP

Background on PSDP

Bio on Michel Temer