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More than 2 million Brazilians are set to lose unemployment benefits by June, data obtained by Reuters show, threatening to erode support for embattled President Dilma Rousseff among her core working class supporters when she needs them most.

The expiration of benefits could fuel frustration and feed a growing wave of protests against Brazil's left-leaning government just as some wavering Congressmen throw their weight behind impeachment proceedings against Rousseff that began last week.

More than 1 million Brazilians have participated in street demonstrations this month. Among the reasons for discontent is a corruption scandal at state oil company Petrobras that has curbed investment in Latin America's largest economy amid recession.

Economists expect the downturn, the worst in a generation, to linger through the rest of the year, driving the unemployment rate to more than 10 percent from the current 9 percent.. The number of jobless people losing unemployment benefits may become a more important source of discontent.

    Data provided by the Labor Ministry showed an average of 492,000 benefits a month running out between February and June, stripping many families of a crucial source of income.

    The severity of the downturn means the jobless are struggling for months without finding work. About a third of unemployed Brazilians have been without a job for more than six months - the highest rate in 10 years, according to official data.

    "There is a vicious cycle in which political paralysis feeds the economic downturn that reinforces the political crisis," said Rafael Cortez, analyst at consultancy firm Tendencias. "They are running against time, as unemployment data show. The sooner the impeachment vote happens, the higher the chances for the government are."      


Impeachment proceedings against Rousseff in Congress' lower house focus on allegations she manipulated government budget accounts - making them look better than they were - to benefit her reelection in 2014. The lower house is expected to vote by mid-April on whether to send her for trial in the Senate.

If approved, Rousseff could face trial in the Senate as soon as May and would be suspended from office while the case is being heard.

Like many who are unemployed, Fabio Lorusso's patience is wearing thin. The 30-year-old public relations professional was fired in July and has lived with his parents since his benefits ran out in December. He blames the Petrobras scandal, in which prosecutors have uncovered billions of reais in political kickbacks to ruling party politicians, for deterring investment. "It is the greed of our politicians - the people who are robbing us - that is tainting our image abroad and giving us fewer opportunities," he said.

"There should be more protests," he said. "We won't keep our head down anymore."

In a nation of more than 200 million, an estimated 9 million are unemployed. Nearly 2.5 million Brazilians are living on unemployment insurance, which lasts five months. By comparison, an average of 3 million people were living on benefits in 2014, according to Reuters calculations based on Labor Ministry data.

But the current wave of job losses is expected to take years to reverse, in part because, unlike in previous downturns, companies have taken on more debt that will make it more difficult to return to growth.

According to a Reuters poll, economists say they believe that the nation’s economy will not return to its pre-crisis size and employment level until 2019.

Long lines of jobless people - applying for work or for unemployment insurance - have formed in cities across Brazil in recent months.

In Rio de Janeiro, Globo TV found people illegally selling their place in queues. Diomarcos Prado, a 40-year-old former supervisor at a home appliance manufacturer in the southern city of Curitiba, had to wait 40 days to get his unemployment benefits.

When they expired in January, his wife became the sole provider for the couple and their twin children. Prado has spent more than six months looking for a new job without success.

"It is like talking to a brick wall," he told Reuters in a telephone interview. "I applied for a supervisor job. Then 350 other people did the same - people that used to earn much higher salaries. Managers are competing against supervisors and analysts."

GOVERNMENT "VERY WORRIED" More than 1.5 million jobs already have been lost since the downturn began in early 2014, and companies continue to dismiss a net 100,000 workers a month.

Labor minister Miguel Rossetto told Reuters in an interview that the government is "very worried" and expects a few more months of job losses before a recovery in the second semester. Already struggling to cope with a fiscal deficit that topped 10 percent of gross domestic product (GDP) last year, the government has no way to extend the benefits, which vary between 880 reais and 1,542 reais ($245-$430) per month. Rousseff reduced the scope of unemployment insurance last year to help curb government spending. That decision was partly responsible for the plunge in her approval ratings. "The welfare systems, such as unemployment insurance, continue to operate, but eventually it will be exhausted," said Miguel Foguel, a labor market expert at economic think tank IPEA, in Rio de Janeiro.

He expects poverty and inequality measures to rise after many years of improvement in the 2000s that made Brazil a model. "If the economy does not recover in the first half of the year, maybe in the second half, we could be in a very complicated situation as families use up their savings." ($1 = 3.5811 Brazilian reais)

Reuters | By Silvio Cascione

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