Brazil’s next challenge is its flailing economy

Michel Temer, Brazil’s new president, may have just vanquished his rival, Dilma Rousseff, in the bruising impeachment battle that resulted in her final removal from office. But for Mr. Temer, the hard part is just beginning.

Brazilians booed him as he presided over the opening of the Olympics in Rio. He has been accused of taking bribes. The economy he is supposed to rescue is on the cusp of a depression.

Michel Temer, Brazil’s new president, may have just vanquished his rival, Dilma Rousseff, in the bruising impeachment battle that resulted in her final removal from office on Wednesday.

But for Mr. Temer, the hard part is just beginning.

“Get yourselves into the trenches,” urged Roberto Requião, a senator from Mr. Temer’s party who rebelled by siding with Ms. Rousseff in the impeachment vote. “Conflict will be inevitable,” he added, warning that Ms. Rousseff’s ouster had cleared the way for an era of intense division in Brazilian society.

The biggest challenge facing Mr. Temer, who largely operated in the shadows as Ms. Rousseff’s vice president before breaking with her earlier this year, is evident: the economy.

Brazil’s gross domestic product has plunged 9.7 percent on a per-capita basis in the last nine quarters. The downturn, which Goldman Sachs likens to a depression, has even exceeded the 7.6 percent decline during the so-called lost decade of the 1980s, when Brazil fought hyperinflation.

Broad swaths of the population are angry with the entire political establishment, especially now that unemployment has surged to 11.6 percent, from 6.5 percent at the end of 2014. More than 1.7 million Brazilians have lost their jobs in the last year while politicians like Mr. Temer have been battling for power.

“His attack on our democracy will sink the country even further,” said Judson Albino Coswosk, 25, a university biology student who has accused Mr. Temer of ousting Ms. Rousseff for his own political gain.

Amid the anger and economic turmoil, Mr. Temer is vowing to push ahead with a range of politically risky economic changes, including privatization of public companies, limits on public spending and an overhaul of a pension system that currently allows Brazilians to retire at an average age of 54.

Mr. Temer first took over the presidency on an interim basis in May, when Ms. Rousseff was suspended to face impeachment charges. But even with broad support in a fractious Congress, the early results of Mr. Temer’s ambitious agenda have been underwhelming, perplexing some who had expressed support for his new economic team.

“Temer’s government is requesting sacrifice from the population, but has pushed for wage increases for public servants who already enjoy job stability,” said Marcos Lisboa, the president of Insper, one of Brazil’s top business schools.

After the move drew criticism from allies seeking to curb public spending, Mr. Temer suspended the wage increases. But some analysts still expect the plan to advance at some point because it enjoys support from many legislators in the president’s Brazilian Democratic Movement Party.

Despite doubts about Mr. Temer’s government, many Brazilians place the blame for the country’s economic woes squarely on Ms. Rousseff and her Workers’ Party, which held power for more than 13 years.

“To put it simply, the left failed in Brazil,” said Jacques Kfouri, 62, a businessman in São Paulo. “Temer is fantastic compared with the alternatives. What he needs now is for others to support him.”

Others point out that Mr. Temer could get a boost in the coming months. The economy is still bad, with the authorities reporting on Wednesday that it contracted 0.6 percent from April to June. But some economists drew consolation from data that showed a rise in investments for the first time since 2013, perhaps signaling a floor to Brazil’s most severe economic crisis in decades.

Either way, the fate of Mr. Temer’s ambitions will hinge on public sentiment and his ability to bargain with Congress. His approval ratings, which are almost as dismal as Ms. Rousseff’s, have been heavily influenced by the scandals swirling around him and his party.

Earlier this year, Mr. Temer was convicted of violating limits on campaign financing. In something of a paradox, he is allowed to occupy the presidency as a result of Ms. Rousseff’s impeachment, but the conviction against him could make him ineligible to run for office for eight years.

Separately, various political figures and businessmen have tied Mr. Temer to colossal graft schemes around large public energy companies. A construction executive has testified that Mr. Temer was the beneficiary of a $300,000 bribe related to contracts at Eletronuclear, Brazil’s state-controlled nuclear energy producer. Mr. Temer denies that.

As Mr. Temer seeks to dispel doubts about his legitimacy, the corruption investigations that have shaken nearly the entire political class are steadily advancing. Several ministers in Mr. Temer’s cabinet have already resigned over revelations that they sought to thwart the inquiries, raising the possibility that new scandals could emerge.

“The biggest problem for this administration is the absolute unpredictability of what the investigations are still going to reveal because we are far from the end of this process,” said Rubens Ricupero, a retired diplomat and former finance minister.

While Mr. Ricupero supported the impeachment process and considered Ms. Rousseff incompetent, he noted that new information coming out posed a risk that Mr. Temer is “going to run all the time because most of the people who are around him, in one way or another, have been under investigation for some time.”

On Wednesday, in his first televised address after the Senate’s vote to oust Ms. Rousseff, Mr. Temer seemed to acknowledge the difficult road ahead, singling out the unemployment rate as an alarming problem.

“We have a horizon of two years and four months,” he said, referring to the time left in his current presidential term. “As of today, the demands will be much greater on this government.”

New York Times |By SIMON ROMERO

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