The Path to Power in Brazil

Brazilian politics at a crossroads through the 2018 presidential election

By Ricardo Sennes Nonresident Senior Brazil Fellow, Adrienne Arsht Latin America Center
Atlantic Council

With Andrea Murta Associate Director, Adrienne Arsht Latin America Center
Atlantic Council

Brazil is in the midst of an impeachment trial, a serious financial crisis, and a corruption investigation that threatens to bring down even more of the country’s top leaders. In 2018, Brazil will conduct presidential elections that are likely to mark one of the most uncertain political moments in the last few decades. Shaken by recurrent scandals, Brazil’s political parties have lost credibility. At the same time, those in power today are fiercely trying to reposition themselves to maintain their status. Brazil is at a crossroads: it must either reinvent its political forces or deepen the fragmentation contributing to an unprecedented crisis in modern Brasília.

Brazil is at a crossroads: it must either reinvent its political forces or deepen the fragmentation contributing to an unprecedented crisis in modern Brasília.

The country will face troubled times until its next election. After the initial impeachment proceedings against President Dilma Rousseff (PT—Worker’s Party), the interim government that took office in May 2016 will have to work hard to preserve its fragile coalition. Rousseff’s impeachment will likely be confirmed by the Senate in August. This will strengthen interim President Michel Temer’s position in relation to Congress, but he must carefully maneuver among political coalitions to get the necessary structural reforms approved. At the same time, Operation Car Wash—a corruption investigation involving politicians, construction companies, and the state oil company Petrobras—will continue implicating top politicians and complicating calculations about the country’s future for the coming months.

Dilma Rousseff will stand trial in Brazil's Senate in August.
Dilma Rousseff should stand trial in Brazil's Senate in August.

Questions about the course of Brazilian politics will inevitably intensify as the corruption investigation produces almost daily twists. After the traumatic interruption of the Workers’ Party mandate and its fourteen-year rule, what will be the fate of the country’s Left? Can Michel Temer’s Brazilian Democratic Movement Party (PMDB) and the Brazilian Social Democracy Party (PSDB), which is the Workers’ Party (PT) main opposition, forge an alliance for the next two years and beyond? How far will a new wave of social conservatism reach? Will the expected but gradual improvement in the economy ease popular pressure against the country’s leaders, or will a deep political reform be necessary? And finally, are there any viable alternatives to the traditional ruling class?

Political Forces: Perspectives After the Crisis

With the recent shocks that the Operation Car Wash investigation has dealt politicians of various parties, Brazil’s characteristic political fragmentation and the consequent instability of party alliances will almost certainly deepen. The country’s three main political parties—PT, PMDB, and PSDB—will emerge weakened, which can make way for other smaller and potentially volatile parties with less strategic coherence. With so many uncertainties, drawing up a multiyear plan to win the presidential election in 2018 will not be an easy task.1

In the past few years, Brazil’s major political power, the Workers’ Party, has endured a long period of uncertainty and disgrace. This began with the “Mensalão” scandal in 2005, 2 and deepened enormously starting in 2014, with Operation Car Wash. The discovery of these corruption schemes tainted the political novelty once enjoyed by the PT during Luiz Inácio Lula da Silva’s administration (2003-2010). The Workers’ Party was completely centered on Lula and the magnitude of the party’s troubles played down his administration’s social achievements—especially the fight against poverty—which was one of the PT’s proudest feats.

But though the Workers’ Party is in a weakened state, it will continue to be a major political force in the country. Although it has lost the support of much of the middle class (who used to favor Lula’s government), the Workers’ Party still has strong links with trade unions, civil servants, and various social movements. For the time being, Lula has the lead in the 2018 election polls, with approximately 20 percent of the votes. It is important to take into account that this is the worst crisis the Workers’ Party has faced since Brazil’s transition to democracy. A 20 percent lead in the polls is remarkable and is largely due to Lula’s persona, as he is considered a strong leader for those from the Left. It also reflects the weakness of other national politicians.

If the economy doesn’t respond quickly to Temer’s policies, his entire support group — PMDB, PSDB and parties such as the Brazilian Labor Party (PTB), Democratas, etc. — will be shaken as they enter the presidential race.

Other left-wing players such as the Party of Socialism and Freedom (PSOL) and United Workers’ Social Party (PSTU) will continue to jockey for political position. Although these parties have not been directly affected by the Operation Car Wash scandal, public opinion and support networks in various social movements still consider them as minor players on Brazil’s political stage.

Meanwhile, the PMDB and PSDB will each have a hard time reorganizing themselves in the post- impeachment period, as both lack strong leadership. In addition, it’s expected that Operation Car Wash will reach some of the most important names in both parties, which will limit the choices for candidates on a 2018 presidential ticket.

The PMDB and the PSDB are also struggling to develop support beyond just their opposition to the Workers’ Party. Even though both parties backed recent protests against the Workers’ Party, the center- right’s market-based policies—especially in the economic field– tend to win them little support in the country. Indeed, not even a majority of business leaders tend to support very pro-market policies.

With Temer, the PMDB intends to push market-based reforms, particularly those for social security (the main proposal for this reform would be to increase minimum retirement ages). However, the PMDB’s impetus for putting forward these reforms is to slow down the recession, not to promote an excessively market-based ideology. On the other hand, an important section of the PSDB defends these market- based views on ideological grounds.

Regardless of intentions, voters will see these reforms as a shift to the right promoted by the PMDB. The big question here is whether voters will condone this shift in light of the current crisis. Until impeachment proceedings are finalized—in other words, while Temer’s adminstration is still provisional—the interim president has two main priorities: a fiscal adjustment for the economy; and for politics, maintaining his significant block of support in Congress. The content of Temer’s plan does not differ substantially from the previous administration’s program; however, Dilma Rousseff was unable to win sufficient support from lawmakers to get her policies approved.

Michel Temer and finance minister Henrique Meirelles have been entrusted with reorienting Brazil's economy.
Michel Temer (right) and finance minister Henrique Meirelles have been entrusted with reorienting Brazil's economy.

Only after the Senate confirms Temer’s mandate will his real administration emerge. It is expected that he will then alter his Cabinet and launch an aggressive infrastructure package (changing the role of state-owned companies such as BNDS, Eletrobrás, Petrobras, in addition to concession and privatization models). He is also expected to raise taxes and restructure social security, increasing the minimum retirement age. Additionally, Temer will try to make Brazilian labor laws more flexible. His policies will tend to be more market-based and similar to the administration of Fernando Henrique Cardoso (PSDB, 1995-2002).

Assuming these initiatives are undertaken, they will certainly impact the 2018 election and will be a test for what type of government Brazil wants: pro-market or interventionist. If the economy doesn’t respond quickly to Temer’s policies, his entire support group—PMDB, PSDB and parties such as the Brazilian Labor Party (PTB), Democratas, etc—will be shaken as they enter the presidential race.

Traditionally, the PMDB has not put forth its own presidential candidate, choosing instead to join coalitions with other groups. But recently, speculation about a PMDB presidential candidate has surfaced. It is unlikely that Michel Temer would be considered for the ticket. However, if his government is able to refuel significant economic growth and contain the political and social crisis, it may help set up the candidacy of Temer’s finance minister, Henrique Meirelles.

It is also expected that the PSDB will pick a candidate and try to win back its traditional place as the major political opposition party to the PT, as in the Lula-Dilma administrations. The biggest question is how the PSDB will produce a meaningful candidate in the next year and a half, especially taking into account internal divisions, which are likely to deepen with the current crisis. It has been suggested that Aécio Neves—who was a candidate in 2014—will soon be implicated in Operation Car Wash. But Geraldo Alckmin—Governor of the state of São Paulo and Lula’s second round opponent in the 2006 presidential elections—has a better chance to lead a ticket in 2018.

There is yet another group, more vocal and more media-savvy than the traditional parties, that has been gaining ground in the political game: the new conservatives. As a response to the more progressive movement’s concern with social issues and minority rights, some evangelical leaders, former police officers and chiefs, former mid-level military officers, and others have sought to foster policies that are mainly linked to fighting crime, family values, and gender issues. But without a clear economic agenda, these conservatives are more focused on challenging the left’s role in defending civil rights and individual freedoms than on issues related to the country's development.

This conservative wave will increasingly influence the national and regional legislative powers, but the chances for their representatives to gain significant power in the executive are slim. In any case, due to the political fragmentation in Brazil and the instability of national political coalitions, the smaller and more conservative parties will have more sway than apparent in the mere number of seats won in Congress. And in 2018, this influence is likely to grow even more.

Finally, new political forces with fresh profiles and new proposals are emerging in the political spectrum. This change is taking place not only among the urban middle classes—especially younger voters—but also with those linked to environmental issues, as well as certain business groups. These initiatives and their proponents have been gaining ground since 2013, due to their position against the corruption scandals and as an alternative to traditional politicians.

One of the main forces gaining with this type of initiative is former presidential candidate Marina Silva and her newly created party, Sustainability Network (REDE). Silva is a dissident of the Workers’ Party and has a long history with environmentalists both in her home state—Acre—and in the industry’s major non-governmental organizations. She was one of the few national political figures whose popularity rose after the street demonstrations that shook Brazil in 2013. 3

Silva remains an important electoral force and has, for now, threatened Lula's leadership in the polls for the 2018 race. In 2014, she was a serious presidential contender but lost her edge by failing to convince voters of her experience in the economic field. She is a likely candidate for the 2018 elections and remains an alternative to the PT-PSDB party cycles for the Brazilian presidency. But more importantly, not a single member of Silva’s party has been seriously involved in the “Mensalão” or Operation Car Wash scandals thus far.

Street demonstrations, beginning with those that swept Brazil in 2013, signal a search for clear alternatives in the upcoming election, even with the creation of the Sustainability Network party. According to surveys, the demographic that would likely support the Sustainability Network did not participate in either pro- or anti-impeachment demonstrations. Some of these groups defended the need for new elections and political reform. They did not view the impeachment proceedings as sufficient to alter the pattern of Brazilian politics. Winning this part of the electorate will be essential for whomever wants to take the 2018 election.

The Economy and Operation Car Wash: Foundations for 2018

A year and a half into Michel Temer’s interim administration, Brazil will endure one of the most decisive elections in its democratic history. The country will be offered the chance to renew a political class devastated by corruption or, alternatively, to keep its current bankrupt power structure in place. Given the current situation, the most likely outcome is a limited regeneration, with names that present themselves as new and alternative but that are, in fact, still supported by the traditional political foundations.

In 2018, candidacies and election results will depend on two main factors: the country’s economic climate and the effects of Operation Car Wash.

It is the country’s economic situation that has created more shifts in both public opinion and among Brazil’s elite. It is unlikely that the economy will recover extensively by 2018. But it is entirely possible that a partial recovery of investments and unemployment will occur, together with a drop in inflation and interest rates. 4 The country is expected to reach 2018 with small but positive growth in the economy, and therefore social tensions, stemming from unemployment and inflation, are expected to ease.

As far as Operation Car Wash, its consequences are already reverberating in the PT’s political base and particularly for its leadership: Lula da Silva and Dilma Rousseff. But the investigations into the scandal have not yet shown all of their force inside the PMDB and PSDB. The federal judge responsible for the investigations, Sergio Moro, has indicated that he will make key rulings and close the investigations by December 2016. But even if this occurs, the consequences will continue to be felt in 2017 and 2018.

Operation Car Wash has enjoyed popular support at a time of political turmoil.
Operation Car Wash has enjoyed popular support at a time of political turmoil.

Several leaders of the PMDB 5 are formal suspects and might be indicted in the coming months and years. However, it is expected that damage to the PMDB will be less severe than for the Workers’ Party. Unlike the Workers’ Party, whose appearance of ethical behavior was shattered by these corruption scandals, the PMDB has previously been tainted by similar corruption allegations and convictions, and so there would be no element of surprise or shock with new charges. In addition, the PMDB is not centered on a single, strong figure such as the PT’s Lula. Therefore, accusations against PMDB leaders are less contagious for its other members.

For the PSDB, it will be different. The party is, in this sense, more similar to the Workers’ Party than the PMDB. The reputation of its well-respected former President Fernando Henrique Cardoso, along with the anti-corruption rhetoric emphasized in public by several leaders of the PSDB, gives the electoral base the image of a party unlikely to be involved in corruption or influence peddling. If the Operation Car Wash proceedings manage to reach one or more of the PSDB’s heavy-weights, particularly its former candidate for the presidency, Aécio Neves, the damage to the party’s image would be all the more significant for the element of the unexpected.

In any case, the Operation Car Wash scandal will not destroy the current political structure in Brazil (as was the case with Operation Clean Hands in Italy). Not all defendants are expected to serve jail sentences. Brazil’s Federal Supreme Court has been managing the crisis, and the Court does not have an incendiary public profile. Although the Federal Supreme Court has shown a firm hand in the proceedings, it’s expected to act as a “moderating power,” preventing the investigations from fueling an implosion of the country’s political system, and even ensuring that conditions are met for the stability of the government.

Who Will Win and Who Will Lose in 2018

The 2018 elections will most likely see the vote split between a new candidate, who will be expected to bring the moderate left and voters demanding renewal together, and a second candidate, who will have stronger ties to the center-right and its political orthodoxy.

In the first camp, a possible Marina Silva ticket in the 2018 race would most likely become a favorite, as long as the two central problems with her candidacy are resolved: an alliance with a strong name in the economic field to bring substance to fiscal policies, and the professional development of her party, REDE, to create a strong base of support. Even without a clear economic policy, Marina is still viewed as the alternative candidate to traditional politicians, and she attracts voters in the moderate-left, who were stranded after the fall of the Workers’ Party. However, if she is declared the winner, she will suffer from the lack of REDE representatives in Congress, hindering her ability to govern.

Marina Silva’s main opponent will most likely be a representative from the center-right. Two possible names have emerged as candidates well-positioned to be on the 2018 presidential ticket: the Governor of São Paulo Geraldo Alckmin, from the PSDB; and the finance minister, Henrique Meirelles, the potential candidate for the PMDB.

Today, the PSDB is profoundly divided, due to several issues including its support of the Temer administration. Its most relevant candidates on the national level are former presidential candidate Aécio Neves, 6 Foreign Relations Minister José Serra, and São Paulo Governor Geraldo Alckmin. Current projections, however, are that both Neves and Serra may be more directly involved in the Operation Car Wash investigations than previously thought, 7 which would leave Alckmin as the most viable candidate for the party. Despite a controversial administration in São Paulo, the governor pleases most conservative sectors, especially those supporting tough measures against violence. 8

Henrique Meirelles already has clear presidential ambitions and would be a strong candidate for the PMDB. This is especially relevant as the party suffers from a lack of popular national candidates and risks losing other party luminaries to the Operation Car Wash investigations. Meirelles’ candidacy, however, depends on whether the Brazilian economy and its investments are able to bounce back from the current recession in time for the 2018 elections.

The Workers’ Party is expected to come through the end of 2018 stronger than it is today. The party might suffer important losses in the 2016 municipal elections—losing, for example, the city of São Paulo, the largest in the country. But the party may recover in coming years, especially if the economy does not grow more than 1 percent in 2018 and if controversial policies are passed, such as more flexible labor laws.

Due to the respect he still commands and the lack of alternative candidates from the Workers’ Party, the party’s great gamble will be to place Lula himself on the ticket. The only impediments for the ex- president’s candidacy are if he is indicted in connection with Operation Car Wash or if his health does not allow him to run for office. Despite Lula’s popularity, it would be hard for him to win a second round or run-off election. The main objective of a Lula candidacy for the Workers’ Party is to help strengthen other candidates’ campaigns for Congress, keeping the party as one of the key forces in the country, even if it means losing the presidency.

Finally, it’s possible that a surprise candidate may enter the 2018 race: the former governor of Ceará, Ciro Gomes, 9 has been mentioned as a “pre-candidate” for the Democratic Labor Party (PDT). Gomes had close ties to the Workers’ Party, having served as minister of national integration (2003-2006) in the first Lula administration and then supporting Dilma Rousseff in 2014. He also has historical ties with the PSDB, which he helped to establish in 1988. An articulate politician, Gomes has maintained that the Workers’ Party’s error was to allow itself to be associated with corruption schemes. He is also seen as an alternative candidate, with a vast knowledge of economic issues, giving him an edge against Marina Silva.

On the other end of the political spectrum are figures such as Congressman Jair Bolsonaro—a former low-ranking military officer, who is an advocate for the death penalty, the right to carry weapons, the end of gay marriage, and a supporter of the 1964 military dictatorship (among other controversial issues); he has been introduced as the right-wing’s choice. There is a chance that other candidates with similar ideology to Bolsonaro’s may emerge during the race, but it is unlikely that they will draw substantial levels of support.

In this context of political volatility, another possibility that can’t entirely be ruled out is a highly fragmented election, with many candidates dividing the electorate. This also occurred in the 1989 presidential election, when there were twenty-two registered candidates, of whom only seven—the novice and isolated Fernando Collor de Mello (with about thirty percent of the vote) and six other candidates—obtained more than four percent of the vote. 10 In this scenario, the creation of large political coalitions—whether situational or oppositional—will take place after the electoral process, leading to a fragile government faced with highly volatile power struggles. This scenario would exacerbate one of the biggest problems of the Brazilian political system—party fragmentation.

A Chance for Brazil

Regardless of the country’s mood and the 2018 election results, in the short term, Brazil will continue facing a crisis in its democratic governance. Comprehensive political reform is not on the country’s horizon; the smaller parties that provide essential support to the interim government would not survive if proposals to reduce the number of parties in Congress are carried out.

The good news is that gradual changes have begun. Brazil has ended corporate funding of political campaigns, thanks to a recent Supreme Court decision. 11 The country has also reduced the amount of free political advertising time on TV. 12 Some steps that can and should be taken to improve the current system, even if they won’t bring immediate results, are in the works. In the longer term, it is vital that gradual changes continue and, hopefully, develop into even more substantial reforms.

The emergence of a larger, more politically engaged and better educated middle class, as well as the growth of a new, more professional and civic-minded generation of politicians could represent the best chance for Brazil’s democracy to consolidate and strengthen. The 2018 election may be the first step in confirming this trend. The foundations have already been set.

Endnotes

1 While it is possible that early presidential elections will be held, this scenario is quite unlikely. Although Dilma Rousseff and former presidential candidate Marina Silva have both proposed early elections, there is no consensus within their parties, nor is there broad support being voiced during street demonstrations. It is also highly unlikely that the Senate will decide to acquit Dilma Rousseff and reinstate her as president. Thus, the main hypothesis is that Michel Temer’s administration will stay in place until the end of 2018, with general elections to be held in October of that year.

2 The “Mensalão” scandal, which became public in 2005, was a vote-buying scheme in which the administration of ex-President Luiz Inácio Lula da Silva (Workers’ Party) made systematic payments to members of Congress in order to gain support for the executive. The defendants were tried in 2012, resulting in the conviction and imprisonment of powerful businessmen and some government leaders, including the ex-chief of staff, José Dirceu (Workers’ Party). See Simon Romero, “A former Brazilian presidential aide gets 10 years in vote-buying scheme,” New York Times, November 12, 2012, http://www.nytimes.com/2012/11/13/world/americas/ex-brazilian-presidential-aide-sentenced-in-vote-buying-plot.html?_r=0.

3 In 2013, a series of protests in several Brazilian cities brought hundreds of thousands of people from social groups with different demands to the streets. The reasons for the protests were varied and included: the end of corruption, demands for lower public transport fares, and an end to the government's macroeconomic policies, violence, etc. See Protests in Brazil blog by H.J., “The streets erupt,” Economist, June 18, 2013, http://www.economist.com/blogs/americasview/2013/06/protests-brazil.

4 According to the average forecast of economic consultancy groups operating in Brazil, a possible GDP growth of 0.5 percent is expected in 2017, with inflation close to five percent. In the most optimistic scenarios, GDP growth could reach 1 percent and inflation close to 4.5 percent. Among others, see Ana Conceição, “Mercado piora novamente previsão para inflação e PIB em 2016” Valor Econômico, February 15, 2016 http://www.valor.com.br/brasil/4435800/mercado-piora-novamente-previsao-para-inflacao-e-pib-em-2016.

5 Thiago Resende and Juliano Basile, “STF divulga lista com indiciados na Lava Jato,” Valor Econômico, March 6, 2015, http://www.valor.com.br/politica/3941780/stf-divulga-lista-com-investigados-na-lava-jato.

6 Afonso Benites, “Lava Jato avança sobre Aécio Neves enquanto PSDB sela acordo com Temer,” El Pais, May 3, 2016, http://brasil.elpais.com/brasil/2016/05/03/politica/1462228800_933117.html.

7 Mônica Bergamo, “José Serra é citado em delação premiada da OAS na Lava Jato, Folha de S.Paulo,” June 14, 2016, http://www1.folha.uol.com.br/colunas/monicabergamo/2016/06/1781352-jose-serra-e-citado-em-negociacao-de-delacao-premiada-da-oas-na-lava-jato.shtml.

8 Lillian Venturini, O Estado de São Paulo, “Alckmin entre o tom firme e conservador,” Política Eleições, May 19, 2013. http://politica.estadao.com.br/noticias/eleicoes,alckmin-entre-o-tom-firme-e-conservador-imp-,1033387.

9 Ciro Gomes biography, UOL Educação - http://educacao.uol.com.br/biografias/ciro-gomes.htm.

10 Georgetown University, Political Database of the Americas, Federal Republic of Brazil/1989 Presidential Election, last updated August 13, 2005, http://pdba.georgetown.edu/Elecdata/Brazil/pres89.html.

11 Anthony Boadle, “Brazil’s top court bans corporate money from electoral campaigns,” Reuters, September 17, 2015 - http://www.reuters.com/article/us-brazil-politics-financing-idUSKCN0RH33A20150917.

12 Superior Electoral Court, “Eleições 2016: propaganda e horário eleitoral gratuito serão abordados na mesma resolução,” November 4, 2015 - http://www.tse.jus.br/imprensa/noticias-tse/2015/Novembro/eleicoes-2016-propaganda-e-horario-eleitoral-gratuito-serao-abordados-na-mesma-resolucao.