Temer Breathes Easier as Congress Blocks Criminal Charge

By August 2017Brazil

Last week, the Chamber of Deputies voted to prevent the corruption charge against Temer from advancing to the Supreme Court for consideration. 263 deputies voted in favor of Temer, while 227 voted against him. (At least two thirds of the lower house was required in order to push the criminal charge forward.) Ever since the emergence in May 2017 of incriminating audio tapes divulged by business magnate Joesley Batista (of the food conglomerate JBS), Temer has been fighting for his political survival.

The vote represents Temer’s most remarkable victory yet in his battle against the Attorney General’s Office. After almost being forced to resign in late May, Temer has doggedly struggled to maintain support of his base. Last week’s vote saw a number of defections – including from his own Brazilian Democratic Movement Party (PMBD) and the center-right Brazilian Social Democracy Party (PSDB). However, Temer benefited from a fragmented opposition and the absence of significant popular mobilization against the administration. The longer he manages to hold on, the more costly his removal will become, considering that presidential and gubernatorial elections are scheduled for next year.

The administration’s claims that it will immediately push forward with austerity reforms should be viewed with skepticism, in our view. Much of the government’s support to block the criminal charge was achieved via the aggressive tactic of releasing federal funds to various legislators’ pet projects. Over the last few weeks, the administration applied what has been jokingly referred to in the local press as “a package of niceties” – including everything from refinancing rural producers’ debts to increasing mining royalties, as advocated by certain factions in Congress. These measures rapidly increased spending and have generated rumors that the government might not meet its fiscal targets. From this perspective, the fact that still almost half of Congress voted against Temer shows how diluted his base of support has become, particularly when compared to the initial shows of strength shortly after then President Dilma Rousseff’s impeachment in 2016.

The administration’s claim that it will immediately approve a pension reform (which would require a two-thirds majority in both houses of Congress) seems excessively optimistic, in our view. Considering that the Attorney General’s Office still has two further charges to file against Temer – one accusing him of obstruction of justice and the other of involvement in a criminal organization – the administration will likely continue to be pressured by its fickle base to provide funding for pet projects, which in turn pressures the budget and makes austerity harder to achieve. In an attempt to circumvent these issues, Temer’s economic team, led by Minister of Economy Henrique Meirelles, has suggested increasing certain taxes. But this tactic would be risky for an administration that is experiencing historically low approval ratings, currently at 5%.

Moreover, as the 2018 elections approach, Congress members are likely to become increasingly concerned with their local constituencies. Gathering and retaining support for an inevitably unpopular pension reform would be very difficult. Chamber of Deputies Chairman Rodrigo Maia, of the rightwing Democrats (DEM), who has until now been an important ally of the president’s, said that the administration “needs to reorganize its base to vote reforms,” casting further doubt on Temer’s pledges to immediately push ahead. Maia’s comments have particular weight, as he would succeed to the presidency if Temer were ousted or forced to resign.

Last week’s victory for the administration returns Brazil to a lower level of political instability, although it does not inaugurate a new phase, contrary to what the administration is trying to imply. A number of threats to the administration remain, including the two charges that Attorney General Rodrigo Janot is likely to file before leaving his position in September. Additionally, there are credible rumors circulating that Eduardo Cunha, disgraced former chairman of the lower house and a key member of the PMDB, is in the final stages of negotiating a plea bargain with the Attorney General’s Office. He is central to the JBS scandal – the hush money Temer is suspected of agreeing to in the audio tapes was allegedly destined for Cunha. He is also widely considered to be one of the most important figures in the corruption schemes investigated by the Lava Jato. If a plea bargain is indeed reached, revelations from Cunha might directly affect Temer and his inner circle, thereby renewing the political scandal. The government will continue battling to stave off further scandals until the 2018 elections.