A few short years ago, Brazil was soaring. Its economy was on the upswing and the country was preparing for the international spotlight with the 2014 World Cup.
But now, as it gets ready to host the Summer Olympics this August, Brazil is mired in political crisis and economic turmoil, and is plagued by the worsening Zika virus. Over the weekend, more than a million demonstrators hit the streets to protest against the government and demand the president’s resignation.
There are several things happening at once. President Dilma Rousseff is facing several attempts to remove her from office. There are impeachment proceedings over her handling of the economy and a motion to annul the 2014 elections over illegal campaign contributions. She has record low approval ratings and very little political support.
Separately, her predecessor and mentor, Luiz Inacio Lula da Silva, known as “Lula” in Brazil, is the subject of two separate corruption investigations that link him to a massive scandal at the state oil company, Petrobras.
Silva, who served as president from 2003 to 2011, was incredibly popular and is credited with transforming Brazil by lifting millions out of abject poverty with generous social programs.
State prosecutors last week asked for his arrest. This set off a political firestorm, with some commentators saying the country could be headed for a political “civil war.”
Silva says he is the victim of a political witch hunt. His supporters have said the right-leaning forces of the country are attempting a “coup.”
Rousseff has stood by Silva, and the two are inextricably linked. His troubles make her political survival unlikely, though she has said she refuses to resign. Massive protests against her government took place across the country over the weekend.
Economy In Free Fall
Brazil’s economy, once a darling among the world’s emerging markets, is now in a free fall. It contracted by 3.8 percent in 2015. Economists say it’s the worst recession here for 100 years — and possibly ever.
The reasons for the downturn are many. Some are not of Brazil’s making. There is less demand from China the past couple years for Brazil’s commodities, like iron ore, sugar and soybeans. The price of oil is low, denting the budget of oil-producing states like Rio de Janeiro, which get a big portion of their revenue from the energy sector.
But critics say Rousseff has badly mismanaged the economy, spending lavishly on social programs, even in the downturn. There are also structural problems that have made it difficult to address the economic ill winds. Add to that the corruption scandal that has affected Petrobras, the state oil company, and the construction sector — and you have a perfect economic storm.
The result has been called stagflation. Brazil’s economy isn’t growing, but prices are rising at nearly 11 percent a year.
Brazil is very corrupt, but until recently, nothing much was done about it.
Last year, a small group of federal prosecutors in the state of Parana, in southern Brazil, rocked the most powerful forces in the country by opening an investigation called “Lava-Jato” or car wash.
They uncovered and are prosecuting a kickback scheme at Petrobras. The way it worked was that construction companies would over-charge Petrobras, and then would funnel the extra money into campaign slush funds and political bribes.
The web of corruption the prosecutors uncovered has touched Brazil’s highest levels of corporate and political power. The Odebrecht conglomerate, Latin America’s biggest company, is based in Brazil, and its head was just sentenced to 19 years in prison for involvement in the kickback scheme. The leader of Brazil’s lower house of Congress has also been implicated, as have many other senior business and political figures — most notably, Silva.
Many observers say the investigation is fundamentally changing the country. That might be overstating the case. But it certainly isn’t business as usual in Brazil anymore.
Ask almost anyone on the streets of Rio de Janeiro how they feel about the Summer Olympic games and you’ll get a similar answer: They are not happy. So far, despite promised benefits, all that residents have gotten is a big headache.
A subway extension that was meant to be ready for the Games probably won’t be. Key waterways that were to be cleaned up haven’t been. Security has deteriorated. Meanwhile, because of budget cuts, Brazil’s hospitals are in crisis at a time when it’s more important than ever to battle the Zika virus, with its suspected link to babies being born with brain damage.
Brazil pulled off the 2014 World Cup, and it will pull off the Olympics, too. But many here are wondering what it’s all for. In many ways, Brazil may serve as a cautionary tale to countries and cities who may want to take on mega-sporting events — at great cost and for uncertain benefit.