Rousseff’s Downfall Punctuates Brazil’s ‘Lost Decade’
James M. Roberts /
Brazil’s senate voted to begin impeachment trails for President Dilma Rousseff on Thursday. Rousseff, who is accused of breaking federal budget laws, will be suspended from her position while the trial takes place.
The suspension provides an opportunity for Brazil—Latin America’s largest country—to bring to an end a “Lost Decade” during which misguided policies resulted in a tragic failure to pull millions out of poverty permanently.
Government spending programs championed by Rousseff and her socialist mentor and predecessor, “Lula” da Silva, only managed to pull Brazilians out of poverty temporarily, through cash transfers and welfare benefits.
After solid rates of economic growth until the 2008 financial crisis, with reduced poverty, rising incomes, and a growing middle class, The Economist noted that Brazil’s economic slowdown began when Lula ramped up spending in his second term—spending that continued under Rousseff.
Little was done during the good years to continue the difficult—but necessary—structural reform process begun in the 1990s by former President Fernando Henrique Cardoso to remove the real obstacles that have limited productivity growth and thwarted convergence with more advanced economies.
Now, according to The Wall Street Journal, Brazil is stuck in the
worst downturn since the Great Depression. GDP contracted by 3.8 percent last year and is on pace to shrink at least that much in 2016. Debt, deficits and interest rates have skyrocketed. Unemployment has reached double digits; inflation is hovering near 10 percent.
Brazil has also scored poorly in recent editions of the annual Index of Economic Freedom, dragged down by too much government spending, corruption, and regulatory inefficiency.
Acting President Michel Temer has his hands full, but he might be able to translate public anger at Rousseff and public corruption into support for politically difficult but fundamentally important reforms,
Further south in Argentina, the new center-right government of President Mauricio Macri is doing exactly that, cleaning up the economic damage inflicted by a decade of Peronist populism similar to the Lula/Rousseff years.
Rousseff’s downfall signals difficult political times for Brazil, but is another positive sign that the era of disastrous populism in Latin America is at an end.