The political and economic crisis that is shaking Brazil goes far deeper than the booms and busts that have characterized the country’s recent history. With the economy paralyzed and public debt soaring, Brazil’s sovereign debt rating has been reduced to junk. Public approval of Brazilian President Dilma Rousseff, now in her second term, has sunk below ten percent. And Rousseff’s leftist government, led by the Workers’ Party (PT), is hanging by a thread in the Brazilian Congress due to a deep split with its coalition partners over the austerity measures Brazil that needs to control its fiscal crisis.
These problems are too large to be fixed by tweaks to economic policy or by modest political maneuvering. The crisis arose out of Brazil's populist economic model; to resolve it, that model needs to change. Under Brazil’s economic system, first enshrined by Rousseff's predecessor, Luiz Inácio Lula da Silva, the state distributes wealth to rich and poor Brazilians alike—in the form of subsidies and social services—to secure public favor in elections. After years of extravagant public spending and easy credit, that model is no longer sustainable. The public is also increasingly suspicious of it, given recent revelations of high-level corruption in the country’s public sector.
Rousseff, then, must contend with a public that is struggling to make ends meet, demands the continuation of social spending, and resists the tax increases that the government must pursue to put its fiscal house in order. And she must deal with the disintegration of her electoral base in the Workers’ Party.
That might sound impossible, but there are things Rousseff can do to address the problems. In particular, she must build a ruling coalition that incorporates conservative forces in the national congress and responds to the interests of the country's private sector, which seeks greater fiscal responsibility from the federal government. Without such a coalition, her government will lack the legislative clout it needs to tackle the crisis at
Loading, please wait...