I had dinner recently with a Fortune 500 executive who was absolutely furious over Brazil. At great pains, he had finally convinced his board to take a fresh look at investing there under interim President Michel Temer’s government. But the latest wave of corruption-related resignations and arrests had scared them away once again, for fear Temer’s government might be at risk of falling, too. “When will this stop?” the executive asked incredulously. “My God, are they all corrupt?”
This was akin to asking whether all Americans are assault rifle-wielding bigots. That is, it’s a terribly unfair question, but given recent news, there are plenty of outsiders asking it. And just as many Americans these days are looking at polls and headlines and wondering exactly what kind of country they live in, many Brazilians are looking at their capital and wondering if there’s anyone with sufficient moral fiber, or at least a clean criminal record, left to lead the country.
They could be forgiven for thinking the answer is “no.” Even before new allegations were published on Wednesday implicating Temer in the Petrobras scandal for the first time, the investigation had shown no signs of losing steam following last month’s impeachment of Dilma Rousseff. Since then, we’ve seen the Speaker of the House deposed and arrest warrants requested for a former president, the current head of the Senate and the ruling party’s top senator – all of them leaders in Temer’s PMDB party. (The arrest requests were denied, but the investigation continues.) Even Newton Ishii, a Federal Police officer who became a kind of folk hero for arresting suspects in the Petrobras case, was himself arrested last week, reportedly on smuggling charges. Meanwhile, numerous other scandals continue to ripple through other areas of Brazilian society, from soccer to school meals to banking.
To what extent Temer will be swept up by all this remains unclear. The new accusations stem from plea-bargain testimony by Sérgio Machado, a former oil executive, who says Temer coordinated an illegal campaign donation for a PMDB candidate in 2012. Temer immediately denied any wrongdoing, and the case against him so far looks like less than a smoking gun. It’s possible Machado is lying in order to get a lesser punishment for himself. But the track record of previous witnesses in the Petrobras case is strong. And Temer and his allies have left themselves extremely vulnerable, in political terms, to new accusations.
That’s because of a strategic choice they made a month ago when they took power. Temer could have aggressively embraced the lessons of Lava Jato, as the Petrobras probe is known, by appointing a new generation of young, untainted leaders to key ministries. They could have made it their top priority to pass a political reform to reduce the number of parties in Congress (which could reduce the incentives for bribery), withdraw special legal immunities and privileges enjoyed by top politicians, and make the campaign finance system more transparent prior to the 2018 elections. Temer could have spoken movingly, early and often about the brave work of judges and prosecutors, and the need for greater transparency in Brazil. With polls showing that Brazilians see corruption as their country’s number-one problem, even amid the worst recession in recorded history and a severe crisis in public health, this would have been a sensible strategy.
Instead, Temer bet on “governability.” That is, he opted to embrace Brazil’s political system as it currently exists, more or less, in order to get legislation through Congress that might bring the recession to an end. This meant appointing a Cabinet that made the parties in his coalition very happy – but angered much of society because it was all-male, all-white and composed of elderly career politicians, many of whom are under investigation. Three Cabinet officials – including the anti-corruption minister – have already been forced to resign. The end result is that Temer has a first-rate machine for passing laws – but his government is widely perceived as being indifferent to popular opinion and opposed to Lava Jato. Largely as a result, it has an approval rating of just 11 percent, similar to Rousseff’s just prior to impeachment.
Before anyone prepares Temer’s eulogy, though, consider this: He may have actually made the right choice, strategically speaking. Brazil’s economy is indeed showing signs of life. Some of this is due to natural bottoming out after two years of severe contraction, but it’s also the result of improving expectations among consumers and investors. Whatever problems Temer’s Cabinet has as a whole, his economic team is undeniably very good, and it enjoys enthusiastic support from the business community. If the recovery continues, Temer’s approval ratings will almost certainly trend upward – recent history suggests that Brazilians are (forgive me) almost as shallow as Americans when it comes to the relationship between economic growth and government approval (as opposed to, say, Peruvians, who seem to reliably hate their leaders no matter how much their economy is booming).
The potential fatal flaw of Temer’s strategy, though, has to do with my answer to the angry Fortune 500 executive:
No, they’re not all corrupt. But the prevailing way of doing politics in Brasília is.
Lava Jato has definitively proven that the problem is not one politician, or two or three parties. Instead, it’s the fundamentally illicit way that many basic transactions have occurred, from campaign finance to the passing of legislation through Congress to the management of state-run enterprises and so on. Of course, not everyone who was in Brasília in recent years participated in the corrupt system. We can certainly debate whether this degree of corruption was a feature of the past 14 years of Workers’ Party rule; or whether it existed for decades or centuries, and we’re just seeing it more clearly now. But the evidence is indisputable, laid out in the huge – and still growing – number of wiretaps, plea bargains and banking records that have sent previously untouchable politicians and executives to jail.
The old system, meanwhile, is clashing with numerous powerful forces for change. These have been documented at length here in Americas Quarterly, and elsewhere: they range from a growing middle class to social media to a new generation of independent prosecutors. These same forces are on the rise elsewhere in Latin America, from Guatemala to Chile to Colombia, with equally disruptive results.
Which of these two sets of forces is stronger in Brazil? Some within the prevailing system are betting everything on themselves. The most prominent example is Senate President Renan Calheiros, who reportedly said Wednesday he will try to impeach the attorney general who recently requested his arrest, and also change the law so that no one who is in jail can make plea-bargain testimony. This may seem shockingly bold, but it is based on a simple political calculation that the status quo will prevail. He, too, may be proven right.
However, if the forces for change do indeed have the upper hand, then we need to consider the possibility that no one who is part of the old system will survive. Upcoming plea-bargain testimony from witnesses such as construction magnate Marcelo Odebrecht or (gasp!) former Speaker of the House Eduardo Cunha seem likely to further incriminate huge swathes of the PMDB and the rest of the political class with specific, damning accusations. In this scenario, it may become irrelevant whether Temer himself is personally accused – in the same way Rousseff’s clean reputation ultimately failed to protect her. If this happens, we may well see a revival of popular anger, a new wave of arrests – and clamor for an earlier, off-cycle general election capable of bringing in a truly new generation of leaders.
In other words: The battle for Brasília may be coming. Buckle up, and keep your board on speed dial.
Winter is the editor-in-chief of Americas Quarterly and author of four books about Latin America.