World·CBC in Brazil

Chaos in Brazil likely far from over after cabinet post for former president Lula

The turmoil is Brazil is getting worse week by week. In the wake of record demonstrations against her government and charges of money laundering against her ally, Brazilian President Dilma Rousseff could have chosen to distance herself from her former mentor. Instead, she doubled down.

Seeds of political and economic turmoil were sewn in past, but Dilma Rousseff isn't distancing herself

Demonstrators in the tens of thousands gathered in Liberty Square, in Belo Horizonte, Brazil, on March 13, 2016 seeking to bring down President Dilma Rousseff. (Douglas Magno/AFP/Getty)

In the wake of record demonstrations against her government and charges of money laundering against her ally, Brazilian President Dilma Rousseff could have chosen to distance herself from her former mentor. Instead, she doubled down.

Prosecutors are hoping to arrest former president Luiz Inácio Lula de Silva for his alleged involvement in a multi-billion-dollar kickback scandal. The charges have been sent to — but not yet approved by — a federal judge.

But instead of going to jail, the once-immensely popular Lula is headed to a post in Rousseff's cabinet as chief of staff, where he'll be immune from prosecution in almost every court. Under Brazilian law, only the country's supreme court can authorize the investigation, imprisonment and trial of cabinet members.

Shortly after Lula was sworn in on Thursday, a judge issued an injunction against his appointment. The government can appeal to a higher court, but such a move would likely only make tensions worse.

Opponents claim the appointment goes beyond mere loyalty and that Rousseff is only trying to protect herself because they're both implicated in the scandal. Rousseff's supporters claim Lula's appointment is meant to help save the country from the economic and political crisis. But some experts fear this move will only hasten Brazil's downfall — a trajectory that began more than a decade ago.

More than a million people lost their jobs in Brazil last year as the economy has been dragged down by low oil and commodity prices. (Nacho Doce/Reuters) ((Nacho Doce/Reuters))

"The government thought it would be rich now, so it could no longer be constrained by fiscal responsibility, could keep spending without limit, without responsible orientation," says Carlos Pereira, a political analyst with the Getulio Vargas Foundation in Rio de Janeiro. "All those aspects somehow diverted Brazil from the right track. And Brazil started spending much more than it could do, and we got in this wrong direction and the economy became completely unsustainable."

In the early 2000s, it was as though Brazil had won the lottery. Oil and commodity prices were high. The country was flush with cash. So the government spent lavishly and successfully bid for the World Cup and the Olympics. Now oil and commodity prices have plummeted. And so has the Brazilian economy.
Political analyst Carlos Pereira says Brazil, a few years ago, thought its oil revenue would never run out and kept spending without limit. (Kim Brunhuber/CBC)

"The problem with these lotteries is that they come to an end," says Carol Wise, a professor with the School of International Relations at the University of Southern California who writes extensively on Brazilian politics.

She says the government had a 10-year window to invest in reforms that could have transformed the country into the fully developed nation it aspired to be.

"They did not keep their eye on the prize; they really lost sight of a lot of reforms that now are absolutely essential to the economy growing again. And these are really simple things like starting a business, getting a contract approved through the bureaucracy, transparency, effectiveness of government — all of these sort of basic things for securing investment — investment drives growth, etc.

"And in the case of Brazil, you can see that [they have] even gone backwards on some of these reforms."

An estimated three million people took part in more than 100 protests Sunday across Brazil. President Dilma Rousseff is facing a growing backlash amid the worst recession in decades and a sprawling corruption investigation that has closed in on key figures in her Workers' Party. (Nacho Doce/Reuters)

More than a million Brazilians lost their jobs last year, some due to the scandal involving the state oil company Petrobras. Many officials and politicians have been swept up in the multi-billion-dollar corruption probe, most notably Lula. Now Petrobras stocks are practically worthless, Wise says, and that has affected the economy of the entire country.

"Brazil lost its only investment-grade rating as a country, and it's trading now on junk-bond markets."

As the Olympics get closer, Wise says the demonstrations will get even bigger. But experts are watching to not just to see how many are marching, but who is marching.

USC's Carol Wise says Brazil missed a golden opportunity to make reforms that might have prevented the current chaos. (Kim Brunhuber/CBC)
Walking through Sunday's protest in Rio, you'd notice almost immediately that nearly everyone is upper middle class. According to surveys conducted by Datafolha, more than three-quarters of the protesters in Sao Paulo were white, more than three-quarters were university graduates, and most were fairly well off. That demographic has always tended to oppose the left-leaning party that's been in power for the last four elections.

But Brazil's poor see things differently. In the favela of Santa Marta, one of Rio's least-developed slums, some people I spoke with hadn't even heard about the demonstrations.

"I don't have a TV," one woman told me. 
"I don't look for problems around, you know?"

Those facing the largest problems say they're too busy trying to make a living to get involved with the protests. But with Lula's appointment stirring discontent even among loyalists — analysts suggest more than two million Brazilians are expected to lose their jobs this year — that could change.

About the Author

Kim Brunhuber

Los Angeles correspondent

Kim Brunhuber is a CBC News Senior Reporter based in Los Angeles. He has travelled the world from Sierra Leone to Afghanistan as a videojournalist, shooting and editing pieces for TV, radio and online. Originally from Montreal, he speaks French and Spanish, and is also a published novelist.