Just when the Brazilian depression (as we first called it in December 2014 [10]and as Goldman confirmed a year later [11]) appeared that it couldn't get any worse, especially in the aftermath of the BTG Pactual scandal which saw the CEO of Brazil's "Goldman Sachs" arrested last week, the bottom fell out of the floor for Brazil following news that the long awaited impeachment proceedings against Dilma Rouseff would actually begin, despite expectations they would be delayed into 2016.
Moments ago Brazil lower house chief Eduardo Cunha announced that he has accepted an impeachment request filed by Helio Bicudo. Cunha told reporters in Brasilia that the decision is not political, and while one can debate that, the implications will have a tremendous impact on both Brazil's political situation not to mention its already imploding economy (Really Eduardo? You accept an impeachment request a few hours after you learn that the Workers' Party will support an investigation into possible graft on your part and it "isn't political?").
To be sure, the writing was on the wall all day.
Earlier, the Workers’ Party said lawmakers are set to vote in favor of a motion to open an investigation into Cunha’s role in the Carwash corruption probe. The ethics committee is set to vote next week.
As we noted in October [12], this has essentially always been a race against time to see if the house ethics committee will force Cunha’s resignation before he can secure the lower house support to initiate a Senate impeachment trial.
Wanting to get out ahead of the committee, Cunha moved to accept an impeachment request.
As Bloomberg adds [13], Cunha told reporters in Brasilia on Wednesday he "profoundly regrets" what’s happening. "May our country overcome this process." The impeachment process could take months, involving several votes in Congress that ultimately may result in the president’s ouster. Rousseff would challenge any impeachment proceedings in the Supreme Court, according to a government official with direct knowledge of her defense strategy.
The speaker’s decision will put the president’s support in Congress to a test after government and opposition spent months trying to rally lawmakers to their sides. The move also threatens to paralyze Rousseff’s economic agenda as she focuses on saving her political life rather than reviving growth. Her ouster would mark the downfall of the ruling Workers’ Party that won global renown for lifting tens of millions from poverty before becoming ensnared in Brazil’s largest-ever corruption scandal.
Accusations that top members of her party accepted bribes, coupled with surging consumer prices and rising unemployment, have driven Rousseff’s approval rating to record lows. The majority of Brazilians in public opinion polls agreed that Congress should open impeachment proceedings against the president.
As noted above, Cunha himself is facing allegations that he accepted kickbacks and hid the money in overseas accounts. The lower house ethics committee is considering whether to open a probe that could result in his removal from office. His decision today comes after Workers’ Party members on the committee agreed Dec. 2 to vote in favor of investigating Cunha. The speaker denies wrongdoing.
More details from Bloomberg:
Backed by Brazil’s leading opposition parties, the impeachment request accuses Rousseff of breaching Brazil’s fiscal responsibility law in 2014 and 2015. The country’s top auditors in October recommended Congress reject her accounts, saying the administration used fiscal maneuvers to hide a budget deficit last year. The government has denied wrongdoing.
The petition accepted by Cunha goes to a special committee made up of all political parties that must issue a recommendation whether impeachment hearings should start.
The lower house then votes on the committee’s report. If two-thirds of the deputies back impeachment, hearings would begin in the Senate. In that case, Rousseff would have to step down and hand over the reins to Vice President Michel Temer. He would remain in power if the Senate impeaches Rousseff or step aside if she is absolved.
Rousseff’s ruling coalition on paper has enough members in Congress to block impeachment hearings from starting in the Senate. Yet members of the alliance frequently dissent from the president. Cunha himself is a member of the largest allied party, though he said in July he would oppose Rousseff and has since orchestrated some of her biggest legislative defeats.
In other words, what was until now a full-blown political and economic crisis just got even worse.
As a reminder this is the country where a sweeping corruption investigation into state-owned oil company Petrobras has already implicated some of the country’s most powerful politicians and businessmen with the latest to be dragged into the probe being Andre Esteves, the head of the "Goldman of Brazil" investment bank BTG Pactual, who was arrested last month.
Yesterday Brazil also just reported its biggest GDP drop on record which hardly helped Rouseff's case to push through more fiscal austerity measures. At this point it is clear that all budgetary plans are officially dead. Put differently, there's no respite for Brazil and between the forthcoming investigation into Cunha, the impeachment threat for Rousseff, and the extreme paranoia that will now permeate the legislature thanks to the arrest of Amaral, you can kiss the primary surplus dream goodbye.
Finally this is the country hosting next year's Olympics: at the rate it is going, it just may announce in the last moment the Olympics have been cancelled. We wonder if there is a Plan B for when Rio throws in the towel?
