Brazil's Rousseff undone by hubris, economic missteps

[BRASILIA] Minutes after taking her oath of office in 2011, President Dilma Rousseff stood before Congress and pledged to end the dirty back-room deals and kickback schemes at the heart of Brazilian politics.

"Corruption will be combated ceaselessly, and the entities that control and investigate these matters will have my full backing," she vowed.

For a time, it seemed she would make good on her promise. In her first year, she forced out seven cabinet ministers tainted by accusations of wrongdoing and had the highest approval rating of any president since Brazil's return to democracy in 1985.

Yet five years on, amid the worst recession since the 1930s, Ms Rousseff will be stripped of office if the Senate, as expected, votes on Wednesday to put her on trial for breaking budgetary laws.

Although she faces no allegations of personal enrichment, Ms Rousseff also stands accused by Brazil's public prosecutor of obstructing a huge corruption investigation at state-run oil company Petrobras, Brazil's biggest-ever scandal.

She chaired the board of Petrobras from 2003 to 2010, when the worst of the corruption was taking place.

Ms Rousseff denies any wrongdoing and says she is the victim of a 'coup.' But outrage over the recession and the Petrobras scandal turned most Brazilians against her, motivating opposition efforts to unseat her.

In explaining what went wrong, former ministers, aides and congressmen point to Ms Rousseff's stubbornness, economic mismanagement and a tendency toward self-isolation. Combined, those traits led her to rebuff advice that might have averted recession and saved her politically.

She even ignored Luiz Inacio Lula da Silva, her powerful predecessor, who had hand-picked her to succeed him as candidate for the leftist Workers Party in 2010.

One former Rousseff minister points to a critical mistake in 2014 after she was narrowly re-elected, despite rising discontent over the economy and poor public services.

At their first meeting after the election, Ms Rousseff proudly told her mentor Mr Lula that the vote showed the people were still on their side, the minister recalled.

"No," Mr Lula argued. "They are giving us a warning. And they are telling us that we'll not have a second chance."

But Ms Rousseff did nothing to change course.

Instead of reining in spending and rethinking the state-led economic policies that were fueling inflation and widening an already large budget deficit, she stuck to the artificially rosy picture she painted during that campaign.

"She went into a complete state of denial," the former minister said.

EARLY SUCCESS, MASS PROTESTS

Ms Rousseff easily won her first election.

Aloft an economic boom fueled by Chinese demand for Brazilian iron ore, soy and oil, Mr Lula marketed Ms Rousseff as a no-nonsense technocrat who would preserve generous social policies that helped lift millions from poverty.

But she lacked Mr Lula's charisma and negotiating skills, a fatal flaw in rough-and-tumble Brazilian politics.

Warning signs appeared early on. Economic growth halved in her first year in office to 3.9 per cent as commodity prices tapered and debt-laden consumers curbed spending.

Mr Lula's government had used subsidized lending to promote public works and stoke a consumer binge. Ms Rousseff attempted the same in much leaner times.

Gradually, she abandoned economic principles such as inflation targeting and balanced budgets that for two decades had kept at bay high inflation and boom-bust cycles.

She also ignored business leaders' pleas to pursue tax, labor and pension reforms they said would make Brazil more competitive.

Despite falling tax revenues, Ms Rousseff increased spending, hoping that public works would encourage investment. To curb inflation, she froze fuel prices and gave electricity companies tax breaks to keep power rates low.

"She really thought she could will the economy back into shape," said another former aide, who asked to remain anonymous.

In 2013, things came to a head.

An increase in bus fares sparked demonstrations that exploded into mass protests, with millions marching against everything from corruption to the dismal state of schools and hospitals.

After a week, Ms Rousseff sought to appease protesters, saying in a televised speech that she heard them. But instead of appreciation, the speech sparked ill will and made Ms Rousseff a lightning rod for the protests.

Still, the heavy spending helped her clinch re-election, even if it soon became apparent that accounting maneuvers had allowed government finances to look better than they were.

Almost immediately upon starting her second term in Jan 2015, the severity of Brazil's problems showed.

Annual inflation surged past the government's target ceiling of 6.5 per cent and ended the year at above 10 per cent. The jobless rate climbed, as did public anger over corruption, and Ms Rousseff's approval ratings plummeted.

OPTING FOR CONFRONTATION

Angry she had misled voters over the state of public finances, opposition lawmakers called for her impeachment. A federal auditor confirmed the budget irregularities.

Ms Rousseff stumbled again, this time mishandling the powerful PMDB, a party with more seats in Congress than any other and the key to her ruling coalition.

"Instead of seeking dialogue and agreement, she opted for confrontation," said senator Fernando Bezerra, another former minister.

Vice President Michel Temer, the PMDB leader, publicly broke with Ms Rousseff in December. Several PMDB ministers and other coalition partners followed, abandoning Cabinet posts and swelling pro-impeachment ranks in Congress.

"She underestimated the reaction of the PMDB and the importance of the government's reliance on that party," said Paulo Pimenta, a longtime PT congressman.

Ms Rousseff will almost certainly be put on trial by the 81-seat Senate, suspending her and making Mr Temer interim president.

Few expect an acquittal. Polls show foes have as many as 51 Senate votes against her, just shy of the two-third majority they need to convict her. Ms Rousseff has only around 20 votes.

Many in her own Workers Party have distanced themselves. They include Mr Lula himself, who has said he may run for the presidency in 2018, although he is under investigation in the Petrobras case and is no longer the towering figure he once was.

REUTERS