Brazil's senators have begun the final phase of impeachment proceedings against left-wing president Dilma Rousseff as the nation's chief justice warned them of the gravity of the decision they were about to take.
The senate will hold several days of debates, with Ms Rousseff due to appear before a final vote next week. The vote is expected to lead to the president's replacement with her former centre-right deputy, Michel Temer.
"The parliamentarians gathered in this house have been transformed by the law into judges and should as a consequence, as far as is humanly possible, leave aside their opinions, ideologies, political preferences and personal inclinations," said chief justice Ricardo Lewandowski, who is presiding over the session.
Yesterday's final round of the impeachment process, in which Ms Rousseff has been accused of manipulating the budget, comes four days after Brazil closed the 2016 Olympics in Rio de Janeiro.
Ms Rousseff has attacked the process as a parliamentary coup and her Workers’ Party has attempted to generate opposition to it at home and abroad, but proponents of the impeachment say it is being conducted according to the constitution.
The impeachment is expected to pass by more than the necessary two-thirds margin of the 81-seat senate, putting Mr Temer into the hot seat, with business and markets expecting rapid advances on the economy once he takes over.
Restoring confidence
“Mr Temer’s challenge is about restoring domestic and foreign investor confidence and citizens’ trust in the government, which is a very tall order,” said
Paulo Sotero
, director of the
Brazil Institute
at the Washington, DC-based Wilson Center. “But there is no alternative.”
The benchmark Bovespa Index has gained nearly 70 per cent in dollar terms since the April opening of impeachment proceedings against Ms Rousseff.
In particular, markets want to see Mr Temer's star finance minister, Henrique Meirelles, deliver reforms to rein in Brazil's ballooning budget deficit and place public finances on a sustainable track.
The keystone reform is a new law that would rule out real increases in public spending for the foreseeable future.
Solid progress on reforms would coincide with a nascent economic recovery that economists predict will begin in Brazil next year.
Capital Economics forecast in a note that Brazil’s gross domestic product would grow 1.5 per cent in 2017 after shrinking an expected 2.5 per cent in 2016 – a more optimistic forecast than many other economists expecting a fall of 3 per cent or more this year.
One of the biggest threats to Mr Temer is that his fiscal reforms could be watered down in congress with resistance already under way to efforts to include health and education in the budget cap.
He has been able to use the impeachment as an excuse for not getting reforms through until now. But the clock will start ticking if Ms Rousseff is removed as expected and he is installed as president until the next elections in 2018, analysts said.
Mr Sotero said that whatever happens, Brazil will be forced to confront its problems over a lack of accountability in public finances and budget overspending.
Public spending in Brazil constantly rises whether or not tax revenues increase or fall, with public debt on track to reach 90 per cent of GDP by 2018 – considered unsustainable given Brazil’s high interest rates.
“Now we are finally going to have the good debate and the necessary fight we have been postponing for years,” said Mr Sotero. – Copyright The Financial Times Limited 2016