Amid Division and Paralysis, an Isolated Rousseff Confronts Scandal and Her Own Troubled Legacy

02/12/2015 03:16 pm ET | Updated Apr 14, 2015
WENDERSON ARAUJO via Getty Images

Millions of Brazilians will sing and dance in the streets in the pre-lent festival of Carnaval starting this weekend. This year, however, there is no way to escape the harsh realities of a government paralyzed by division, scandals, and an economy on the verge of recession. The sharp increase of the inflation rate to 1.24 percent in the month of January, or 7.14 percent in the past 12 months -- well above the Central Bank's target limit of 6.5 percent -- did not come as a surprise to Brazilians. According to a new survey, 86 percent of them believe prices will keep rising in 2015 as the government puts in place an austerity strategy described by President Dilma Rousseff in the first cabinet meeting of her recently inaugurated second term as "corrective" and "indispensable" to restore the country's financial health. The expectation of continued price hikes will complicate the task of the team led by Finance Minister Joaquim Levy to stabilize the economy and restore confidence among Brazilian and foreign investors in the country's capacity to resume sustainable growth in the years ahead. Some 90 percent of those surveyed said they expect salaries not to keep up with inflation, which implies rising social tension and trouble ahead within the government coalition led by the Workers' Party (PT).

Brazilians' overall perception of the economy has turned sharply negative, according to a telephone survey called Radar Ideia Popular conducted by Ideia Inteligência, with a sample of 78,222 people in 259 cities in all regions of the country from January 26 to February 1. Three quarters expect employment levels to worsen during the year in comparison with 2014, when record low unemployment served as a powerful campaign argument by President Rousseff. The negative perception on employment trends is more pronounced in the Southeastern states, Brazil's economic powerhouse and home to the bulk of political opposition to the president, who won reelection last October by a narrow 3 percent margin: 81 percent expect the situation to get worse and only 15 percent said it will get better. A slightly more optimistic view prevails in the pro-government Northeastern region, where 30 percent see a rosier picture on employment, compared to 68 percent who are pessimistic. Nationally, there is strong pessimism on employment among the young, with two thirds of them expecting the job situation to deteriorate.

When the topic is taxes, Brazilians have realistic expectations. Seventy percent say taxes will rise. Women, however, are more hopeful, or less prepared, for bad news on taxes than men, with 38 percent saying they will decrease. Regionally, residents of the Northeast are evenly divided about the prospects on taxes, while 81 percent of those who live in the Southeast, and carry the bulk of the nation's tax burden, expect taxes to go up. "The overall perception of recession, inflation and higher taxes will certainly have a negative impact on national public opinion throughout the year. The government will face a very difficult challenge to revert economic expectations," said pollster Mauricio Moura, who coordinated the survey and presented the findings at a session hosted by the Brazil Institute of the Wilson Center on Wednesday.

The survey findings compounds an already charged political picture dominated by bad news for the president and the country. A Datafolha poll released on Saturday showed that Rousseff's approval/disapproval ratings have inverted in the past two months. Less than two months after starting her second term, 44 percent of Brazilians say she is doing a "bad" or "very bad" job. This is higher than the 42 percent who praised her performance in the last Datafolha poll in early December. Ominously for the president, 77 percent of the 4 thousand people interviewed said they believed Rousseff knew about the corruption in Petrobras, the state-run oil giant that she has controlled for several years as president and previously as chairwoman of the company's board, during the administration of her mentor Luiz Inácio Lula da Silva.

Rousseff has not been directly linked to the crimes committed against Brazil's largest company and she continues to enjoy a reputation of personal integrity among Brazilians. The Datafolha survey shows, however, that a growing proportion of the public -- now at 30 percent -- believe the scandal could lead to the president's impeachment. Eduardo Cunha, a political adversary of Rousseff's in the PMDB, the PT's main partner in the government coalition, has dismissed talk of impeachment after he was elected president of the Chamber of Deputies on February 1, defeating a candidate favored by the president's party. But the topic has entered the national debate, with Cunha's help. One of his first acts as president of Brazil's lower house of Congress was to create a parliamentary inquiry committee on the Petrolão, as the scandal is popularly known. Undermining finance minister Joaquim Levy's efforts to restore fiscal balance and credibility to Brazil's economic policy, Cunha has also led the approval a constitutional amendment making mandatory expenditures in projects favored by his peers.

The Petrobras scandal is bound to produce more bad news. In the coming weeks, the federal prosecutor's office is expected to indict several congressmen from the government coalition accused of having participated in and benefited from the assault on Petrobras, estimated in the billions of dollars. Last week's selection of a new CEO for the company to replace the discredited Graça Foster was not well received by markets, further fueling speculations about Rousseff's inability to confront the crisis. The PT has distanced itself from Rousseff, leaving her increasingly isolated. "Dilma is moving towards self-destruction," wrote Ricardo Kotscho, a veteran journalist and close friend of former president Lula in his blog last week, summing up the Brazilian leader's predicament less than three months after her reelection.