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Brazil’s political crisis, explained

Brazil protest Batman Rio
An anti-government protest in Rio.
(Steffen Stubager/Anadolu Agency/Getty Images)

Brazilian President Dilma Rousseff is in the midst of a stunning fall from grace.

In 2013, Rousseff had a roughly 80 percent approval rating. Today, it's around 10 percent. Just this Sunday, one house of Brazil's Congress voted to impeach her.

The story behind Rousseff's collapse is extraordinary — but also a bit complicated. If you're just learning about it, it might be a little bit difficult to parse why Rousseff is in so much trouble, and why this is all blowing up now.

The short explanation has to do with an economic downturn and one of the most dramatic corruption scandals in modern political history. The longer story relates to Brazil's centuries-long battle with inequality and poverty, and shows just how far-reaching the implications of this crisis could be for the one of the world's most important countries.

So, to help you get a handle on what's happening, here's a list of 11 things one absolutely has to understand in order to get what's going on in Brazil — and why it's so important.

1) Rousseff's party has been in power for years

To really understand the current situation in Brazil, you need to understand a little about Rousseff's background — specifically, her political party's astonishing pre-2014 success.

The Workers' Party, known as PT, is a left-wing party. It began life in 1980, as a party opposed to the military dictatorship that ran Brazil at the time. After the transition to democracy in 1985, the PT became the major left-wing party in Brazil.

It took power in 2002, in the midst of a severe recession. The party's leader, Luiz Inácio "Lula" da Silva — a former steel worker and trade union leader — promised to revive the economy, address Brazil's longstanding inequality problem, and rein in corruption.

And initially, the PT looked wildly successful. Brazilian GDP skyrocketed, as you can see in the chart below:

(Google/World Bank)

Moreover, inequality — the biggest political issue in Brazil — fell dramatically, as did poverty. As Berk Özler explains in FiveThirtyEight:

From 2001 to 2007, income inequality in Brazil started to decline at an unprecedented rate: The Gini coefficient fell from above 0.60 to below 0.55, reaching its lowest level in more than 30 years. The incomes of the poorest tenth of Brazilians grew by 7 percent per year, nearly three times the national average of 2.5 percent. In less than a decade, Brazil had managed to cut the proportion of its population living in extreme poverty in half.

The PT and Lula deserve real credit for some, though not all, of these gains. Its Bolsa Familia program, which handed out cash to poor families if they adhered to certain conditions (like sending kids to school), played a significant role in the declines in both inequality and poverty.

So when Lula was term-limited out of office in 2010, the PT was riding high — and Rousseff reaped the benefits. She was his handpicked successor with a compelling biography: She was a trained economist who had been tortured by the military regime in the '80s due to her anti-dictatorship militant activity. She won the presidency by a 12-point margin and became the first woman ever to lead Brazil.

Rousseff continued and expanded on Lula's pro-poor, redistributive policies — and it initially paid off, with her personal popularity peaking at 79 percent in 2013.

But that success depended, crucially, on the PT's ability to demonstrate that it could continue to stand up for the little guy against Brazil's moneyed interests. And that perception was about to take a major hit.

2) The current crisis began with the largest corruption scandal in Brazil's history

Athletes Village Construction in Progress Ahead of the Rio 2016 Olympic Games (Matthew Stockman/Getty Images)

In mid-2013, Brazilian police detained a money launderer named Alberto Youssef, who had been arrested nine times before, on yet another money laundering charge.

But this time, Youssef had something very different to say.

"Guys," Youssef reportedly told prosecutors, "if I speak, the republic is going to fall."

Youssef began to describe what we now know as the Petrobras scandal — the single biggest problem for Rousseff's government.

Between about 2004 and 2014, the state-run energy firm Petrobras — which is Brazil's largest company and one of the largest corporations in the world — engaged in one of the most astonishing corruption schemes ever to be uncovered.

Nobody knows who exactly came up with the scheme. But it was developed during the commodities boom of the 2000s, when oil prices were high, and involved three main groups of players: leaders at Petrobras, top executives at Brazil's major construction companies, and Brazilian politicians.

It worked in four steps:

  1. Construction executives secretly created a cartel to coordinate bids on Petrobras contracts and systematically overcharge the company.
  2. A select group of Petrobras employees turned a blind eye, allowing the construction companies to charge Petrobras outrageous sums.
  3. The construction executives then pocketed the proceeds from these inflated contracts and rewarded their partners inside Petrobras with big bribes.
  4. Some of the proceeds also got sent to friendly politicians, as either personal gifts or donations to their campaigns. Because Petrobras is partially owned by the state, politicians can install people as executives — who then turn around and reward that politician with a bribe.

Huge sums of money, according to the New York Times, would be "hand-delivered by an elderly gentleman who flew around the world with bricks of cash, shrink-wrapped and strapped beneath thigh-high socks and a Spanx-like vest." Sometimes bribes would be distributed in the form of "Rolex watches, $3,000 bottles of wine, yachts, helicopters and prostitutes."

All in all, somewhere upward of $5.3 billion changed hands as part of this scheme.

3) The scandal plays into Brazil's defining political issue: inequality

A drawing of a Brazilian dinner on a coffee plantation, circa 1820.
(Hulton Archive/Getty Images)

It seems astonishing that anyone involved in the Petrobras scheme thought they could get away with something this large. But corruption has long been widespread in Brazil. To understand how that came to be, you need to go back a bit — to the first days of the country's founding.

The Portuguese began colonizing the area we now know as Brazil during the early 1500s, and before long it became the hub for the Atlantic slave trade, dwarfing even the colonies in what would become the United States. Portuguese colonists used slaves to grow sugar and mine gold, bringing those colonists enormous wealth — and developing what would become a deeply entrenched caste system.

By the time Brazil declared independence in 1822, the caste system had hardened along clear lines — the white elite was fabulously wealthy, while the darker-skinned slaves and laborers were deeply impoverished.

The country formally abolished slavery only in 1888 — the last country to do so in the Western world. But class hierarchies remained. The Brazilian elite retained their advantages, and used their wealth to entrench their own power in society. One common method they developed for doing this was by bribing government officials.

"Brazil is a country that's defined by its income inequality," Brian Winter, the vice president of the Americas Society/Council of the Americas, told me last month. Winter calls this inequality "the most important structural factor" in encouraging Brazilian corruption.

"You had this tiny elite that really thought they could get away with anything, and often did," he said. "The corruption comes from that."

This problem persisted throughout Brazilian history, through multiple governments, and even the military coup in the 1960s.

"There's a famous president of Brazil who ran on the slogan of 'sweeping away corruption' in the 1950s," Matthew Taylor, an American University scholar who studies Brazilian corruption, explained in a conversation with me last month. "He even carried a broom around … to show that he was serious about corruption."

Over time, corruption became more and more normalized. For decades, prosecutors and police failed to investigate corruption, creating a climate of impunity in which even the grossest corruption became business as usual.

"Until 2010," Taylor said, "the chances of you going to jail, especially if you were a politician, were virtually nil."

Estimates suggest that in Brazil, roughly "3 to 5 percent of GDP is lost to corruption," according to Taylor.

It's important to note that Brazil is far from unique in this regard: A number of other Latin American countries, for example, have similar corruption problems, sometimes owing to similar factors. But Brazil is a much bigger country — the world's fifth largest by population and seventh by GDP — so the scale of the problem is larger as well.

The massive Petrobras scandal, then, is the culmination of what happens when you have a corruption problem building, more or less unchecked, over several generations and in one of the world's largest countries.

4) Rousseff isn't personally implicated — but her mentor is

Brazil's former president, Luiz Inacio Lula da Silva, is sworn in as the new chief of staff for embattled President Dilma Rousseff
Lula (L) and Rousseff (R).
(Igo Estrela/Getty Images)

In 2014, independent Brazilian prosecutors made their first arrest in Operation Car Wash — so named, reportedly, because some of the Petrobras money had been laundered through an actual car wash. Between March 2014 and March 2015, dozens of engineers, construction executives, and Petrobras officials were arrested as part of Operation Car Wash. Each arrest allowed prosecutors to gather more evidence, often through plea bargains wherein implicated figures outed co-conspirators.

In March 2015, the scandal really blew up: Brazil's Supreme Court announced that it was investigating 34 sitting politicians on suspicion of involvement in Petrobras corruption — a huge political scandal. Since the scandal began, 93 people have been convicted of crimes relating to Petrobras in total, most of them members of Brazil's political or economic elite.

The politicians involved have come from across the political spectrum. But the Petrobras scandal was most devastating to Rousseff and the PT — even though Rousseff herself hasn't been implicated. There are a few reasons for that.

First, some Brazilians blame Rousseff for the scandal being allowed to happen. Not only was the PT in control of the government for the entire duration of the Petrobras scandal, as former President Lula's energy minister, Rousseff personally chaired Petrobras's board from 2003 until her presidential victory in 2010. This all occurred under her watch, a seemingly damning indictment of her judgment and competence.

Second, it's a major blow to the PT's reputation. The PT was supposed to be different from other parties, more interested in helping the poor and less involved in the kind of corruption that's endemic among Brazil's super-wealthy. PT legislators being implicated in Petrobras suggests this is a lie.

"The PT, when it first came to office, was seen as the party of ethics that would clean up Brazilian politics," Taylor said. "For Brazilians to see the PT arm in arm with politicians who have been proven to be corrupt … is extraordinarily frustrating."

Finally, former President Lula has been personally implicated. Lula, as well as his philanthropic foundation, allegedly received $7.8 million in payments from construction officials involved in the Petrobras scandal. In March 2016, police raided his home and briefly detained him. Many Brazilians believe his indictment is an inevitability.

This, of course, hurts Rousseff and the PT. Lula was the chief architect of the PT, and Rousseff's political mentor. If he's corrupt, then how could anyone trust a PT government?

So while politicians from a number of Brazilian parties have been indicted, the PT is bearing the brunt of public anger.

5) Brazil's economy is a mess

Brazilian Government Plans For Social Program Cuts Amid Recession (Mario Tama/Getty Images)

If Brazil's economy was doing well, the Petrobras scandal might not have been so bad for Rousseff. But it isn't, and as a result people are extra-super furious.

Brazil's meteoric growth under the Lula presidency and first Rousseff term was always unsustainable. It was fueled by exports of commodities like soy, iron, and oil, which were quite expensive during the 2000s. But beginning around 2012, prices fell considerably, tanking Brazil's economy.

To make matters worse, Rousseff had gone on a spending spree: The deficit increased from 2 percent of GDP in 2010 to 10 percent in 2015. The debt now makes up 70 percent of Brazil's GDP, far too much for a middle-income country, creating a serious inflation problem.

These two factors combined to produce an economic nightmare: an even worse version of the stagflation Americans experienced in the 1970s. People have less money due to the recession, and what money they still control is increasingly worthless.

"Latin America’s biggest economy appears headed for one of its worst recessions ever," the Wall Street Journal's John Lyons wrote in March. The figures he cites are dire:

It stalled in 2014, shrank 3.8% last year and now faces a similar contraction this year. Unemployment rose to 9.5% on Thursday as wages fell 2.4%, both trends forecast to worsen. One in five young Brazilians is out of work, and Goldman Sachs says Brazil may be facing a depression.

And remember, this economic crisis began at the same time the Petrobras scandal broke, and accelerated as the revelations deepened. That's why the Rousseff administration is in so much trouble.

"The recession is driving the anger," Winter explained. "There was a corruption scandal of smaller, but still epic proportions, 10 years ago … and the [incumbent] government survived, in large part because the economy was good."

6) Literally millions of Brazilians have protested to call for Rousseff's ouster

Brazilians Hold Rallies For And Against Impeachment Of President On Day Of Crucial Vote (Victor Moriyama/Getty Images)

The conjunction of the Petrobras scandal and the recession hasn't just infuriated Brazilians; it has brought them out into the streets. Since March 2015, when the first major Petrobras-linked indictments of politicians came out, there have been several massive waves of protests against the Rousseff government.

And by "massive," I mean massive. In the first wave, in March 2015, roughly 1 million people turned out to protest. A year later, similar protests attracted 3 million people, according to police data.

The protestors have, very explicitly, been calling for Rousseff's impeachment or resignation, blaming her for both Petrobras and the economic crisis. Most of the public is on their side: According to a recent poll, 61 percent of Brazilians support impeaching Rousseff.

These street protests are a key factor in Rousseff's political vulnerability. They show that not only is she unpopular, but that there are a huge number of Brazilians that feel passionately about removing Rousseff. This has, quite intentionally, put pressure on legislators to distance themselves from her.

"The big question is what the street protests do," Taylor said. "There were big protests [in mid-March] — 3 million — and those were aimed largely at fence sitters in Congress."

7) There is a major class and race divide over Rousseff

Dissatisfaction with Rousseff is widely shared among Brazilians. A September 2015 poll found that only 17 percent of Brazilians who had previously voted for Rousseff approved of her job performance.

Nonetheless, there are some real divides among Brazilians when it comes to Rousseff, principally falling along race and class lines. You can see this in the major anti-Rousseff protests, which are dominated by wealthier and whiter Brazilians.

"At the largest anti-Rousseff protest, in Sao Paulo, 77 percent of the demonstrators self-identified as white, and 77 percent were university graduates," AFP's Joshua Howat Berger reports. "Nationwide, those figures are 48 percent and 13 percent, respectively."

Pro-Rousseff counter-protests, Berger reports, have been noticeably less white.

This makes sense. The PT's greatest successes have come in tackling inequality and poverty, so it's natural that Brazil's marginalized groups would be the least willing to give up on her.

More controversially, some have argued that the protests represent a reactionary backlash: rich Brazilians upset that the PT has leveled Brazil's hierarchies.

"They're discomforted by the fact that people are rising to places where they're not supposed to be," John French, a historian of Brazil at Duke University, told AFP's Berger. "For example, a lot of poor people are now flying in airplanes, which really outrages them, because airports used to be an upper-class preserve. Or the tripling of the number of people going to higher education."

This type of class and race tension has cast a pall over the anti-Rousseff campaign. Even though Rousseff's approval ratings are in the toilet, many also find the campaign against her distasteful.

You can see how this plays out in a photo from a recent protest. It shows a white couple walking to a protest with their dog, dressed in Brazil's national colors. Alongside them there's a black nanny, dressed in an all-white maid's uniform, walking their kids in a stroller:

The photo was shared millions of times across social media, symbolizing the unease with the protest movement. "I want my country back, where I can have my 'maid' and not give her any rights (IRONY)," one internet comment highlighted by the BBC read. It continued, "What the picture says, between the lines, is that you are asking for a better world for yourself as a white employer, and for your perfect family, while the black nanny continues to be a maid."

8) The impeachment proceedings are nominally unrelated to Petrobras (emphasis on "nominally")

Lower Houses of Congress Votes to Impeach President Rousseff
The day of the impeachment vote.
(Igo Estrela/Getty Images)

You might think that Rousseff is being impeached over the Petrobras scandal. But in a purely technical sense, this is incorrect. The impeachment charges currently being debated in Brazil's Congress are about completely unrelated fiscal improprieties.

Basically, Rousseff is alleged to have cooked the government's books during her 2014 reelection bid. She made a series of public banks, used for things like disbursing government transfer payments, pay for government expenses for a chunk of time between 2013 and 2015 — essentially, giving an interest-free loan to the treasury. This allowed her to temporarily keep spending high without growing the deficit, essentially hiding the true scope of the country's debt problem.

And there's no doubt Rousseff did in fact manipulate the books: in October 2015, a Brazilian appeals court unanimously found that she was responsible. This ruling had no punishment attached to it, but it did allow the Brazilian Congress to pursue impeachment charges — which they filed for in December 2015.

These financial shenanigans, the Brazilian-American writer Caroline P. Martinez explains, are called "pedaladas" — and are hardly unheard of in Brazilian politics and in fact happened several times under Rousseff’s predecessors.

Rousseff's supporters and opponents go back and forth on the merits of the technical legal case. But they aren't actually that important, as in this case the impeachment is mostly political and isn't actually about Rousseff's corruption at all. The pedaladas charges are a fig leaf that gives the opposition a legal pretext for getting rid of an unpopular president they don't like.

How do we know that? For one thing, the massive protests buoying the drive for impeachment are yelling about the economy and Petrobras, not pedaladas. For another, the vast majority of Brazil's Congress is itself facing corruption charges, as the Los Angeles Times' Vincent Bevins explains:

Of 65 members on the impeachment commission, 37 face charges of corruption or other serious crimes, according to data prepared for the Los Angeles Times by the local organization Transparencia Brasil...

Of the 513 members of the lower house in Congress, 303 face charges or are being investigated for serious crimes. In the Senate, the same goes for 49 of 81 members.

It's nigh impossible to imagine that a Congress this corrupt would seriously believe Rousseff's alleged number fudging, a less serious charge than what many of them are facing, deserves impeachment.

So this isn't like Watergate, where a legislature was genuinely stunned by presidential misconduct. It's more like the Monica Lewinsky scandal, where the charges are merely a pretext and the real driving force behind the impeachment is political partisanship.

9) The man leading the charge for impeachment is implicated in the Petrobras scandal

Brazil's former president, Luiz Inacio Lula da Silva, is sworn in as the new chief of staff for embattled President Dilma Rousseff
Eduardo Cunha.
(Igo Estrela/Getty Images)

The mastermind of the impeachment drive, which began in December 2015, is Eduardo Cunha, who holds a position in Brazil's Chamber of Deputies (its lower house of Congress) that's roughly equivalent to speaker of the house. He hails from the Brazilian Democratic Movement Party (PMDB), and has been described as Rousseff's "nemesis."

The most important thing to know about Cunha is that he is — so far — the highest ranking member of Parliament to be charged in conjunction with Petrobras. Allegedly, Cunha took $40 million in bribes as part of the scheme and hid it abroad in a Swiss bank account. He faces up to 184 years in prison if convicted.

This has made him a more unpopular figure than even Rousseff. While 61 percent of Brazilians believe she should be impeached, 77 percent believe that he should, according to a recent poll.

His attempt to impeach Rousseff, then, was widely interpreted as something like Samson bringing down the Philistines' temple: He knew he was going down, so he might as well try to take his enemy with him.

Initially, it fizzled out: The December 2015 impeachment charges died due to lack of support. But revelations in March changed things.

Early that month, police raided former President Lula's home and detained him on suspicion of involvement in the Petrobras scandal, the clearest sign yet that he was to be indicted.

Later that month, Judge Sérgio Moro — the jurist who had spearheaded the investigation into Petrobras — ordered the release of a wiretap recording from Lula's phone. On the recording, Rousseff promises to appoint Lula to her cabinet in order to make prosecuting him more difficult.

This sparked the mid-March protests, the largest in the entire Petrobras saga, and breathed new life into Cunha's impeachment quest. On April 17, Cunha managed to secure the required two-thirds vote to send the impeachment charges forward into the Senate.

10) Rousseff's fate is in the hands of Brazil's Senate

Dilma Rousseff Makes Statement After Brazil's Lower House Votes For Impeachment (Igo Estrela/Getty Images)

In Brazil's political system, impeachment is a three-step process. First, the Chamber of Deputies of Congress has to approve the charges, which it has done. Next, the Senate has to agree to hear the charges. That requires a majority vote and, if it happens, will force Rousseff to temporarily step down for up to six months. The last step is for the Senate to vote on the charges themselves. If two-thirds of the Senate votes to convict Rousseff, then she'll be impeached — and if not, she'll be reinstated.

So right now, we're waiting to see if a majority of senators will vote to hear the charges and thus temporarily suspend Rousseff.

It is hard to predict whether this will happen. Brazil's political system is incredibly fractured, with 14 parties holding at least one Senate seat. So it's possible that Rousseff could hold onto the loyalties of enough members of these parties to defeat the impeachment push.

But it's not looking good for the president right now.

"On current estimates the opposition can already count on the required two-thirds majority of Senators needed to support an ultimate impeachment decision," the Economist Intelligence Unit explained in an email sent to press on Monday.

The defection of the PMDB, a former ally of Rousseff's that her Vice President Michel Temer actually belongs to, has played a huge part in tipping the numbers against Rousseff. The PMDB holds the single largest bloc of seats in the Senate, roughly 22 percent of the total.

11) The implications for Brazil's future are significant

(Evaristo Sa/AFP/Getty Images)

Even if Rousseff survives the impeachment, there's another, even crazier, way she could potentially lose her job.

There is currently a legal investigation underway looking into whether Rousseff's campaign took Petrobras kickbacks in 2014. If that finds evidence of Rousseff's involvement, which seems easily within the realm of possibility, a court could rule that election null and void and throw her out in a separate procedure from impeachment, called cassação. Winter explained it to me by comparing it to a sports team being forced to give back a championship title after a cheating scandal.

In the event of Rousseff's impeachment, Vice President Temer will take over. However, Temer is also being investigated over possible campaign kickbacks from Petrobras in 2014. Should that investigation find evidence of Temer's involvement, a court could throw him out, too.

The next in line after Temer is Cunha — who, of course, might end up in jail for life.

The Brazilian political system, then, is potentially nearing a point of real chaos. The president is facing impeachment and might be thrown out by the courts — which means she has substantially weakened power to pass new legislation to deal with Brazil's economic problems. Leading opposition figures, as well as former leaders, are also in serious trouble.

So when the Brazilian people today look out at their options, they see a thoroughly corrupt and incompetent elite. This, together with the ongoing economic problems, could empower the rise of a previously weak or entirely new party in the country's 2018 elections.

"Look at politics in our country; the factors that allow [political] outsiders to come in are very strong around the world right now," Winter says. "Think about how appealing an outsider might be in Brazil, where things are actually bad!"

There could even be some longer-term damage. Some observers believe that the impeachment proceedings might be normalizing impeachment as a tool of politics in Brazil, since they're motivated by Rousseff's vulnerability rather than major wrongdoing.

"It’s putting a very large bullet in Brazilian democracy," Lincoln Secco, a professor of history at the University of São Paulo, told the New York Times. "This will set a very dangerous precedent for democracy in Brazil, because from now on, any moment that we have a highly unpopular president, there will be pressure to start an impeachment process."

And remember, this is the world's fifth-largest country by population, and its seventh-largest economy. This kind of instability there is a very, very big deal.

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