Can Dilma Rousseff Fix Brazil?

By Jaime Daremblum
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Thus far, Rousseff’s record has been decidedly mixed. On the positive side, she has taken a firm stand against political corruption, demanding the resignations of seven government ministers who were caught up in scandals. In addition, there have now been more than two dozen convictions in the so-called mensalão case, a congressional bribery scandal that dates back to the Lula presidency. (These convictions included a lengthy prison term for Lula’s former chief of staff, José Dirceu.) Many Brazilian reformers are hopeful that the mensalão trials could mark a turning point in their battle against a longstanding culture of impunity. 

Rousseff should be congratulated for her anti-corruption vigilance, as well as her efforts to privatize certain infrastructure projects and thereby improve the quality of Brazil’s airports, railways, roads, and seaports. The Brazilian president has also slashed payroll and electricity taxes to ease the tax burden on companies and consumers alike.

On the negative side, Rousseff has attempted to drive down Brazilian electricity rates even further by strong-arming utility firms. In early December, Reuters reported that her intervention had “wiped more than $15 billion off the book value of Brazilian power companies,” with the Norwegian investment fund Stavanger (part-owner of the Brazilian utility Eletrobras) losing roughly $200 million. Brazil has endured several massive blackouts since Rousseff announced the rate cuts on Sept. 6.

Meanwhile, her government’s treatment of the multinational energy giant Chevron following a relatively small November 2011 oil spill has been outrageous. Indeed, the editors of Latinvex, an online business journal, note that “foreign oil companies are having trouble recruiting executives to Brazil” because of the “scandalous” punishments imposed on Chevron, which have included enormous fines and the threat of 31-year jail terms for various executives.

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Finally, Rousseff has not been bold enough on privatization. “After selling 51 percent stakes in three airports last February,” observes The Economist, her government “got cold feet and spent the rest of the year sounding out foreign operators to see if any would consider bidding for minority shares in the next round of auctions. Only when it found no takers did it decide to continue to sell off controlling stakes.”

With a general election scheduled for October 2014, Rousseff is still very popular, probably because the national unemployment rate remains quite low. But there are no politically easy fixes to Brazil’s deep-rooted economic challenges. The only way to get faster real growth over the long term is to enact controversial but necessary supply-side reforms. As Brazilian-American economist José Scheinkman recently told the Financial Times, “We have to do the tough stuff.”

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Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.

(AP Photo)

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