1st Month Government Michel Temer
Intense. That’s the word to describe the first thirty days of the Temer Government. The challenging climate, present since its first day, has given impulse to the taking of substantial measures in an attempt to halt the economic crisis and rescue credibility . .
1st Month of the Interim Government
Intense. That’s the word to describe the first thirty days of the Temer Government. The challenging climate, present since its first day, has given impulse to the taking of substantial measures in an attempt to halt the economic crisis and rescue credibility.
The first major challenge was the selection of ministers to form his government. Temer had to comprise his government with members of several parties in an effort to earn the support of parliament in both Legislative Houses, the House of Representatives and the Senate, with a view to obtaining approving for proposals which undoubtedly would be the starting point for the country’s reorganization and resumption of economic growth.
Despite Temer having elected to nominate mostly political figures to the head of ministries, he has tried to adhere, with regard to some strategic positions, to the appointment of persons with particular technical and professional experience, and brought credibility to his government in doing so.
However, despite Temer having sought a conciliatory atmosphere in his government, it did not take long for problems to arise. He sought to appease the desire of the political parties and of the people for a qualified and experienced cabinet. During the early stages of this interim term, some misunderstandings have occurred with regard to the restructuring of ministries, which has required swift action from the new president to ensure the political stability of his government.
But on the other hand, it has the perception of little firmness in relation to social pressure, such as the vote on increasing the judicial servants, not entering into opposite position, considering the need for government spending reduction.
News about economic proposals removed, for a short time at least, the focus on the profiles of the ministerial team and some initial blunders. These preliminary days were ones of great expectation, with the reappointed Minister of Finance, Henrique Meirelles, nominating an economic team of strong technical ability capable of disentangling the public accounts. The plan of action was to delineate a realistic diagnosis of the economic situation and propose efficient fiscal measures, which was widely considered very positive.
Despite the optimistic mood, news of the involvement of certain Ministers in suspicious recordings related to ‘Lava Jato’, the biggest corruption investigation conducted so far in Brazil, put Temer in a delicate situation and culminated in the first removal of a member of a ministerial team. Romero Jucá, Minister for Planning, vacated the office and resumed his position as Senator to assist the government in passing resolutions for priority proposals in the Senate. The reaction of the market, despite pragmatic handling by the government’s economic team to calm things down, was instantaneously negative. The value of the real fell against the U.S. Dollar, interest rates rose, and there was a drop in the Ibovespa –the most important indicator of the average performance of shares traded on the São Paulo Stock Exchange.
Soon after the departure of Romero Jucá from the Ministry of Planning, Temer faced his first major test in Congress: the vote on the fiscal budget, announced in the amount of R$170 billion.
The situation was delicate and, despite a troubled parliamentary session, the new budget was approved, indicating significant parliamentary support for the interim government and paving the way for a vote on austerity measures announced by the economic team. Among these measures are the authorization of the return of funds from the National Bank for Social Development (BNDES) to the National Treasury in the amount of R$100 billion, a proposed amendment to the Constitution to limit the high government expenditure currently above inflation and GDP which has made it difficult to manage public funds, a project to extinguish the Sovereign Fund, support for a project to exempt the participation of Petrobras in pre-salt mining investments, pension reform and labor reform.
In the midst of this victory and an atmosphere of confidence, criticisms by the Minister for Transparency, Fabiano Silveira, relating to the conduct of prosecutors in the Lava Jato investigations and his giving of advice to individuals under investigation, were leaked to the press. A conversation between Silveira, Renan Calheiros (President of the Senate) and Sérgio Machado (former president of Transpetro), led to an institutional crisis and the subsequent replacement of the minister.
During the course of the investigations, any further leaks during this transitional period would likely be disruptive to the actions of the government and the pace of work in Congress, not to mention the economic fluctuations that may have an impact on the credibility of the country.
An interesting point relating to the Temer Government is the dialogue taking place with and rapprochement to the National Congress, which will have a decisive role, not only during this period but in a possible Temer Government until 2018. However, this dialogue will not be restricted to Congress, but will extend to aligning government actions with decisions of the Federal Supreme Court.
During these first thirty days of the interim government, Temer has also made ??his mark in the appointments of second tier positions, opting to nominate individuals with the technical capacity and competence to action the changes necessary to get the country out of its current crisis.
Another important feature, and one which is extremely important in this transitional period, is the direction of foreign policy. The Minister, José Serra, has defined the priorities of the government’s foreign policy, which is in line with its domestic policy, in strengthening the Mercosur, the expansion of markets, and a strong role in environmental issues. It will seek to create new opportunities by promoting exports and developing new bilateral trade agreements.
The changes have already been noticeable and, in a context of institutional, economic and political crisis, it is possible to state that between the rights and wrongs so far committed, the balance has been beneficial to a country showing some fragile signs of recovery and economic growth.
The first thirty days of the interim government, under the leadership of Temer, could not have been more troubled; a fact that was much expected. The last year of the Dilma government put the country in a perilous economic situation, the peak of which was reached following the denunciations made in relation to the Lava Jato investigations involving prominent politicians and the leaking of phone conversations between former President Lula and Dilma Rousseff.
During this period, street protests took prominence on national and international news, and the pro-impeachment movement gained strength. Temer does not exactly represent the change that the people want to see, but at the moment it reflects the opportunity for the country to realign its trajectory and rescue economic and social prosperity. Prior to the admissibility of the impeachment proceedings against Dilma, Temer had already signaled that if he were to assume the position of interim president, he would break the administrative habits of the previous government. No sooner was it said than done.
Soon after having assumed the interim presidency, Temer presented a proposal to reorganize the ministries with a view to reducing the number of roles and of treasury expenditure. This action was positive and in line with the objective of halting the public deficit, however from the point of view of some factions of society, some errors were committed in this plan and the initial restructuring ideas were rethought.
Significant changes such as the merging of the Ministry of Education and Ministry of Culture, as well as various changes made to the Ministry of Culture itself – having lost its ministerial status, then becoming a secretariat, and then again becoming an independent ministry – was an important development that showed the character of the Temer Government. In the words of the acting president “I know what to do in government and know how to administer one. If mistakes are made in the administration of government, they will be reviewed and corrected.”
The rhetoric to this time was consistent with the reality of the situation, especially considering the inclusion of Ministers’ names in the Lava Jato investigations and their subsequent removal from office, and reaffirmed Temer’s capacity to handle delicate situations. He has always been aware of the risk of the appointments made to positions in government, since in Brazil if the government does not have a “good relationship” with the political parties and a significant base in Congress, the chief of the executive does not govern.
One can say that Brazil is going through a period of expiation, and the exit of certain persons from government has opened the space for new nominations. If the impeachment of president Dilma Rousseff is confirmed, other changes in ministerial staff may occur. Criticisms regarding the eminently male ministerial appointments resonated negatively during the first days, and were abated with the change of a few positions.
Appointments of leadership positions in state-owned banks and companies finalized the phase of strategic appointments for the Temer government for the time being. In analyzing the curriculums of the professionals appointed to these state bank positions, one can notice their particularly technical profiles. Leading the National Economic Development Bank (BNDES) is Sylvia Maria Bastos Marques, at the Bank of Brazil (BB) is Paulo Caffarelli, and at the Caixa Econômica Federal (CEF) is Gilberto Occhhi.
With regard to regulatory agencies, no significant changes are expected to occur during the interim governmental period.
In the economic arena, oscillations followed the lead of the events that took place during the first month. What can be deduced from the chart below is that before Rousseff’s removal there was much expectation of change, and that if Temer were to assume office, he would be able to effect these changes. In light of this, the Real strengthened during this initial period, and markets reacted positively to the announcement of austerity measures made by the economic team.
But it was short lived. With the involvement of ministers in the Lava Jato investigations, markets immediately reacted negatively and revealed the insecurity surrounding Brazil. However, the speed with which Temer reacted was positive, calming the market and strengthening the Real’s exchange rate. It is noticeable that in light of measures taken and some matters approved by Congress, the market stabilized, resulting in the fall of the U.S. Dollar as against the Real, as can be seen in the chart below.
2. ACTIONS BY THE INTERIM GOVERNMENT
The first bold actions taken by the Temer government were the restructuring of ministries and their responsibilities, and the creation of the secretariat for investments to administer concessions and investments in infrastructure.
The first legislative proposal sent by the Government to Congress was Provisional Measure No. 727/2016, which created the Partnership and Investment Program (PPI), an instrument with the capcity to make the grant of federal concessions more agile by reducing bureaucracy and excessive state interference. The goal is to unite the state with the private sector by make partnership agreements relating to public infrastructure projects, thereby increasing investment and creating jobs.
In addition, the proposal seeks to guarantee minimal state intervention in business and investments, which shows a break in policy from the previous government of the Workers’ Party (PT). The Provisional Measure is currently before Congress and awaits creation of the joint committee to review the proposal.
With regard to the restructuring of ministerial functions and responsibilities, the highlight has been in relation to the Ministry of Foreign Affairs. Since the initial days of the interim government, Foreign Affairs Minister José Serra presented the new guidelines of the country’s foreign policy and reaffirmed commitment to notions of democracy, human rights, and the peaceful pacification of conflicts. He stressed in his first public statement that, “our foreign policy will be governed by the values of the state and nation, not of the government and never of any political party”. Everything indicates that foreign policy will be a central protagonist once more and that searching for opportunities in the market will be a major challenge. Analyses of international relations for Brazil during the Temer government should consider two factos: Brazil’s relations with Latin America on the one hand, and extra-regional relations on the other.
With the definitive ousting of Dilma Rousseff, Brazilian foreign policy should direct its focus on bilateral relations with countries in the Northern Americas, with such consequences in the medium term as the rise of multilateralism and a more or less intensified relationship with the United States, which to some degree would weaken cooperation policies between South American countries. The present time is more about waiting than expectations.
Among the priority issues for the interim government during these thirty days, the most pertinent included voting on the new federal budget and the proposal for amendment No. 4/2015 to the Constitution, which recreated the DRU (Discharge of Union Revenues) with retroactive application from 1 January 2016 and valid to 2023. The proposal is an important one because it allows the government to freely allocate 30% of tax revenues, social contributions and intervention on economic domain (CIDE), which today are designated by constitutional or legal determination, to organs, funds and specified expenses. Also included in the list of issues are proposals for a constitutional amendment to limit the government’s public spending, which is currently set above GDP, pension reform, and workplace social security. There was a point of departure in relation to economic adjustments, in which a group of syndicated workers unions was created and coordinated by the executive office to discuss the reforms, without taking away rights already achieved by workers.
In addition, another priority showing that the interim government is committed to solve the country’s economic problems is the determination to return 100 billion Reais to the National Treasury, as well as termination of the Sovereign Fund, and alteration of the pre-salt exploration rules withdrawing the exclusivity of Petrobras.
Other important measure taken during this period was the suspension of the project “My House, My Life”, after the new Minister for Cities, Bruno Araujo, said that he would perform an audit of the program because of the 61,000 units under contract since 2009, and there having been only 7,548 delivered as at the end of March 2016. Another highlight, in the field of education, was the suspension of new vacancies under FIES (Student Financing Fund), PRONATEC (National Program for Access to Technical Education and Employment) and PROUNI (University for All Program), showcase programs of the PT’s government.
In the health sector, the More Doctors program launched by Dilma Rousseff will also reduce the number of hired foreign doctors. This indicates a movement towards higher quality professional associations and the priority of hiring medical professionals trained in Brazil.
3. BALANCE OF THE INITIATIVES
The balance of these first days showed that there are possible alternatives for a new beginning for the country. The success of the interim government in the approval of the fiscal budget, and the recent approval in the 2nd round of the Proposed Amendment to the Constitution which recreates the DRU (Discharge of Union Revenues), with retroactive effect from January 1st 2016 until 2023, are significant steps towards economic and social management.
Even with the administrative reform announced under Temer’s administration, which abolished several ministries such as the Ministry of Science and Technology, Ministry of Culture, Ministry for Agrarian Development, Ministry for Women, Ministry for Racial Equality and Rights, which did not come without harsh criticism from opponents, as well as the embroilment of ministers in Lava Jato, the balance is positive.
However, after a month’s interim government, the company Brazil Communication – EBC, has become a major focus of the dispute between the current government and President Dilma Rousseff away. After Temer name the journalist Laertes Rímoli to command the EBC, a decision of the Supreme Court – STF determined the return of Ricardo Melo to the direction of EBC. He had been appointed for a term of four years by Dilma, a week before the departure of the President. As the decision of the Court does not revoke the appointment of Temer, the company lives a dual situation from the beginning of June. A preposterous situation, which should only be resolved after the decision on the impeachment of President Dilma Rousseff away.
The challenges are ongoing and certainly today’s decisions will impact the lives of all Brazilians. There is no way to predict whether the necessary reforms will materialize further than merely on paper, but the actions taken so far indicate that there will be effort made to realize them.
4. EXPECTATIONS FOR THE COUNTRY
Temer holds himself out to be a good alternative to Dilma Rousseff’s government, with a trend of improved public opinion and especially for economic recovery.
What will determine the success of the interim government and the achievement of new objectives for the country will depend on the permanence of Temer’s government. The measures to come may not be popular, but it seems that Temer’s goals are to build a solid foundation to ensure conditions for sustained growth of the Brazilian economy at an average rate of at least 3.5% to 4% per annum over the next decade, which corresponds to an increase of the per capita income of at least 2.5% per year. This does not mean excluding important social programs developed over these previous 14 years of PT governance.
According to data collected relating to the impeachment process, Temer is becoming more likely each day to be confirmed as the new official president. The number of undecided Senators has decreased, while the number of Senators in favor of the impeachment has increased. The number of Senators against the impeachment has not varied significantly, indicating that the impeachment of President Dilma Rousseff is inevitable.
Prior to the vote by the full Senate, it will be necessary to approve the report of the special committee. After the vote on the report, the indictment will be read and voted on by the Senate with a simple majority victory. If the indictment is approved, the case will be referred to the Federal Supreme Court and a date will be set for trial. The trial will be chaired by the President of the Federal Supreme Court. There will be allocation for pleadings by the defence and prosecution – the lawyers responsible for the complaint against Rousseff. Senators will be asked to determine the following question:
“Has the accused Dilma Rousseff committed the crime of which she is charged, and should she be sentenced to the loss of her position?”
According to the news circulating in the mainstream media, it seems that the impeachment will be confirmed. There is a consensus among analysts that the numbers of senators in favor of the exit away from President Dilma, will be sustained.
However, the scenario in the Senate can change if they are confirmed the accusations against the current president, Renan Calheiros and possible imprisonment. The vice – president of the Senate, Senator Jorge Vianna is the Workers’ Party, which should interfere with the possible relationship Government Temer and Senate.
The idea of new elections have been considered for some time, even with the Proposed Amendment to the Constitution (PEC 20/2016), however it is unlikely to have enough support for approval. The suspended president has in recent days prepared a letter of commitments in the case that the impeachment can be reversed, and intends to present this letter to the ‘Fearless People and Populist Brazil’ group, which lead demonstrations against president Michel Temer and will indicate intention to a turn to the political left and in the opposite direction to her second term in government. The purpose of the letter would be to dissipate resistance from the political left that has advocated the holding of new presidential elections or who hold doubts about Rousseff’s ability to create basic conditions for governability.
The country’s future seems uncertain or perhaps with some instabilities, however, it seems that there will be impeached and Temer will have the challenge to restructure the country and prepare it for the new president to be elected in 2018. In this sense, important to stress that the institutions are functioning, democracy is strong in Brazil and there is no more space for social uprising. After confirming the impeachment, Temer should coloar implement their proposals and prepare the country for reforms.
INTERIM GOVERNMENT MINISTERS – MICHEL TEMER
Daniella Barbosa Pereira