Brazil’s Senate has just done something pretty extreme. Generally speaking, the government in power makes decisions about things like how much public money to spend on what and why. But Brazil’s just passed a constitutional amendment called PEC 55, which has frozen public spending for the next twenty years in all branches of government. This is big.
What with corruption scandals galore, mass protests, a president impeached, a new one brought in, and the Olympics, it’s been a rollercoaster year for Brazil already. I’m a Brazilian, and this amendment makes me even more concerned for my country’s future. Here’s why.
First, a quick recap of the corruption scandal that rocked the nation last year.
So, since 2014 there has been an operation underway in Brazil to investigate a money laundering, bribery and corruption ring of a partially state-controlled oil company called Petrobras. This operation is called Lava Jato, which means car wash in Portuguese – partly as a metaphor for the fact that the judiciary is trying to ‘clean up’ corruption, but also partly because a lot of the illicit transactions literally took place in a car wash.
Lava Jato coming to light caused major protests across the country. Brazilians joke that our government is crooked, but seeing key leaders of the nation from politicians to business leaders all being named as part of one mega scandal was a step too far.
Then in August, our President, Dilma Rousseff was impeached – i.e. kicked out of office. Officially, it was because she’d violated budgetary laws to make it look like Brazil’s (the amount of money the government had spent above what it earned) was lower than it actually was.
Unofficially, a lot of Brazilians wondered whether she was also the most convenient person to blame for all that had been going wrong in Brazil, when really, the whole system was corrupt. Case and point: the president who filled her shoes, Michel Temer, is also being investigated for money laundering charges.
Okay, we're up to speed. Next: this new plan to 'cap government spending' for twenty years.
Ladies and gentlemen, the A-word is back. It's austerity time.
This word was all over the news last year when the EU was using it to describe their policies in relation to countries across Europe in a lot of debt – graciously called the PIGS (Portugal, Italy, Greece, Spain.) The crux of the idea is based on the assumption that high deficits and large debts are a bad thing for a country’s economy. The next assumption is that to reduce the deficit, a country needs to lower its spending on things like public services, pay off its debts, and reboot.
The idea behind austerity sounds a lot like what we’d do as individuals if we were in too much debt. But a country’s economy doesn’t work quite the same as a one person budget.
Brazil’s economy is the least active it’s been in decades. In other words, they’re not making stuff or trading stuff at the rate that they used to. In other words, it’s in a recession.
Is PEC 55 going to fix this? A freeze on spending effectively means putting the brakes on the government’s ability to increase its investment in Brazil’s economy for twenty years.
Those who defend the idea would say that having tighter pockets for a while will help boost and investment into Brazil, largely because a country which has its bank balances in order is a country an international investor is far more likely to trust. High debt levels, they argue, are unsustainable for a country in the long-term.
Others aren’t so sure. No-one’s ever seen a 20 year austerity plan before, so this is uncharted territory for the country. Think about what your country looked like 20 years ago, and how different it is now. Setting a policy whose effect is so long-lasting feels premature when things could change so much between now and its expiry date.
Plus, some aren’t so sure that this policy is tackling the right problem in Brazil. One economist made an impassioned speech arguing that the problem of the country’s economy isn’t that it’s spending too much – it’s that it’s not getting enough money back, because so much is lost to corruption and inefficiency along the way.
As always, it seems like it's a mixed bag in terms of emotions on the ground, and forecasts for the future.
Speaking to my family and friends on the ground, emotions are mixed. Millions are on the streets – but millions more are silent. A lot are quite simply out of steam after decades of lies and corruption. Even among those who defend this policy, there’s a concern that passing such a big economic decision through the Senate is anti-democratic, effectively stripping Brazilian governments in the next 20 years of the power to make those choices themselves.
