POLITICS-BRAZIL: Election Disputes Begin to Affect Economy

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Apr 9 2002 (IPS) - Draft laws considered essential by the Brazilian government have run aground in parliament due to disputes arising from the campaign for the October presidential elections, the impact of which threatens to cut short the country’s economic recovery.

The governing coalition, weakened by the withdrawal of the Liberal Front Party (PFL), demonstrated Tuesday that it is currently incapable of pulling together to pass key bills aimed at balancing the public accounts in order to recover investor confidence and overcome the energy crisis.

An extension of the Provisional Contribution on Financial Movements or 0.38 percent “check tax” on bank withdrawals, which expires on Jun 17, depends on approval of a constitutional amendment blocked by the PFL’s refusal to vote for it.

Support from the PFL, the largest party in the Chamber of Deputies with 96 seats out a total of 513, is essential for passage of constitutional amendments, which require a special majority of 60 percent.

State coffers will lose 173 million dollars a week starting on Jun 17, according to tax authorities. Since an amendment would not go into effect until 90 days after ratification, only a vote prior to Mar 17 would have prevented the interruption of the inflow of money from the check tax.

The PFL broke off from the coalition that backs President Fernando Henrique Cardoso last month after a Mar 1 police inspection of Lunus, a company which belongs to the woman who was slated to be the party’s presidential candidate, Roseana Sarney.

The 582,000 dollars worth of reals, the local currency, seized in the company and exhibited on national television led to a steep drop in popularity for Sarney, then-governor of the northeastern state of Maranhao and second in the polls after leftist Workers Party (PT) leader Luiz Inacio Lula da Silva.

Sarney and her husband Jorge Murad will have to appear in court, suspected of diverting, through their companies, funds earmarked for promoting development of the Amazon jungle region – a scandal that broke out last year, and in which other political leaders from northern Brazil are also implicated.

Murad and Sarney maintain that the confiscated money came from campaign donations. However, the public is not convinced. The scandal has destroyed Sarney’s presidential aspirations, while improving the prospects of former health minister José Serra.

The PFL accused the Party of Brazilian Social Democracy (PSDB), to which Cardoso and Serra belong, of provoking the scandal, and pulled out of the ruling coalition in reprisal, withdrawing its four cabinet ministers and obstructing the passage of bills in parliament.

A solution to the country’s energy shortage, which led to the adoption of rationing measures from June to February, is also facing obstacles.

Without the votes of PFL legislators, approval is unlikely of a bill needed to indemnify power companies for loss of revenue during the rationing and to authorise the government to build new “emergency” thermoelectric plants to avoid new crises.

A full 83 percent of Brazil’s electricity is hydropower, which means the country is overly dependent on rainfall.

The energy industry measures are of interest “to the country and to society as a whole,” and not only to the government, and thus must be approved as soon as possible, argued Pedro Parente, the head of the president’s civil cabinet, referring to the PFL’s responsibility for the consequences of the stance it has taken.

Furthermore, Parente warned, if the tax on checks is not immediately extended, the loss of revenue that would be accrued by late 2004 would force the government to cut social spending, at the expense of the neediest segments of the population.

But the president of the PFL, Senator Jorge Bornhausen, denied that his party was responsible for the current state of paralysis in Congress, arguing that the government still held a majority in parliament and could thus pass the laws it deemed necessary.

However, the governing coalition only formally holds a majority. The election fray has caused other divisions that have made it impossible to push through controversial bills like the one on energy and the draft law on the check tax, which was created eight years ago as a “provisional” measure that has been extended until now.

Another large party comprising the government coalition, the Party of the Brazilian Democratic Movement (PMDB), is divided. One faction wants to field its own presidential candidate and has put up resistance to voting for government initiatives.

Smaller forces like the Progressive Brazilian Party (PPB), which in the past has firmly backed Cardoso, have split over the Oct 6 elections, while others, like the Brazilian Labour Party (PTB), have gone into opposition.

Another major factor of political uncertainty is the possibility of a triumph by the PT’s Lula, currently the front- runner in the polls.

Compounding the uncertainty is the external turmoil threatening Brazil’s economic recovery, like the Argentine crisis and oil price instability. Analysts had projected 2.5 to 3.5 percent Gross Domestic Product (GDP) growth this year.