- The Senate inquiry into the pandemic (CPI) has reached a significant inflection point, having refocused from presidential denialism to systemic corruption.
- The CPI has divided supporters of the president in Congress, especially the “Big Center” parties.
- Reforms have become all the more difficult as a result.
The Senate inquiry (CPI) into the pandemic was expected to expose the detrimental effects of over-the-top denialism on the part of President Jair Bolsonaro. It did so for a couple of months and then the course of the inquiry was disrupted by revelations of a different sort. An ally of the president testified that the president had done nothing after being told of irregularities in purchases of the then still unapproved Covaxin vaccine in the health ministry. The president hardly had any time to react, and new revelations surfaced about bribes of USD 1 per dose for a purchase of 400mn doses being asked by a director at the health ministry. The Senate inquiry that had aimed initially at the president suddenly had to reset its bearings and follow evidence to the core of a scandal that can be lethal to both congressional-executive relations in general – and the president in particular.
These are the main implications of the current political situation:
In both the Covaxin and AZ cases, the leader of the government in the House, Ricardo Barros, has been implicated – whether by the president who allegedly said so to allies or by key people involved in the alleged corruption that were known to be Barros’ cronies in the ministry. This has added to the complexity of the state of affairs in Congress since Barros is an adversary of House Speaker Arthur Lira in the Progressives Party (PP) – and Lira may use Barros’ momentary frailty to divide and conquer. Both are, of course, leaders in the so-called Big Center ( Centr ao) – the pragmatic group of parties that have supported any government since democratization, independently of political convictions. The Big Center, however, has become increasingly divided since the CPI. The president of the CPI, for example, is a member of the grouping on paper but has been vicious against the government in practice.
The disarray and the divisions caused by the specter of a weakening government among former presidential allies and the Big Center has put the reform agenda at risk. At the House, what had already become a plan for incremental infra- constitutional simplification of the tax regime – as opposed to a sweeping constitutional reform – has now met with strong opposition from business sectors who see in it an increase in the overall tax burden. A tax rate of 20% on dividends was especially opposed and will need to come down significantly to be accepted. More importantly, talk of reviving the proposal for a constitutional amendment in the Senate (PEC110) has resurfaced, indicating the level of discord and confusion in the handling of the reform agenda. Ultimately, the government will be lucky if proposals to reform the income tax and merge two federal consumption taxes into a single 12% VAT clear the House by yearend.
The Senate committee overseeing the inquiry into the pandemic filed a complaint against the president in the Supreme Court (STF) for the crime of prevarication for his inaction when informed about irregularities in the purchase of the Covaxin vaccine. The STF then authorized the Prosecutor’s Office to investigate the president, alongside investigations already underway against him by the CPI itself and the Federal Police. It is likely that a request for the indictment of the president will be sent by the CPI to the Prosecutor’s Office at some point. Bolsonaro can only be indicted, however, if head prosecutor Augusto Aras, widely perceived as an ally of the president, forwards the request to the Supreme Court. Much therefore hinges on whether Aras, who has been passed over by Bolsonaro for a vacancy at the STF, will continue to be loyal to the president, shielding him from prosecution.
There are more than 120 requests for impeachment currently in Congress, but nothing happens until the House Speaker decides to launch the proceedings. The decision is fully political. Current speaker Arthur Lira sees no reason to accept any of the requests. An important ingredient for such a state of affairs to change refers to the perceived political situation of the president – in particular, the level of support he still musters in Congress and, most importantly, in the populace. Massive street protests against the president and in favor of vaccination started in May, led by leftist parties and movements but joined, albeit timidly, by centrist voters as well. The tendency is for such protests to grow in size and configuration – especially as the CPI, televised on a daily basis on cable TV, produces new signs of wrongdoing by the president and his government. Impeachment remains unlikely but no longer impossible.
It was not clear after a few weeks of testimony how the CPI could affect the political establishment, but the least one could expect was a deterioration of the president’s re-election prospects for 2022. The president’s rejection rate has indeed reached 62.5% now from 51% in February. Former President Luiz Inacio Lula da Silva has seen improvement in his electoral numbers, already beating Bolsonaro in both the first round and runoff elections according to the polls. Assuming the president survives threats to oust him, his electoral future will hinge heavily on whether voters will forget about the mishandling of the pandemic and a few assorted related scandals involving his name once the economy begins to grow and some form of new normalcy sets in. It also hinges on whether centrist forces will be able to coalesce around one strong name for presidential contender – still a fairly unlikely possibility.