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Brazil's Rousseff Focuses on Economy in Face of Impeachment

  • Associated Press

FILE - In this Oct. 6, 2014 file photo, Brazil's President Dilma Rousseff listens to a question during a campaign news conference at the Alvorada Palace, in Brasilia, Brazil.

FILE - In this Oct. 6, 2014 file photo, Brazil's President Dilma Rousseff listens to a question during a campaign news conference at the Alvorada Palace, in Brasilia, Brazil.

With her job on the line, Brazilian President Dilma Rousseff is spending January developing an economic plan she hopes will restore faith in her leadership and weaken looming impeachment proceedings against her.

The once-popular successor of former President Luiz Inacio "Lula'' da Silva has fallen so far that it's unclear whether she can recover. And she'll have little room to maneuver once Congress reconvenes in Brasilia in February: Her approval ratings hover in the single digits, both friendly and hostile lawmakers are restive and Latin America's largest economy is expected to continue contracting in 2016.

"Dilma will have one month with no major problems blowing up in Brasilia to come up with a plan to revive a faltering economy,'' said Claudio Couto from Brazilian think tank Fundacao Getulio Vargas. "The key is to bring some confidence back.''

That confidence has been shaken by a series of ballooning crises over the past year. Major scandals, some of which touch Rousseff, have combined with tanking commodity prices to slam the economy, which has suffered credit-rating downgrades, a sharp currency devaluation and 10-percent annual inflation.

"I can't wait to stop hearing bad news from Brasilia,'' said Gabriela Malvezzi, a 28-year-old psychologist in Rio. "I don't even turn on the TV anymore. All that I wanted was for 2015 to end.''

Nelson Barbosa, who took over as finance minister in December, is expected to propose a stimulus package and fiscal reforms over the next several weeks.

Ideas being floated include infrastructure projects, tax breaks for home purchases and a car-swap program to encourage buying new vehicles. Some are proposing a tax on banking transactions and a reform of the country's pension system to keep workers in the job market an additional five years. Depending on the sector, women now can retire between 50 and 55 years old, while men can do the same between 55 and 60.

Pension reform is sure to draw the ire of Rousseff's base. But analysts say she must show she is serious about tackling spending, and that she has little to lose.

"Let's say she tries something and it doesn't work. So what?'' said Peter Schechter, director of the Atlantic Council's Adrienne Arsht Latin America Center. "Does that mean she goes from 8 percent to 7 percent approval ratings?''

Regardless of what Rousseff proposes, Congress may not go along. The Workers' Party has only 59 of the 513 members of the lower house and traditionally has passed legislation by forming coalitions with other large blocs, which may find little incentive to work with the president now.

It's also unclear whether even reforms can slow the tidal wave of bad economic news. Layoff announcements, from sugar mills to steel factories, are a daily occurrence. Even Wal-Mart, one of the largest supermarket chains in Brazil, said it would close 30 stores in January.

A wild card is lower house Speaker Eduardo Cunha, Rousseff's long-time nemesis who has led the impeachment movement based on allegations that her administration used state-run banks to fill budget gaps. Rousseff has denied wrongdoing.

Cunha has said no new bills will be voted on until lawmakers decide on the makeup of the commission to consider impeachment. If the commission allows a full-chamber vote, Rousseff's opponents will need a two-thirds majority to temporarily oust her while it moves to the Senate.

But Cunha has his own problems: He has charged been with accepting millions of dollars in bribes for building contracts in a graft scandal involving state-run oil company Petrobras, allegations he strongly rejects.

Attorney General Rodrigo Janot has requested that Cunha be arrested and removed from office, which will be decided by the Supreme Court.

Analysts are also closely watching Vice President Michel Temer, head of the large centrist Democratic Movement party, who has not voiced support for Rousseff over her potential impeachment. He has said he'll spend January giving lectures and traveling, widely interpreted as signs that he no longer wants to be part of Rousseff's government.

"Dilma is between a rock and a hard place,'' said Christopher Garman of the Eurasia Group. "And if you have inaction, the economic crisis will deepen.''