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Big Business Could Help Brazil President Survive Political Storm

  • Reuters

Demonstrators attend a protest against Brazil's President Dilma Rousseff, part of nationwide protests calling for her impeachment, in Sao Paulo's financial center, August 16, 2015.

Demonstrators attend a protest against Brazil's President Dilma Rousseff, part of nationwide protests calling for her impeachment, in Sao Paulo's financial center, August 16, 2015.

Brazilian business leaders may have ideological differences with struggling leftist President Dilma Rousseff, but calls for her impeachment make many of them nervous, effectively giving her support from an unexpected quarter.

The business community worries that a traumatic ouster would pile a period of deep political uncertainty onto a downturn that economists say could translate into a two percent contraction of the economy this year. That tacit support of big business and a tentative deal with a restive Senate is helping Rousseff survive a crisis just seven months into her second four-year term.

"An impeachment is a traumatic affair that affects the political and business arenas at a time when Brazil is struggling to regain its credibility abroad," said Alencar Burti, president of the Sao Paulo state Federation of Chambers of Commerce, which represent some 200,000 business owners.

"What matters now is saving our country. We need to find a solution above personal interests."

Though some businessmen have told lawmakers that an impeachment would help Brazil regain credibility, most see few gains from the uncertainty it would likely bring.

Earlier this month, Brazil's biggest industrial groups and most powerful media corporation, Globo Comunicacao e Participacoes SA, called for a political deal to secure stability.

Interventionist measures

But while they may not want her impeached, many investors hope Rousseff's weakened political state will force her to abandon her interventionist economic policies for good.

Under intense pressure from Congress, Rousseff last week embraced a business-friendly agenda proposed by Senate chief Renan Calheiros. Such a plan had long been demanded by companies struggling with the country's notoriously tangled red tape and byzantine tax system. The measures includes fast-tracking environmental permits, simplifying taxes and bolstering guarantees in contracts with the state. The plan, which is yet to be debated in the Senate, could bring down costs for companies ranging from retailer GPA SA to miners like Anglo American Plc and even embattled engineering firms such as Odebrecht SA.

Although Rousseff scored political and court victories last week that made an impeachment vote in Congress less likely in the short term, it still looms as a threat as her opponents press allegations she took illegal campaign donations and doctored public accounts.

Popularity plunge

A Datafolha poll published on August 6 showed two out of three Brazilians say Rousseff should be impeached.

Her approval rating was eight percent, as her popularity plunged to the lowest of any president since Brazil returned to democracy 30 years ago.

Hundreds of thousands of Brazilians took to the streets on Sunday to call for her ouster.

The upheaval is already hurting businesses.

In the second quarter, the number of companies ruling out investments over the next 12 months surpassed those considering new capital expenditures, the worst result since the Getulio Vargas Foundation started the investments survey in 2012.

The survey's coordinator, Aloisio Campelo, said the political noise is making companies more wary of new investments.

From crisis to change?

Rousseff, of the leftist Workers Party, has struggled to control its motley alliance in both the Senate and the Lower House, which is led by the Brazil Democratic Movement Party. She also needs business on her side - throughout Brazil's turbulent years of democracy, the business elite has traditionally been a power behind the throne.

Rousseff is organizing a meeting with the heads of the country's biggest companies as early as this week, seeking support in trying to revive the economy, government officials told Reuters.

Finance Minister Joaquim Levy, seen by many in financial markets as her government's remaining anchor of credibility, already met with senior executives of top lenders such as Itau Unibanco Holding SA and Banco Bradesco SA, sources familiar with the meeting said.

Rocky relations with business

Rousseff, a technocrat and ally of former leftist president Luiz Inacio Lula da Silva, has had rocky relations with big business since she first took office in 2011.

Though during her first term Rousseff bestowed dozens of billion of dollars in cheap loans for Brazilian corporations to expand abroad, her involvement in the contracts of electricity producers and imposition of low rates of return in road projects angered many executives.

Since her re-election last October, Rousseff has eased her intervention in the economy and opted for more an orthodox approach that included fiscal austerity. She is now adopting the Senate's pro-business agenda to get Congress on her side.

"Her fragility could pave the way for a modernization drive that brings forward measures that have been dormant for a long time," said Leonardo Barreto, head of political consultancy Mosaico.

The measures could also help recover some lost market confidence.

"This new agenda arrived late, but at least it puts something on the table that could help bring back confidence," said Paulo Protasio, head of Rio de Janeiro's Chamber of Commerce. "This could change the mood, but we need to see it materialize."