BRAZILIAN PRESIDENT CUTS THE SIZE OF CABINET AND REDUCES HER SALARY: WE HOPE VISIONLESS PEOPLE LIKE LUNGU WILL LEARN FROM PROPER LEADERS

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DilmaBRASÍLIA—Brazil’s President Dilma Rousseff shook up her cabinet Friday in a bid to save her job and break a political logjam that is paralyzing Latin America’s largest economy.

The changes give more clout to Brazil’s largest political party, the PMDB. Its leaders are seen as key to blocking a possible impeachment process against Ms. Rousseff and helping her pass much-needed fiscal reforms.

The revamp comes as the deeply unpopular president and her ruling Workers’ Party or PT struggle to cling to power less than a year after Ms. Rousseff won a second four-year term in the October 2014 elections.

“This reform…increases our governability,” Ms. Rousseff said in a speech announcing the changes. The goal, she said, is to “strengthen the relationship with the parties and lawmakers that give us political support.”

The president reduced her own party’s representation in her cabinet, but it is unclear whether that sacrifice will pay off. Brazil’s cutthroat political environment has turned increasingly toxic this year as the president has weakened and her rivals began to smell blood.

“The changes show that she is desperate and very indecisive,” said David Fleischer, a political scientist at the University of Brasília. “She continues to lose power.”

Ms. Rousseff cut eight ministries and 3,000 workers in a nod to austerity. She trimmed her own salary by 10%, along with those of the vice president and the heads of Brazil’s remaining 31 ministries. She said 20% of her administration’s costs will also be axed.

In addition, she removed her controversial chief of staff and fellow party member Aloizio Mercadante, whom some blamed for exacerbating tensions with Congress. Mr. Mercadante was named the Education Minister.

For her new chief of staff, Ms. Rousseff tapped Defense Minister Jaques Wagner. A longtime PT member, Mr. Wagner served as chief of staff under former President Luiz Inácio Lula da Silva, and is known as a skilled and personable politician who could help ease friction with lawmakers.

But the big winner was the PMDB.

The party’s leaders will now head seven ministries, up from six. The biggest plum is the addition of the Health Ministry, which controls around $25 billion in spending, giving its new leader sizable clout. That job went to PMDB House member Marcelo Castro, who replaces PT member Arthur Chioro.

But whether Ms. Rousseff’s gambit works remains to be seen. The president has clashed with the powerful House leader Eduardo Cunha, from the PMDB, a fracture that may not be patched up with the cabinet revamp.

Mr. Cunha publicly broke with Ms. Rousseff a few months ago. He has openly worked against the administration’s austerity efforts in Congress and refused to quash impeachment threats looming from opposition parties.

The impeachment push could fade as Mr. Cunha himself is embroiled in his own struggles. He has been charged with corruption and money laundering in connection with a widespread graft and price-ringing investigation at Brazil’s state-controlled oil giant Petróleo Brasileiro SA, or Petrobrás.
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Swiss authorities this week turned over documents to Brazilian authorities that allegedly prove Mr. Cunha kept bank accounts in Switzerland. Brazilian investigators suspect the accounts held money illegally paid to Mr. Cunha by suppliers seeking to do business with Petrobras.

A spokeswoman for Mr. Cunha declined to comment. He has denied all accusations, and has been able to hold on to the speakership despite of them. But the increasing pressure could weaken his leadership.

“If he shows he doesn’t have any accounts in Switzerland, he can remain on the job. But if he doesn’t” he will lose support, Aviation Minister Eliseu Padilha, a PMDB leader, said recently.

Friday’s cabinet changes are also aimed at persuading lawmakers to help the administration pass measures to cut public spending and boost taxes to plug a widening budget hole that is threatening Brazil’s economic stability.
The country is forecast to contract by 2.7% this year, while inflation is at a steep 9.5%. In August, the budget deficit reached a worrisome 9.2% of gross domestic product. Standard & Poor’s last month cut Brazil’s sovereign credit rating to junk.