Recession Harms Temer's Agenda

Brazil’s worst-ever recession extended into its third year as the GDP contracted 3.6 percent in 2016, as reported by the Brazilian Statistics Bureau (IGBE) on March 7. This issue along with a deepening budget crisis has dealt a major blow to President Michel Temer’s economic agenda. In the early months of 2017, it appeared that the recovery was underway with automobile production and supermarket sales rising, said the Rio Times. The Focus Report, a survey of 100 financial institutions by Brazil’s Central Bank, predicted that the GDP would grow at a higher rate in 2016 and 2017. However, their prediction overestimated the strength of the recovery in 2016, leading many to question their forecast for 2017, especially with the unemployment rate stuck at a record 12.6 percent.

Analysts still agree that the economy will grow in 2017 and 2018. Finance Minister Henrique Meirelles did not appeared concerned by the poor growth reports and has maintained that the recession is in the past and the economy will only move up from now on.

Protests have broken out in numerous cities against pension reform, according to Folha de São Paulo. Temer’s government coalition has decided to cap pension benefits and raise the minimum retirement age from 54 to 65. The government claims that these cuts are necessary in order to avoid a crisis similar to that of Greece or Spain, said BBC. Transport workers in São Paulo paralyzed the city for 24 hours in response to Temer’s austerity measures.

This represents just one symptom of growing unrest with the budget crisis. Temer’s decision to institute austerity cuts to major social institutions, such as Social Security, has proven wildly unpopular among Brazilian citizens but has spurred foreign investment, said  the Financial Times.

The government has instituted a reform that prevents any increases in real budget expenditures for up to 20 years. Police have gone on strike in some states while public school teachers in Pernambuco and Rio Grande do Norte have declared an indefinite strike, said G1. In Rio de Janeiro, restaurants that provide subsidized meals for the poor are closing and authorities are eliminating housing subsidies for almost 10,000 homeless families, as reported by UOL Notícias.

United Nations Special Rapporteur on extreme poverty and human rights Philip Alston said that the budget cap would “place Brazil in a socially retrogressive category all of its own.”

While the leaders of the government have pressed for austerity measures for the public, they have not extended austerity to their own professions. Legislators in São Paulo voted to increase their own salaries by more than 26 percent in December of 2016, according to Folha de São Paulo. Additionally, Temer’s dinner in support of the budget cap cost over $11,000 per attendee, said G1. According to a poll conducted by MDA in February, one percent of respondents said that they would vote for Temer in the 2018 elections, in which he is prohibited from running due to a conviction for a violation of campaign finance laws, said the New York Times.

It is too soon to tell if the recession will continue into 2017 or if Temer’s austerity measures will improve the stability of major social institutions. The protests against austerity have the possibility to grow even larger as the year progresses.