Brazil From The Ground: What Right And Left Are Saying About The Crisis

Brazil has been in trouble for a while, as the real depreciated and corruption scandals linked high level government officials – many of which have been arrested – to massive bribery cases at state-controlled oil company Petroleo Brasileiro SA Petrobras (ADR) PBR (NYSE: PBR-A). However, when it seemed things could not get any worse, the real explosion came when former President Luiz Inácio Lula da Silva was brought in by the police for questioning.

What happened next might surprise. In a bold move, current President Dilma Rouseff appointed Lula da Silva as her Chief of Staff, leading many of her critics to accuse her of wanting to shield the former president from prosecution.

In response to this appointment, Judge Sergio Moro, who was in charge of the Operation Car Wash (Operation Lava Jato) investigation, made public roughly four dozen tapes featuring phone conversations between Lula da Silva and several high-ranking politicians, government officials, judges and business executives. The tapes led many Brazilians to take the streets. Massive protests against Rouseff crashed with equally massive demonstrations against Moro.

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While Rouseff has not been implicated in the Operation Car Wash, Congress has started an impeachment process – approved at a plenary session, arguing that she had manipulated government data to conceal the actual dimension of the economic crisis in Brazil.

Rouseff has denied all charges,and characterized the impeachment process as a coup attempt (please see footnote on military interventions in Latin America). While fears of a military intervention take over the Brazilian society, how are people from both sides of the ideological spectrum living the situation?

Benzinga spoke with highly influential people in Brazil. While they shared their thoughts and interpretations, they all asked not to be identified, assuring that the political situation was so heated that anything one said could be used against him/her.

A very well known left-wing activist and leader (let’s call him Mr. L) explicated: “The conflict is just huge.“

“The two main actors: government and right wing sectors.”

However, he added, “People are fighting over the wrong issues.”

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A business intelligence specialist working on accelerating startups, who declared he stood on the far right end of the political spectrum (let’s call him Mr. R), also pointed out the “highly conflictive” nature of “the political issue in Brazil right now,” adding he does not like exposure.

“Talking about these things right now is troublesome [...] It could get me in a real pickle.”

“This is the first time that the Brazilian people have actually talked about politics,” Mr. R continued. “We never talked about this before. Now, we discuss politics at the pub, at schools, at work, even at churches and temples—.”

“The largest division is that between those who support the PT and those who support Sergio Moro, the judge in charge of the Operation Car Wash investigation, which involves high level government officials and business executives,” he went on to explain.

“What we have right now is a cultural war. And politics right now are hotter than soccer or soap operas. We’re witnessing a live House of Cards,” Mr. R said humorously – yet, actually meaning what he said.

The aforementioned left-wing activist assured that, economically, nothing has changed. “I still have a job, I can still live my life normally,” he stated.

“However, my everyday life has changed a lot. I’m well known in Brazil for participating and leading left-wing movements [...] And that is causing a lot of trouble right now.”

“I’m being hounded; there are places in my city where I cannot go [...] I cannot talk to the press, or express my political views. And that has me worried.”

“The climate in Brazil right now, the mood, is not very democratic. Quite the opposite, I’d say.”

One of the best-known architects and builders in northern Brazil ("The Architect," going forward) seemed to disagree with Mr. L.

“The crisis in my sector is very, very big,” he expounded. “The civil construction sector was one of the most affected, since large builders tend to borrow money from banks to finance construction. And, since this government had to tighten credit restrictions, getting a loan became a lot harder. This affected production as a whole.

“However, not all sectors of the economy have been affected in the same dimension.”

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Mr. R, for his part, assured that “Brazil’s economy is screwed, regardless of the crisis. The PT [Workers Party] forgot the economy and took all the wrong steps.”

“High unemployment, new taxes every day— all of this did not help those who wanted to produce. Hence, companies needed to shrink and/or close [...] As the crisis worsens, the entire population can see the size of the hole.”

“In fact, the economic problem in Brazil is larger than the political crisis,” he concluded.

Mr. R went back into the economic issue later during the conversation. “Us, Brazilians, are ‘poor’ right now. Our currency depreciated and, therefore, everyone (rich, poor, very wealthy) is taking a hard look at their expenses and trying to save money,” he elaborated.

“In the business world, closing deals is getting very hard due to (1) political instability and (2) long-term projects no longer make sense, because we do not know what will happen tomorrow and every company out there is complaining about high costs. Obviously I'm talking about the majority, because in every crisis there are opportunities, and it’s no different here," he added

A doctor living in São Paulo ("The Doctor") affirmed that the economic situation is “terrible right now. But only for those who don’t have any money [...] I have personally felt no changes. I still live a fantastic life, and so does my family. However, it is true that our family business generates less revenue than it used to,” she revealed.

Mr. L assured “The press behaves like a political party— and that is hurting democracy.”

Interestingly, The Architect and Mr. R seemed to agree. The former explicated, “Big media in the Northeast is very biased. They clearly don’t like the government, and they have no problem showing it.”

Mr. R also agreed with the others. “Brazilian media just sucks,” he said. “However, we have an increasing number of new internet portals that are more impartial.”

Mr. L then went into the President’s impeachment. “Impeaching Dilma is one step away from a coup [...] And that would hurt Brazilian democracy so much.&lrdquo;

“It could even lead to some kind of civil war,” he stated.

Regarding the impeachment, Mr. R said very little, but suggested he was not completely against the idea, “Claims are really serious now.”

“[Dilma] is a hostage of the PT [...] She has lost her political power within the government, and with the people.”

The Doctor seemed to agree with Mr. R. “We all hate Dilma, we all protest against her, and want her impeached. And I agree,” she voiced strongly, and quite angrily.

Finally, talking about Lula da Silva’s return to the government, Mr. R stated, “I am quite a right-wing guy, so I don’t like Lula. He has soiled the image of the Brazilian left with the power project that he – and other leftist leaders in Latin America – have. His return as a Chief of Staff is nothing else than an attempt not to be arrested, and each one of his maneuvers proves that he is, in fact, a villain, the mafia leader who believes that he’s above the Brazilian law. But he will be arrested! You take my word.”

Note on military interventions in Latin America: Latin America has witnessed numerous military interventions and coups in the recent past, and the consequences have been dire. The costs were not only economic, but could also be counted in thousands of human lives. Their practices have often been characterized as “State Terrorism.”

For instance, the dictatorship that took place in Argentina between 1976 and 1983 is said to be responsible for the “disappearance” of roughly 30,000 people.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.