Following Dilma Rouseff's impeachment last May, the Brazilian Congress, the Judiciary and the Executive have been embroiled in a three-way power struggle, against the background of growing tension between, on the one hand, anti-corruption legislation, and on the other the need for initiatives to reinvigorate the economy, currently experiencing a severe recession. Growth is currently forecast at just 1% for 2017, with the public deficit at 10% of GDP.
In November the Senate amended an initial draft anti-corruption bill to include a proviso allowing judges and prosecutors to be indicted for abuse of power. The vote on the bill had to be postponed, however, when the prosecutors responsible for pursuing the so called 'Car Wash' investigation into inflated prices in government contracts (affecting among others Petrobras), threatened to resign if the Senate approved the draft legislation. Hundreds of congressmen have been named in the Car Wash investigation.
Meanwhile, in November Brazil's Supreme Court ruled that no person indicted for a crime could occupy a position in succession to the presidency, and on 1 December 2016 the head of the Senate, Renan Calheiros, was indicted on charges of misusing public funds involving child support for his daughter. Mr Calheiros was also made the subject of an immediate injunction removing him from the succession, though the injunction itself was subsequently overturned by s 6-3 majority verdict of the Supreme Court. As head of the Senate, Mr Calheiros is the second in line to the presidency, after the speaker of the lower house, in view of the fact that Brazil does not currently have a vice-president. His removal would have left the leadership of the Senate to a leftist senator whose Workers Party had recently opposed a government bill to place a cap on public expenditure for the next 20 years, a measure that was only finally approved on 15 December 2016. The bill was largely viewed as a precondition for Brazil's recovery of its investment grade.
Among other measures to reactivate the economy, President Temer has recently signed a law giving foreign companies more access to deep-sea oilfields and the government has invited private firms to bid for the right to manage four airports. At the same time, the central bank cut its benchmark interest rate by a quarter-point, to 13.75%., and Congress is looking at measures to cap the interest that credit card companies can charge, from a current average annual rate of 450 percent. The government has also announced measures designed to reduce red tape, simplify taxation and streamline import and export procedures.
These initiatives are also taking place in the context of changes in the mining industry, with Vale changing its focus from Minas Gerais (in the south east of the country) to Pará (in the north), having recently opened a new $14bn iron mining complex, named S11D. Regulators have been reluctant to grant licenses to mine fresh deposits in Minas Gerais, following the major tailings dam spill last year. At the same time, a $4bn WTO dispute is to be launched by Brazil against Canada over claims of improper financial assistance to Bombardier, which is said to have adversely affected the competitive position of the Brazilian aerospace conglomerate, Embraer. It is also expected that 2017 will bring a significant upturn in Brazil's agro-livestock sector, with a record projected grain harvest of 213 MMT coupled with expansion of the livestock industry.