Ditching President Dilma Rousseff would bring Brazil new problems. Nationwide protests slated for Sunday are set to call for her impeachment, which some lawmakers have already said they'd consider. Any bid to oust her, though, would hurt Brazil's already ailing $2 trillion economy by raising political uncertainty and discouraging investors.
Latin America's largest economy is heading for its worst recession in 25 years. In many respects that's the result of Rousseff's free-spending first four-year term in office, which showed that populism may be easy, but has a cost down the road. During the first seven months of her second term she has had to embrace austerity policies so unpopular that polls put her approval rating as low as 8 percent, with two-thirds of respondents thinking she should be forced out of office.
Her opponents and even ostensible allies have fanned that sentiment, engaging in legislative sabotage to defeat her administration's measures to balance the economy. That contributed to the government having to announce last month that it wouldn't achieve its primary fiscal surplus goal this year or next.
Brazil's credit default swaps, which measure investors' perception of the country's credit risk, widened some 50 basis points in the ensuing weeks, improving only after Moody's on Tuesday downgraded the country's rating by just one notch, not two, and declared its outlook stable.
Signs of a poor investment climate abound, though. Airline Azul this week pulled its planned stock market debut. Shares of state-controlled Banco do Brasil, the nation's largest lender, sank on Thursday after it raised estimates for loan-loss provisions. Retail sales fell for the fifth straight month in June. Economists now expect GDP to contract by almost 2 percent this year, with no growth in 2016.
Rousseff can't be impeached for cratering the economy. She could, though, if a probe of massive corruption at state oil giant Petroleo Brasileiro called "Car Wash" showed illicit funds went to her re-election campaign. Alleged fudging of the nation's 2014 accounts by her government could also lead there.
For now, she appears to have the beginnings of a political compromise with the Senate whereby they agree on some measures to help the economy, and the upper house takes a dimmer view of starting messy, drawn-out impeachment proceedings. Barring a "Car Wash" surprise, letting Rousseff finish her term would be a smart economic decision.
