Brazil crisis escalates, impeachment starts

OREANDA-NEWS. March 18, 2016. Brazil's congress installed a commission tasked with determining whether president Dilma Rousseff should face an impeachment vote related to the alleged manipulation of state fiscal accounts, escalating a rapidly unfolding political crisis that has paralyzed the government.

The crisis puts to rest any near-term chance of significantly expanding development of Brazil?s extensive sub-salt oil reserves, a major non-Opec play that has already come under pressure from the oil price collapse since mid-2014.

The 65-member cross-party congressional commission established today will evaluate a December 2015 impeachment request in up to five technical sessions. The leader of the lower house says its portion of the impeachment proceedings should be completed in 45 days.

If the request is accepted, the fractious 513-member lower house must approve the impeachment by a two-thirds vote that is hard to predict in the current tumultuous climate.

Yesterday, the supreme court ruled that Rousseff would not be forced from office while the senate analyzes the request from the lower house, if approved.

Rousseff denies any wrongdoing with respect to the government accounts, and has resisted widespread calls for her resignation.

Nonetheless, startling developments in recent days have shortened the odds Rousseff will finish her second four-year term. Yesterday, Rousseff took the controversial decision to name her mentor, former president Luiz In?cio Lula da Silva, known as Lula, as her chief of staff.

Lula, who led Brazil in 2003-11, is currently under investigation for his alleged role in systemic corruption at state-controlled oil company Petrobras. He denies any wrongdoing.

The invitation to join the cabinet was seen as a way for Rousseff to shield Lula from prosecution, since only Brazil's supreme court has the jurisdiction to investigate and try members of the government.

The nomination was complicated by federal prosecutors? dramatic release last night of an intercepted telephone call between Lula and Rousseff, which some Brazilian legal experts say is evidence of Rousseff's intention to protect Lula. Other wiretapped recordings, all obtained by federal police, of Lula's discussions with political leaders also suggest the former president was trying to unduly influence the historic probe. More wiretaps are trickling out this afternoon, prolonging the drama that has gripped the nation.

Lula briefly assumed the role as chief of staff this morning, but a court injunction annulling the nomination was granted just hours later. The government is appealing the decision and Lula's current status is unclear. Last week, federal prosecutors recommended his arrest after he was brought in for questioning.

Spontaneous anti-government protests have mushroomed throughout Brazil since last night, adding to pressure on politicians to accelerate impeachment proceedings.

The crisis has delayed critical policy decisions aimed at reviving the shrinking commodities-based economy. Brazil's GDP shrank by 3.8pc in 2015 and is expected to contract by another 3.5pc this year.