Will Temer Douse the Flames?

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After the Brazilian Chamber of Deputies accepted President Dilma Rousseff’s impeachment, the Senate approved it, and she will be tried in the Senate in a proceeding that has to finish within 180 days. The President of Brazil in the interim is Michel Temer, who was Dilma’s Vice President—and who is almost as unpopular as she. Few observers give high odds for her return to power. Brazil’s future now appears to be in the hands of Temer’s government, and so your humble correspondent offers here informed speculation as to what the government may do—also what it most needs to do in the current economically stressed circumstances.

First of all, Interim President Temer appointed as his Finance Minister Henrique Meirelles, the former chairman of the country’s central bank. Meirelles is well accepted by investors and has a solid background. He was chairman of BankBoston and performed well as Brazil’s central banker during the first presidential term of Dilma’s mentor, Luíz Inácio “Lula” da Silva. He seems aware of the urgent need for structural reforms, especially in the area of Brazilian labor policy and the country’s shaky Social Security system.

Brazil does not have the aging population of the United States, Japan, or the European countries, but its Social Security system is completely unfunded and unsustainable nevertheless. We Brazilians spend more than 12 percent of GDP on retirement pensions, which represents a more than $15 billion deficit. Employees in the public sector are the largest problem, but private sector retirees will lop off  larger and larger pieces of the cake. Some people retire at only 50 years old, and that has to change.

Few Brazilian politicians have the courage to fight this war. They get by on the hope that the bomb will explode only when they’re out of office. The ticking is getting louder with each year, though, and action must be taken. Does Temer have the courage? While as I said, he is not popular, he doesn’t need to be—he has no intention of running in the next presidential election. (This was part of the deal between Dilma’s Workers Party (Partido dos Trabalhadores, or PT) and the main opposition, the social democrats.) So he has the opportunity to do something here. Nobody expects a huge reform, which would be necessary, but a modest move in this direction would at least give the country time to breathe.

– See more at: http://www.libertylawsite.org/2016/05/23/will-temer-douse-the-flames