Brazil’s Dilma Rousseff reshuffles cabinet to keep allies on board

Brazilian President Dilma Rousseff announced a major government reshuffle on Friday, Oct 2 2015.
Brazilian President Dilma Rousseff announced a major government reshuffle on Friday, Oct 2 2015.PHOTO: REUTERS

BRASILIA (Reuters) – Brazil’s beleaguered President Dilma Rousseff shrank her cabinet and reshuffled ministers on Friday (Oct 2) to bolster alliances within her coalition government and block efforts to impeach her. 

Rousseff named former defense minister Jacques Wagner, a political heavyweight, as her chief of staff and put one additional cabinet post, the health ministry, under control of the PMDB, a center-right party that is her main ally and now controls seven of the government’s 31 ministries. 

The moves come as Rousseff, politically hobbled less than a year into her second four-year term, grapples with a recession, overdrawn public finances, mounting Congressional opposition and a massive corruption scandal that has already ensnared senior political and corporate officials. 

Rousseff said she was strengthening her coalition’s ties to lawmakers needed to help rebalance public finances.

“My government is seeking support in Congress,” she said in a speech. “We need political stability for Brazil to grow.”

To deal with the shifting alliances, Rousseff picked Wagner, a former two-time state governor and close ally of Luiz Inacio Lula da Silva. The former president was in the capital this week advising Rousseff, his protegee and successor. 

Rousseff named former sports minister Aldo Rebelo, a longtime ally of the ruling Workers’ Party, as the new defense chief. 

In a largely symbolic cost-saving move, Rousseff eliminated eight of a previous 39 ministries by cutting lesser portfolios and merging others, such as labour and social security, and human rights with racial equality and women’s affairs. 

She said ministers would take a 10 per cent pay cut and that ministry expenses would by slashed by a fifth, partially through the elimination of 3,000 posts. 

Opposition leaders said Rousseff’s cost cutting was a sham and she would continue to have trouble getting tax bills passed.

But the PMDB’s lower house leader Leonardo Picciani, who negotiated inclusion of two of his caucus members in the new cabinet, told Reuters the risk of impeachment had subsided. 

Rousseff made no changes to her economic team which is struggling to rein in spending, reverse a fiscal deficit and avoid another credit rating downgrade following a decision by Standard & Poor’s last month to drop Brazil’s debt to junk status. 

Friday’s changes gave more heft to the PMDB, which gained the health ministry, the portfolio with the largest budget. Rousseff needs the restive ally both to avoid impeachment and ram through austerity measures. 

So far, though, some PMDB lawmakers have obstructed her belt-tightening proposals. Many have vowed not to approve new taxes, crucial to raising revenue, until she makes deeper cuts in spending.  Even with Friday’s shuffle, the party’s support may be short-lived, considering a convention next month at which the PMDB is expected to reconsider its relationship to the Worker’s Party.

“This reshuffle will give her some relief until the PMDB convention,” said David Fleischer, a politics professor at the University of Brasilia.  Rousseff’s single-digit approval ratings are the lowest for any Brazilian president in three decades.

A poll this week showed Brazilians are most unhappy with high taxes and interest rates.  Other polls show most Brazilians would support her impeachment, though most experts say that at present there are no legal justifications for her ouster. 

Her chances of avoiding impeachment also got a boost this week when prosecutors said her declared enemy in Congress, lower house speaker Eduardo Cunha, held Swiss bank accounts that were found in a corruption probe. 

Officials said the ministry cuts will save only about 200 million reais (S$72 million), a drop in the bucket considering her government on Aug 31 projected a 2016 primary budget deficit of 35.5 billion reais. 

The cabinet announcement gave Brazilian stocks a boost but was shrugged off by currency investors, who said the real was gaining only because disappointing US payroll numbers suggested the Federal Reserve may not be able to raise rates this year.