Lava Jato Investigation
The arrest of Senator Delcídio Amaral (PT-MS), situation leader (Dilma alley) in the Senate, has placed President Dilma and company back into the focus of Operation Lava Jato (Car Wash). Previously, President Dilma and her alleys had managed to shift the focus of the investigation on to Congress.
This is the second setback experienced by the President and her allies within a 24 hour period. Yesterday, the cattle farmer, José Carlos Bumlai, friend of President Lula, was arrested. If he chooses to cooperate with investigations, his testimony could create a great deal of embarrassment, or worse, implicate central government figures.
Brazil’s Supreme Court has sent a notice of arrest to the Senate. The upper legislative house will now uphold or overthrow the notice. The Senate is expected to approve the notice unanimously through a secret vote, where Senators are not obliged to divulge their ballot. If Delcídio remains incarcerated for a long enough period of time, he is likely to be removed from office, similarly to what occurred to former Senator Demóstenes Torres (DEM-GO).
After these two setbacks (Bumlai and Delcídio), Dilma , Lulaand the PT once again will be targeted by the Operation Lava Jato. The silver lining of these developments is that the accusations made by House President, Eduardo Cunha, claiming that President Dilma had illicitly exerted influenced over these investigations, ensuring that the investigative focus was placed on the legislative branch and not on the president and her allies, has now become baseless.
Initially Dilma is likely attempt to distance Delcídio from his leadership role in the Senate, especially since he has been charged with the crime of obstruction of justice. He no longer has the standing required to orchestrate the interests of the Executive in the Senate. Wellington Fagundes (PR-MT) is currently the most likely replacement for Delcídio.
On the short term, the principal consequence of his arrest is the postponement of the voting of bills related to the ongoing fiscal adjustment, these bills had been making progress as result of the efforts made by Dilma’s Secretary of State, Jaques Wagner.
The “repatriation bill” should have its vote differed, since SenatorDeilcídio Amaralwas its designated rapporteur. In fact, Delcidio’s arrest is likely to bog down the progress of all bills which interest the Executive.
Both the budget surplus vote for 2015 and the general budget for 2016, are likely to be compromised, especially if the PMDB and opposition chose to be uncooperative.
It is also worth noting, that the supposed escape plan formulated by Delcídio in benefit of Nestor Ceveró, indicates that the content of the plea bargain made by the former director of international affairs of Petrobras is reinforcing developments of the investigation and could pose a great threat.
Eduardo Cunha is probably the greatest beneficiary of these developments. The media’s focus has been diverted back to Operation Lava Jato, and away from the president of the House, who is currently being investigated by Senate’s ethic committee, which is currently examining a request to terminate his mandate.
The activities of the Planalto (president’s residency), Congress and the financial market will all be impacted by the arrest of the Senator. Congress is unlikely to deliberate on any matters today (25). Pretobras investigations many come to include new suspects and new segments of the economy.
Another possible consequence is the eventual involvement of one of the most important bankers in the country, André Esteves, as well as general negative effect on Brazil’s financial sector. The event as whole may cast doubt over the Brazilian economy, as uncertainty suggests the existence of systemic problems.
From a political perspective, the occurrence, once again, has Dilma and her allies up against the ropes. Furthermore, it proves the political climate is still fraught with surprises, and that, slowly but surely, Operation Lava Jato continues to tighten its grip around the neck of the Brazilian political establishment.
Lastly, today’s events have proven that the possibility for Dilma’s impeachment still exists (40%), confirming the perceived fragility of Dilma and her political allies.
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