Risks and Challenges: What Michel Temer must do and must avoid to make it to 2018

BRAZIL POLITICS - Report 01 Sep 2016 by Murillo de Aragão and Cristiano Noronha

After the conclusion of the impeachment by the Senate, President Michel Temer will face important challenges.
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1. Appeasement of the governing coalition: The PSDB and DEM criticized the PMDB for giving mixed signals to society and the market regarding the fiscal austerity effort. At the same time that they were advocating the approval of the constitutional amendment that limits increases to public spending and Social Security reform, they also supported the approval of salary increases for the Judiciary branch, with an estimated impact of R$ 4.5 billion on public coffers. The president of the Senate, Renan Calheiros (PMDB-RJ), scheduled the vote on the bill for September 8. The matter will have to be managed by the president of the Republic.
2. 2018 presidential succession: The president will also have to work to keep the 2018 succession debate from interfering with the unity of his parliamentary coalition. Temer wanted the PMDB to have its own candidate in the next presidential elections. The PSDB still retains its dream of returning to the Planalto Palace. Ronaldo Caiado is one of the options for the DEM. Henrique Meirelles, a member of the PSD, is regularly mentioned as an alternative.
3. Spending limits: The House is analyzing a proposed constitutional amendment that imposes a limit on federal government spending, which cannot exceed spending for the previous year plus inflation. There is pressure to preserve spending on healthcare and education. The economic team worries that changes could affect the efficacy of the proposal. The House is expected to conclude analysis by the end of October. In the Senate, the matter may only be decided in 2017.
4. Social Security Reform: The government has committed to sending a proposal for reform before the first round of the municipal elections (10/2). The bill includes, among other matters, a minimum age for retirement for private sector workers and changes to retirement rules for the rural and other sectors. Approval is expected in 2017.
5. Concessions program: In the next few weeks, the government is expected to announce a program of concessions and privatizations. Initially, the plan is to transfer four airports, two railways and one port to the private sector. The government is also expected to announce a list of companies that could be privatized. The president has scheduled several trips abroad to try to attract foreign investment.

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