Brazilian politics: Sex, sleaze and taxes

A revista inglesa The Economist analisa a renuncia de Renan Calheiros ao Senado, a luz das discussões para a aprovação da CPMF. Segundo a revista, a CPMF permite combater a sonegação, mas a resistência dos senadores a sua aprovação estaría influenciada pelo fato de 2008 ser ano de eleição municipal. O pretexto do crescimento da arrecadação serviría simplesmente para criar obstaculos ao governo. A saida de Renan, insinua a revista, visava a facilitar o acordo para aprovar o imposto e tería sido negociada pelo governo com o senador. Muitas interpretações e alguns fatos, para alimentar a polemica. A seguir a integra do artigo.

Dec 6th 2007 | BRASÍLIA
From The Economist print edition

What the loss of a key ally means for the Lula government

Illustration by Satoshi Kambayashi

AS THE president of the Senate, Renan Calheiros was perhaps the most powerful ally of President Luiz Inácio Lula da Silva in Brazil's legislature. Seven months ago, the media, acting on tip-offs from the federal police, accused him of getting a lobbyist for a construction firm to make regular child-maintenance payments to his former mistress. On December 4th Mr Calheiros finally resigned his post.

Thus ended a tenacious rearguard action. As well as the link with the lobbyist, Mr Calheiros was alleged to have used shell companies to buy two radio stations and a newspaper in his home state, and to have paid for a dossier digging up dirt on his enemies in the Senate. He protested his innocence. Then his mistress was photographed for Playboy (in the same pose as Christine Keeler, a big-eyed brunette who ended the career of a British minister in 1963). Mrs Calheiros stood by her man. But on December 4th, moments before a crucial vote in the Senate ethics committee that would probably have ended his career, Mr Calheiros gave in.

By resigning his presidency before the vote, Mr Calheiros holds on to his seat in the Senate. (Had he been censured, he would have been barred for eight years from running for office.) That outcome suits the government. Indeed, Mr Calheiros's resignation was probably negotiated with Lula's men. That is because government support for Mr Calheiros was seen as necessary to get through the Senate the renewal of the CPMF, a tax on financial transactions worth 30 billion-40 billion reais ($17 billion-22 billion) a year.

The twists of the Calheiros affair have nonetheless slowed the government down. Getting the CPMF approved has now become a matter of urgency. It is meant to be a provisional tax (and is therefore subject to periodic renewal). But it is also a constitutional measure, requiring a 60% majority. It always generates a tussle. This year the fight is particularly intense—so much so that Lula has cancelled his foreign trips next week so that he can stay in Brasília and twist arms.

The president has formidable political instincts: one of his staffers, who also worked for Brazil's previous president, says that Lula “can just smell politics”. But he does not expend much energy on managing his unwieldy coalition in the legislature. It does not help him that next year there will be municipal elections. Not all of the opposition parties, who have half the Senate seats, want to help swell government coffers before an election year.

The main cause of the government's difficulties, though, springs from Brazil's recent success. Last month the country recorded a small current-account deficit, but overall the economic picture is rosy. In fact, tax revenues are so buoyant that the government is finding it hard to convince congressmen that it needs more money.

One reason for this abundance is that the CPMF makes tax evasion harder, by giving the revenue service information on money moving between accounts. Nuno Camara of Dresdner Kleinwort, an investment bank, has calculated that the government's tax take has already surpassed its own estimates for 2008 by more than 30 billion reais, roughly equivalent to what it might expect to get from the CPMF. “If you compare the situation now with when we introduced this tax, things are completely different,” says Paulo Renato Souza, a congressman for the opposition PSDB party and former education minister.

For its part, the government is trying every legal method it can think of to get the tax renewed—including cutting its rate from 0.38% to 0.3% over the next five years, and exempting low earners. The government has also revived a proposal to limit increases in government salaries to inflation plus 2.5%. “Brazil does need to lower its tax burden,” says Aloizio Mercadante, a senator for the ruling PT, “but suddenly depriving the government of a main source of its revenue is not the way to do it.”

A smoother way to lower the government's future appetite for tax revenue would be to use money from the CPMF to reduce debt faster. Public debt, net of government assets, still stands at 43.5% of GDP. That figure is higher than the average for countries which enjoy the investment-grade credit rating to which Brazil aspires. Though less so than in the past, this debt is still expensive: the government pays a real interest rate of 7%. It is also relatively short-term: some 30% matures every year. Mr Calheiros's continued presence in the Senate, where he still has a great deal of influence, will probably make the passage of the CPMF easier. For the government, some good may yet come from his less than glorious career.