–The Clash Brazil is fighting two battles at this very moment. The first is the biggest economic crisis since 1994, when the Real Plan brought monetary stability after years of hyperinflation. In 2015, GDP contracted 4.6% and inflation reached 10.46% placing the country in a spiral of skyrocketing prices, high interest rates and economic stagnation. The second – scarier and arguably even more damaging – takes the form of a political crisis. President Dilma Rousseff, reelected in 2014, was charged with committing accounting fraud to publish artificially deflated fiscal deficits, a practice that was similarly adopted by past presidents. Congress approved the start of an impeachment process against her only 11 months into Dilma’s second term. Last week, the political soap opera reached its dramatic apex. Prosecutors accused former President Lula, Dilma’s predecessor and arguably the most popular Brazilian political figure of the last half-century, of money laundering and requested his arrest. The ex-president was supposed to be judged by Sergio Moro, a relentless anti-corruption federal judge that has been accused of overstepping criminal procedure laws and using the media to mobilize public opinion. In a twist of events, President Dilma appointed Lula as her Chief of Cabinet, arguing that he would help her navigate the political crisis. Judge Moro then allowed the press to publish wiretapped conversations between Lula and Dilma that indicate that Lula’s appointment aimed exclusively at helping him escape from Moro (according to Brazilian Law, Ministers are judged exclusively by the Supreme Court). In the midst of all that, public discontentment peaked as pro-impeachment protests attracted more than 3 million people to the streets on March 13, accusing Dilma of being involved in the US$2.5 billion corruption scheme in Petrobras, the state-run oil company. Less than a week later anti-impeachment manifestations attracted thousands of supporters that pointed out, among other things, that opposition leaders are also involved in corruption scandals. Hate speech and attacks have been reported from both sides, generating fear of extremism and escalation of violence and further dividing the country between “coxinhas” (right-wing impeachment supporters) and “petralhas” (left-wing supporters of Dilma’s Workers Party). Brazilian HBS students have been divided as well. Some defend the impeachment by pointing to the massive corruption scandals, the weakening of democratic institutions and the use of a political office to protect Lula from justice. Others regard say the impeachment process as a “coup d’état”, pointing out that Dilma was not personally involved in the scandals, that judge Moro is himself breaking the law by selectively leaking information to the press and that the alternatives to Dilma are potentially worse (Brazilians tend to love discussing politics. So please invite a Brazilian for coffee if you would like to discuss this topic further). One thing, however, is consensual: neither solution will automatically solve structural problems of Brazil. Corruption will remain widespread regardless of the party in power, provided the country does not change its political system. Other reforms are urgently needed: high tariffs, underfunded public pension plans, archaic labor laws, an uneducated population and an inefficient public service hinder the economy. Not by accident, the country is placed 116th in the Doing Business ranking compiled by the World Bank. They say you should never let a serious crisis go to waste. The Brazilian crisis could have a long-lasting positive impact if it catalyzed wide-ranging political and economic reforms. Citizens are demanding better institutions, higher accountability, lower corruption and improved social services. On the other hand, the stark political division of pro- and anti-impeachment groups may lower the probability that these institutional changes are adopted. It is indeed hard to negotiate political solutions if you regard the person on the other side of the table as the embodiment of pure evil. Interestingly, this happens in a country with a relatively peaceful society blessed with linguistic unity, religious tolerance, and no separatist movements. So, in a typical HBS fashion, we ask: what would you do? Would you go back to Brazil after business school and try to fix the system or would you try your luck somewhere else? A recent survey of Brazilian MBA students found that approximately half of them want to go back to their home country. The remaining half wants to join the incipient diaspora of high-skilled and unsatisfied Brazilians that are sick of crises and wasted potential. As writer E. B. White put it, “I arise in the morning torn between a desire to improve the world and a desire to enjoy the world. This makes it hard to plan the day.”
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