Brazil Hopes Temer's Economic Superstars Will Carry Weak Team

05/19/2016 - 11h32

Alexandre de Moraes seemed to confirm sceptics' worst fears this week about the corruption-fighting credentials - or lack of them - of the new Brazilian government formed by interim president Michel Temer.

Mr de Moraes, the new justice minister, said Brasília might ignore tradition and not appoint as attorney-general the candidate elected by Brazil's independent prosecutors.

His remarks to "Folha de São Paulo" newspaper raised fears that Mr Temer might already be looking to nobble the independent prosecutors' office.

This was one of the main institutions behind a sweeping probe into state-owned oil company Petrobras that helped precipitate the impeachment of his predecessor, Dilma Rousseff, and has implicated scores of politicians, including some in Mr Temer's government.

In the event, Mr Temer's office hurriedly repudiated the minister's comments, assuring he would appoint the prosecutors' choice.

The brief controversy underlined the dilemma facing Mr Temer: with his cabinet appointments, he is trying to balance the demands of the multiple parties that brought him to power against public expectations.

Mr Temer gained office through the suspension of Ms Rousseff last week ahead of an impeachment process that might last up to six months.

Elected as vice-president to Ms Rousseff, he has no electoral mandate to run the country. This tightrope act might explain the mixed reception to his cabinet appointments. The most severe criticism has come from Brazilians appalled to see a cabinet composed entirely of white males for the first time in years.

"For a moment, it looked like we had retrogressed to the start of the last century," wrote Luiza Nagib Eluf, a columnist.

On corruption, Brazil's bar association decried the appointment of seven ministers who have been cited in the Petrobras investigation. Three of them, including planning minister Romero Jucá, are under formal investigation. Mr Temer himself has been mentioned in the probe.

Such demands are unlikely to sway Mr Temer, however. He will be reluctant to upset the delicate coalition he has assembled in congress to support his nascent administration. Indeed, he knows this support is crucial if he is to achieve what most perceive as the main task of his emergency government - turning round Brazil's sick economy.

With gross domestic product plummeting at a rate of 4 per cent a year, unemployment rising into double digits and the fiscal deficit reaching alarming levels, Mr Temer has to move quickly to stabilise the economy.

The team he has picked for the task have so far been universally applauded. He has not only selected one of Brazil's most respected former central bankers, Henrique Meirelles, as finance minister, he has also installed one of its most lauded economists, Ilan Goldfajn, of Brazil's largest private sector bank Itaú Unibanco, as central bank governor.

Beneath these two he has put in place highly qualified bureaucrats, including Mansueto Almeida, one of the country's foremost fiscal analysts, to crunch the budget numbers. This team has been in situ for less than a week. But they are already discussing how to tackle one of Brazil's most thorny budgetary questions - its unfunded pension system.

That Mr Temer does not have an elected mandate might be a strength. Like China's Communist party he knows his tenure in office is based on an unwritten social contract. He must perform on the economy or Brazil will find a way to dispose of him as it has done with Ms Rousseff.

Even if it succeeds, his administration could still disappear as quickly as it arrived if Ms Rousseff survives the impeachment - viewed as unlikely - or if he is indicted in the Petrobras investigation.

Mr Temer's team selection has serious flaws. But his economic strikers are real superstars. Brazilians can only hope that their talent and energy makes up for the other players.

Copyright The Financial Times Limited 2016

(c) 2016 The Financial Times Limited