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Brazil's biggest party quits ruling coalition, Rousseff isolated

Rousseff will remain in office but the break cripples her fight against impeachment proceedings in Congress.

Brazilian President Dilma Rousseff. Picture: AFP.

BRASILIA - Brazil's largest party announced on Tuesday it was leaving President Dilma Rousseff's governing coalition and pulling its members from her government, a departure that sharply raises the odds she could be impeached in a matter of months.

The Brazilian Democratic Movement Party (PMDB) took just a few minutes to decide unanimously in a packed leadership meeting that its six ministers in Rousseff's Cabinet and all other party members with government appointments must resign immediately.

Under Brazil's presidential system, Rousseff will remain in office but the break cripples her fight against impeachment proceedings in Congress, which could put Vice President Michel Temer, leader of the PMDB, in the presidential seat.

Rousseff has denied any wrongdoing and called the impeachment efforts a coup to oust her ruling Workers' Party (PT).

The opposition is pressing to impeach her for allegedly breaking budget laws to boost spending in the run-up to her 2014 re-election.

Their efforts gained steam as more than 1 million Brazilians took to the streets this month to protest at the worst recession in decades and a vast corruption scandal at state oil company Petrobras (PETR4.SA) that has reached the president's inner circle.

"We're going to try to change the country. The economic and social crisis is very serious," Senator Romero Juca, the PMDB's first vice-president, said after the rowdy meeting in which party members chanted "Temer President" and "Out with the PT."

The loss of Rousseff's main coalition partner may prompt smaller parties to abandon the government, leaving Brazil's first female president increasingly isolated as the impeachment process nears a vote in the lower house, expected in mid-April.

It would be Brazil's first impeachment since former President Fernando Collor de Mello was put on trial in the Senate in 1992 for corruption.

Rousseff's struggles are just a part of a broad crisis in Brazil, which was hailed until recently as one of the world's most promising developing countries alongside China, India and Russia.

Brazil's economy shrank 3.8 percent last year and is on track for the worst two-year recession in more than a century, according to economists. The government is also grappling with an epidemic of the mosquito-borne Zika virus as it scrambles to prepare for the Olympic Games in Rio de Janeiro in August.

TRIP CANCELED

Rousseff will seek new coalition allies and form a new government by the end of the week, her chief of staff Jaques Wagner told reporters.

Rousseff canceled a trip to a nuclear security summit in Washington because of the deepening political crisis, two government officials told Reuters on Tuesday.

She requires the backing of 171 members of congress - or one-third of the lower house - to block impeachment. The loss of the PMDB's 68 votes, means the PT - which has 58 members - must rely heavily on its smaller coalition partners.

Including allies such as the Progressive Party (PP), the Republican Party (PR) and the Social Democratic Party (PSD), the government believes it can muster 180 votes. However, the PP will meet on Wednesday to decide whether to withdraw from the governing coalition.

If the lower house backs impeachment, the Senate must then decide by a simple majority whether to put Rousseff on trial, at which point she would be temporarily suspended and Temer would become acting president. The Senate could vote on that as soon as early May.

Investors weary of Rousseff's interventionist economic policies and a deepening recession have cheered the prospect of her ouster, boosting Brazil's currency 8 percent this year as the benchmark Bovespa stock index .BVSP rose 19 percent.

However, many analysts warn that impeachment could usher in a period of political turmoil, with several senior PMDB figures also targeted by the graft investigation.

Temer aides said he was ready to lead Brazil with policies restoring business confidence. Temer's plan is expected to include drastic cuts in public spending to close a fiscal deficit that cost Brazil its investment-grade credit rating.

Senator Aecio Neves, leader of the main opposition Brazilian Social Democracy Party, said he and the leaders of five other opposition parties were ready to back a transitional government led by Temer.

"Rousseff's government is finished. The departure of the PMDB is the last nail in the coffin of a dying government," Neves told reporters.

Neves, who narrowly lost to Rousseff in the 2014 election, said within 10 days of the lower house decision the Senate would vote to suspend the president's mandate and put her on trial.

However, the speaker of the Senate, PMDB Senator Renan Calheiros, said that the Supreme Court needed to set the calendar for the process in the Senate. A senior PMDB senator told Reuters this month that the government lacks the votes to win a trial there.

Marina Silva, a environmentalist and political leader who came third in presidential elections in 2010 and 2014, slammed the PMDB for opportunism in severing its alliance with Rousseff's party.

"In just three minutes ... the PMDB decided to jump from the government's coalition of which, for the past 13 years, it was the biggest beneficiary - without any explanation to the Brazilian people, and with no apology for being equally responsible for all the things that led to the current crisis," she said.

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