Brazil's Rousseff under pressure but impeachment seen unlikely

For the first time since a corruption scandal erupted at Brazil's state-run oil company Petrobras last year, senior opposition politicians are publicly floating the possibility of impeaching President Dilma Rousseff.

She does not face an immediate risk of impeachment, leading opponents told Reuters, but that could change if prosecutors find evidence that Rousseff knew of or benefited from the massive graft scheme.

Prosecutors say executives at Petroleo Brasileiro SA (PETR4.SA), as Petrobras is formally known, conspired with contractors to skim billions of dollars for themselves and political parties when Rousseff was the company's chairwoman from 2003 to 2010.

The scheme continued after she became Brazil's president in 2011.

Rousseff has conceded that graft took place but emphatically denied that she knew about it at the time. She has urged a full investigation and prosecutors have not presented any evidence that she was complicit in the scheme.

However, a steady stream of arrests and new revelations about the misappropriated money, as well as a recent sharp downturn in Brazil's economy, appear to have emboldened Rousseff's opponents in Congress and elsewhere.

In a poll published over the weekend that showed Rousseff's approval ratings sinking to an all-time low, 77 percent of respondents said they believed she knew about the corruption at Petrobras.

Antonio Carlos Mendes Thame, a legislator and senior leader for the opposition Brazilian Social Democracy Party (PSDB), caused a storm last week when he said in response to a question that the party had "no qualms" about trying to impeach Rousseff if evidence against her mounted.

Such talk is usually taboo in Brazil, which saw President Fernando Collor impeached for corruption in 1992 but since then has become one of Latin America's most stable democracies.

Brazil's Congress is fragmented among 28 parties. So the PSDB or other parties would likely struggle to gather the two-thirds of votes necessary in the lower chamber for a trial of Rousseff to then begin in the Senate.

In interviews with Reuters, legislators generally downplayed the risk of impeachment, but they also declined to rule it out. They said they intend to see whether the investigation yields new evidence that Rousseff was involved or that dirty money was used in her successful re-election campaign last year.

"We have to wait for the investigations by the police and prosecutors to go ahead first, and the inquiries in Congress," said Cássio Cunha Lima, Senate leader for the PSDB.

EVIDENCE AGAINST PARTY MOUNTS

Street protests calling for Rousseff's impeachment first began to pop up in Brazilian cities shortly after her re-election, but most gathered only a few hundred people and opposition leaders were careful to distance themselves.

That began to change, however, as revelations from the Petrobras investigation became more specific and damning.

Last Thursday, police questioned the treasurer of Rousseff's Workers' Party, João Vaccari, after a former Petrobras executive alleged in a plea bargain statement that Vaccari received up to $200 million in bribes between 2003 and 2013.

Vaccari has denied wrongdoing.

A senior PSDB official told Reuters the party "does not want" to impeach Rousseff because it would be traumatic for the country. But the official cited the Vaccari case as a sign that prosecutors are unafraid to pursue evidence against high-level politicians, with more revelations expected in coming weeks.

"You can imagine a scenario in which the evidence is so severe ... that we really have no choice (but to impeach)," the official said, speaking on condition of anonymity.

Thiago de Aragão, a partner at Arko Advice, a political analysis firm in Brasilia, said "it's hard to see" Rousseff losing enough support in Congress and among voters for impeachment to go forward.

Eurasia Group, a political risk consultancy, published a note on Monday putting the odds of impeachment at 20 percent.

'BAD LOSERS'

Congress is launching its own enquiries into the Petrobras case. With the backing of dozens of congressmen from parties in Rousseff's governing coalition, the lower chamber promptly voted last week to set up an investigating committee, and the PSDB is gathering signatures to launch another probe in the Senate.

Lindbergh Farias, a Workers' Party senator, accused the PSDB on Monday of being "coup-mongers," and raising the possibility of impeachment only because their presidential candidate, Senator Aecio Neves, lost by a narrow margin to Rousseff in October.

"You guys are being bad losers!" Farias thundered on the Senate floor.

Congress has its own problems. Brazilian media have published reports that dozens of legislators were also wrapped up in the Petrobras scheme, and have not been publicly accused yet for procedural reasons of Brazilian law.

Legislators' legal problems may ultimately help protect Rousseff, a member of her cabinet told Reuters. "They will have their hands so full defending themselves, that they won't have the time or the moral authority to do us any harm," the member said.

Officials close to Rousseff and the PSDB agree that events will be driven largely by how the Brazilian public reacts.

That remains a mystery, especially as the country faces its second recession in as many years and the possibility of energy and water rationing in large cities in coming months.

Organizers on Facebook and elsewhere are calling for demonstrations on March 15 in 30 cities in favor of impeachment.

"Brazilians expect Congress to do its duty" and investigate the corruption, said Danilo Forte, a legislator for the PMDB, a party that formally supports Rousseff but has increasingly voted against her in recent weeks.

Forte said his party was not currently discussing impeachment, but noted: "There is a lot of anger across the country."