Brazil have repaid on past Wednesday its massive debts load to state-run banks, in a step towards reining in swollen budget deficits that cost the country its investment grade rating and threaten the stability of Rousseff's socialist regime,
while opposition parties have used the debts of $ 14.4 billion dollars to request Rousseff's impeachment, accusing her of breaking budget laws to boost her last presidential re-election campaign. The liabilities repayment combined over the last three years commonly known in Brazil as back-pedalling, aims to prevent contaminating the fiscal results in the upcoming 2016 as the administration scrambles to shore up its accounts. The accumulated debts symbolized a period of high public spending during Rousseff's first term that eroded public finances and investors' trust in Latin America's largest economy, which is now mired in its worst recession within 25 years.
Brazil's socialist administration denies any wrongdoing, even after Rousseff's main head treasurer John Vaccary arrested event occurred amidst a massive $ 800 million dollars in contract kickbacks and bribes funnelled from petrobras straight to Rousseff's workers' communist ruling coalition, who have repaid most of the illegal debt using resources from the Brazilian treasury accounts in December. A remaining $ 388.6 million dollars will be paid via a bond sale on December 31st, 2015. The debts were owed to state lenders such as Bank of Brazil, Federal Economics Bank, included BNDES Bank as well as the state workers' pension fund commonly known as FGTS. The Brazilian treasury said it paid an additional $ 435.2 million dollars to state banks during 2015 for a series of credit and social programs.
Although the repayment puts an end to Rousseff's illegal back-pedalling, it will do little to help mend ties with a rebellious Congress. The opposition will read this as the government's acknowledgement that it did something wrong, as Rousseff's relations with the Brazilian Congress will remain very precarious.
The Brazilian real slumped 2% percent on Wednesday driven by traders' efforts to weaken the currency and get the official rate for the month to $ 4.00 dollars. Concerns over how the government plans to end the "back-pedalling" also added to losses, while the lower house speaker, Eduardo Cunha, a fierce government foe, who have approved the impeachment proceedings against Rousseff's early this month, remarks that the repayment could not undo previous irregularities, while the lower house will decide by the upcoming March 2016 whether to recommend Rousseff's impeachment.
In December, Fitch's has became the second credit ratings agency to cut its rating on Brazilian debt from investment-grade to junk status, which meant that many foreign investments funds, under their by-laws, could no longer invest in the country.