MercoPress. South Atlantic News Agency

Crucial February for Rousseff: economic plan must convince investors and Congress

Rousseff has fallen so far that it's unclear whether she can recover. And she'll have little room to manoeuvre once Congress reconvenes in Brasilia in February

With her job on the line, Brazilian President Dilma Rousseff is spending January developing an economic plan which she hopes will restore faith in her leadership and weaken looming impeachment proceedings against her.

 The once-popular successor of former President Lula da Silva has fallen so far that it's unclear whether she can recover. And she'll have little room to manoeuvre once Congress reconvenes in Brasilia in February: Her approval ratings hover in the single digits, both friendly and hostile lawmakers are restive and Latin America's largest economy is expected to continue contracting in 2016.

“Dilma will have one month with no major problems blowing up in Brasilia to come up with a plan to revive a faltering economy,” said Claudio Couto from Brazilian think tank Getulio Vargas Foundation. “The key is to bring some confidence back.”

That confidence has been shaken by a series of ballooning crises over the past year. Major scandals, some of which touch Rousseff, have combined with falling commodity prices to slam the economy, which has suffered credit-rating downgrades, a sharp currency devaluation and over 10% annual inflation.

Nelson Barbosa, who took over as finance minister in December, is expected to propose a stimulus package and fiscal reforms over the next several weeks.

Ideas being floated include infrastructure projects, tax breaks for home purchases and a car-swap program to encourage buying new vehicles. Some are proposing a tax on banking transactions and a reform of the country's pension system to keep workers in the job market an additional five years. Depending on the sector, women now can retire between 50 and 55 years old, while men can do the same between 55 and 60.

Pension reform is sure to draw the ire of Rousseff's base. But analysts say she must show she is serious about tackling spending, and that she has little to lose.

But regardless of what Rousseff proposes, Congress may not go along. The Workers' Party has only 59 of the 513 members of the Lower House and traditionally has passed legislation by forming coalitions with other large blocs, which may find little incentive to work with the president now.

It's also unclear whether even reforms can slow the tidal wave of bad economic news. Layoff announcements, from sugar mills to steel factories, are a daily occurrence. Even Wal-Mart, one of the largest supermarket chains in Brazil, said it would close 30 stores in January.

A wild card is Lower House Speaker Eduardo Cunha, Rousseff's long-time nemesis who has led the impeachment movement based on allegations that her administration used state-run banks to fill budget gaps. Rousseff has denied wrongdoing.

Cunha has his own problems: He has been charged with accepting millions of dollars in bribes for building contracts in a graft scandal involving state-run oil company Petrobras, allegations he strongly rejects.