Corruption: As Brazilian as Samba and Soccer

In Brazil, corruption in politics has become as common as samba and soccer. In recent years, top government officials have been accused of siphoning, laundering and improperly distributing money, buying votes, and lining their own pockets at the expense of others – often taxpayers. From the Mensalão and subsequent Lava Jato scandal, to the scandal surrounding the president of Rio’s 2016 Olympic bid, corruption abounds in the South American nation and has been largely intertwined with Brazilian politics for the better part of recent history. Superfaturamento (super invoicing), and propina (bribery), have helped create and perpetuate a corrupt political system and a shadow economy that accounts for anywhere between 15-40% of Brazil’s GDP. Programs such as Brazil’s “10 Measurements Against Corruption” have sought to ameliorate the issue, but the development of this most recent scandal has largely stifled any prior progress.

“Mensalao” and “Lava Jato”

Beginning in 2014, the “Mensalão” (“big monthly bribe”) scandal brought about the indictments of several high ranking political officials and businesspeople accused of participating in widespread money-siphoning and multi-million dollar kickbacks in exchange for contracts with Brazil’s huge and majority-state-owned oil company, Petrobras. The case most notably involved members of the Partido dos Trabalhadores (PT), Brazil’s ruling worker’s party which included former President Dilma Rousseff.

The scandal revealed that Petrobras was awarding contracts to large firms who supplied the company with goods and services at inflated prices. This allowed firm executives to skim as much as 3% off of each contract on a “prearranged and rotating basis.” Roughly $2.1 billion was redistributed and used at the whim of the scheme’s operators. Much of this money was used to finance the campaigns of dozens of politicians who would in-turn perpetuate the system. In layman’s terms, Brazil’s largest firms – the ones capable of doing continuous business with the national oil company – would charge higher prices than would be necessary under normal circumstances. After being awarded these contracts, company executives would keep the difference, often using it to fund the political campaigns of favorable politicians who would later re-award the same firms with similar contracts; thus continuing the system.  In short, everybody got paid.

The investigation, codenamed “Lava Jato” (car wash), began in 2014, but did not fully come to light until after President Rouseff’s narrow reelection for a second term. President Roussef’s approval rating dropped to 14%, with almost two-thirds of the Brazilian population blaming her for Petrobras’ troubles. This scandal quickly became the largest ever in Brazilian history. By 2015 investigators were looking beyond Petrobras contracts to the electricity-generating sector, pensions funds for employees of state-owned companies, and the National Bank of Economic and Social Development.

In the end, the economic and political malfeasance appeared to be pervasive throughout the country, affecting all levels of both Brazilian business and government. The scandal was so widespread and negatively received that in conjunction with other financial issues, it served as a catalyst for President Rousseff’s impeachment proceeding which began in June of 2015. Several plea-bargain testimonies given by officials implicated in the scandal, including big business CEOs and Senior Managers of Petrobras and its business partners, revealed an intricate criminal conspiracy that mirrored a Cartel which had begun from within Petrobras under Rousseff’s watch. In March of 2015, 110 people had been formally accused of corruption, money laundering, and other financial crimes. Petrobras’ market value had been reduced by half and the company faced $100 billion debt.

The scandal climbed the governmental ladder as high as Former Brazilian President, Luiz Inácio Lula da Silva (known as Lula). In March of 2016, Lula’s home was raided by police and the former president was brought in for questioning. Lula was formally charged with money laundering for allegedly allowing construction company Odebrecht to buy land for his São Paulo Institute and provide him with an apartment nearby. In response, President Rousseff ostensibly named him Chief of Staff to “tap into his still wide political influence.”  However, a federal judge blocked Lula’s appointment and released a wiretapped conversation between Lula and Rousseff which seemed to indicate that she may have appointed him as Chief of Staff to protect him from federal prosecution.

Lula was later convicted of corruption and sentenced to nine and a half years in prison. The judge ruled that Lula could remain free pending an appeal, but the charges could potentially end his chances of running for president again in 2018. Because Brazil’s constitution bars any candidate from serving three consecutive terms, Lula’s successor and protégé, Dilma Rousseff was handpicked to succeed him.

Brazil’s Lava Jato efforts did not go unnoticed by international agencies. In 2016, the Lava Jato Task Force was awarded the Transparency International Anti-Corruption Award for its work against government malfeasance. The Anti-Corruption Award honors “remarkable individuals and organizations worldwide, journalists, prosecutors, government officials, and civil society leaders who expose and fight corruption.” But despite award winning efforts and groundbreaking investigations, the corruption that has plagued Brazil did not cease with Petrobras.

Government_support_Rio_2016
Lula holds the flag of the candidature along with Nuzman, Jose Alencar, and Olympic Medalists by Agencia Brasil, Wikimedia Creative Commons

The Olympic Scandal

Federal prosecutors in Brazil are now charging Carlos Nuzman, the former Brazilian Olympic Committee President, with helping to run a criminal organization in a scheme that bought the votes necessary to bring the Olympics to Rio De Janeiro in 2016. Prosecutors accused Nuzman of bribing members of the International Olympic Committee (IOC), and after searching his home, asserted that he was “the bridge that linked the criminal scheme together.” Nuzman was arrested on October 5,  subsequently resigning as Brazil’s national Olympic committee president.

Prosecutors say Nuzman was part of a criminal operation that included several wealthy businessmen as well as Sérgio Cabral, Rio’s former governor. This marked yet another large-scale scandal involving Brazilian governmental officials. Rio won the bid by beating out a host of cities including Tokyo, Madrid, and Chicago Brazil was behind Madrid in the initial voting, but came back to win the bid by a vote of 66 to 32. The comeback victory was, at that time, largely considered to be recognition for the country’s growing global presence and popularity.

Nuzman has maintained his innocence, but his alleged counterpart, Sérgio Cabral, has already been convicted and sentenced to 14 years in prison on bribery and money laundering charges. Prosecutors further stated that they possessed “vast documentation and robust evidence” that Brazilian officials had indeed bribed Lamine Diack, the president of the International Association of Athletics Federations (IAAF). Through Brazilian businessman, Arthur Soares, Nuzman allegedly paid bribes from Sérgio Cabral directly to African members of the IOC. Diack has long been known to be a corrupt official and has faced criminal corruption charges of his own; however, he is not the primary subject of the current investigation.

Only time will reveal what truly happened behind the scenes of Rio’s successful 2016 Olympic bid. The games took place in the city with only minor hiccups, as Brazil dazzled the world with its colorful and energetic open ceremony. The awesome spectacle that was the 2016 Rio Summer Olympics touched the hearts of athletes and citizens worldwide, but evidence of corruption and deceit now threatens to add a touch of grey to the otherwise colorful affair. In a country that has long been riddled with corruption and deceit, Brazil’s economic, political and social development will depend greatly on its resilience and its ability to learn from the past and use that knowledge to create a better, more transparent future. Unfortunately, the two cases mentioned here are not the only corruption scandals that have plagued Brazil in recent years, but they do provide salient examples of the problems that inhibit the South American country from exerting itself regionally and globally. Brazil’s focus should turn first to political transparency, the common thread between the scandals and conflicts, as it will in turn help ameliorate economic mishaps and eventually improve the social structure and inequalities the nation currently encounters.

Screen Shot 2017-10-31 at 9.53.37 AMDimitri Silva is a dual degree candidate at the Patterson School of Diplomacy and International Commerce, concentrating on Diplomacy and the University of Kentucky College of Law, concentrating on International Law. He was born in Seattle, Washington, but grew up in Seattle and Salvador, Brazil before moving to Kentucky. Dimitri earned his Bachelor’s degree at the University of Kentucky in Journalism, minoring in Communications. He was also a member of the University of Kentucky Men’s Soccer team. He is interested in international arbitration and international law.

Featured Image: Candidata Dilma Rouseff na inauguração de seu Comitê de campanha em Brasília, Wikimedia Commons

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