Unstoppable: Brazil's Endless Cycle of Corruption
Brazil is the world’s seventh-largest economy, a leading commodity exporter and home to one of the Western Hemisphere’s biggest aspiring middle classes. Since the 1980s, Brazil has also been a flagship democracy among Emerging Market countries, with competitive elections, a vibrant press and at times a contentious public discourse. For all of the confidence that marked Brazil over the last several years, Latin America’s largest economy is now struggling, the political system shaken by a major scandal at the state-owned oil company, Petrobras, while a malaise appears to have settled over the economy and society. Brazil is adrift.
At the center of Brazil’s drama is President Dilma Rousseff, who succeeded Luiz “Lula” Inacio da Silva. The Lula years (2003 to 2011) were Brazil’s golden age. The former lathe operator came to office at the beginning of a multiyear commodity boom that fueled economic expansion and financed extensive social programs aimed at ending hunger and promoting education. His programs are given credit for raising an estimated 20 million people from acute poverty.
Lula was also able to provide a more moderate counterpoint to Venezuela’s ambitious Hugo Chavez in regional politics and helped win the rights to hold the 2014 World Cup and 2016 Summer Olympics in Brazil, marking the first time that the latter will be held in South America.
When Lula left office, Rousseff had very large shoes to fill. A former-Marxist-guerrilla-turned-establishment-leader, Rousseff headed Petrobras from 2003 to 2010. Assuming office in 2012, she inherited what many Brazilians believed was a country on the move, economically strong and gaining in global stature.
Two problems quickly emerged. First was a slowdown in the Brazilian economy and the other was revelations of scandals, the most damaging of which was at Petrobras. Although the Brazilian economy powered through the 2008-2009 Great Recession, it made a notable downshift, stagnating from 2011 through 2014, with an actual contraction expected this year. The currency has declined by close to 50 percent since 2011 and business and consumer confidence is down. Additionally, Brazil was hit by one of the worst droughts in decades, which damaged the grain harvest and created problems in terms of water use and electrical production.
Public discontent over corruption came in 2013. In a number of cities, people took to the streets to initially protest against fare hikes in bus, train and metro tickets. This quickly came to encompass other grievances, including high-ranking corruption. A particular point of irritation was the World Cup stadium building program, which was costly, over budget and widely believed to be grossly overbilled. Many Brazilians questioned the need for building new soccer stadiums when there remained severe social problems. The June demonstrations were the largest seen in Brazil since the 1992 protests against the then corruption-damaged presidency of Fernando Collor de Mello.
Although President Rousseff was able to win reelection in the October 2014 election, the economy’s poor performance and corruption allegations made it a closely fought affair. Indeed, in December 2014, the country’s General Prosecutor Rodrigo Janot stated: “There is a huge criminal scheme in the country under investigation.” According to the legal authorities, Petrobras over the past decades was the center of a massive corruption scam, with the company’s executives and Brazil’s largest construction companies conspiring to siphon billions of dollars off Petrobras contracts, some of which found its way into the funding of political parties, personal aggrandizement and Swiss bank accounts.
As sensationalistic revelations of corruption came out, the company’s chief executive officer, Maria das Gracas Silva Foster, a close friend of Rousseff’s, was forced to resign in February 2015. And in early March 2015, Brazil’s Supreme Court announced that it would investigate the speakers of both houses of Congress and more than thirty other congressmen and senators. The vast majority of those under investigation are from the ruling Partido dos Trabalhadores (“PT”) and its coalition allies. Also formally charged is the PT’s treasurer, João Vaccari, who federal prosecutors believe solicited donations from Petrobras officials and executives at construction companies as part of a vast kickback and bribery scheme.
Revelations of such massive corruption at one of the country’s supposedly best-run companies have left most Brazilians angry at the president. The Financial Times’ Joe Leahy (March 11, 2015) accurately observed: “For a country inured to corruption and scandal, recent allegations surrounding the graft at Petrobras have been mind-blowing. Once a symbol of Brazilian technical prowess, Petrobras has become synonymous with sleaze and incompetence.”