Brazil: seeing the monster

Time for another quick trip down to Brazil.

We’ve reported earlier on the multibillion-dollar Petrobras scandal, which is making every American political scandal since Watergate – put together – look like a mere bagatelle. In recent months, as the investigation has widened, more and more top-level businessmen and politicians have been implicated in the kickback scheme centered on the country’s state-run oil firm.

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Dilma and Lula

And just as with Watergate, the net has reached ever higher. In just the past few weeks, authorities have raided the home of the beloved ex-president Luiz Inácio Lula da Silva (known popularly as Lula) and detained him for questioning, in response to which President Dilma Rousseff tried to name Lula as her chief of staff to protect him from prosecution – only to have the appointment blocked by a federal judge. Meanwhile, Rousseff herself has been drawn into the probe, leading to calls for her resignation or impeachment. In short, it’s looking very much these days like an endgame.

Brasil, Brasília, DF. 18/10/2005. O doleiro Alberto Youssef, operador do mercado financeiro que teria ligações com a corretora Bonus-Banval, depõe na sub-relatoria de Movimentação Financeira da Comissão Parlamentar Mista de Inquérito (CPMI) dos Correios, no Congresso Nacional, em Brasília (DF). - Crédito:JOEDSON ALVES/ESTADÃO CONTEÚDO/AE/Código imagem:161138
Alberto Youssef

Things have come a long way since March 2014, when, as David Segal of the New York Times reported in August, Alberto Youssef, described by Segal as “a convicted money launderer and former bon vivant,” sat in his jail cell and told two lawyers that about to reveal information to them that would bring down the Brazilian republic. As Youssef listed the names of the parties who, he claimed, had enriched themselves with Petrobras funds, the attorneys became increasingly aghast; one of them, Tracy Reinaldet, told Segal that “in Brazil, we know that corruption is a monster. But we never really see the monster. This was like seeing the monster.”

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João Vaccari Neto

In the case of Petrobras, the monster is many-headed one. So far over 100 indictments have been issued, several politicians arrested, and over a dozen companies sued. We’ve examined the cases of João Vaccari Neto, treasurer of the ruling Workers’ Party, and party hack Renato Duque, both of whom have been sentenced to long prison terms, the former for corruption and money-laundering, the latter for padding Petrobras contracts and transferring the excess take to party coffers.

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Joao Santana

We’ve discussed Joao Santana, Rousseff’s answer to Clinton campaign strategist James Carville, who was arrested for knowingly accepting payments from those illicit funds. And we’ve surveyed a number of others who’ve been nabbed for their roles in this massive scheme – among them, Paulo Roberto Costa, Petrobras’s former supplies director; Ricardo Pessoa, owner of UTC, a major construction company; and José Dirceu, Lula’s ex-chief of staff. Then there’s a couple of guys who turned state’s evidence: former Petrobras manager Pedro Barusco, who admitted he’d pocketed almost $100 million in dirty money, and businessmen Julio Camargo, who confessed to paying Petrobras $4.5 million in bribes.

But these names are just the tip of the iceberg. Several other big shots from both the public and private sector have also gone down, some of them since our previous look at this debacle. We’ll spend the rest of this week making their acquaintance.

Brazil: another crisis for Rousseff

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Dilma Rousseff

Last September, as we reported on this site a while back, two top members of Brazilian president Dilma Rousseff’s posse were sentenced to long prison terms. João Vaccari Neto, treasurer of the ruling Workers’ Party, got more than 15 years for corruption and money-laundering; another party hack, Renato Duque, got 20 years for inflating oil contracts and shoveling the excess profits into the party’s coffers. The convictions of these two men were only part of a large-scale disaster – a blend of scandal and economic crisis – that sent Rousseff’s popularity ratings south, making her, in the words of the Financial Times, “Brazil’s most unpopular president in recent democratic history.”

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Joao Santana

Then, on February 23, just as Rousseff’s numbers were starting to recover and she seemed to be emerging from under the cloud of possible impeachment, yet another member of her inner circle was put under arrest. Joao Santana, a journalist and political strategist, was the mastermind behind her two election victories and is one of Rousseff’s more intimate friends and advisers – the James Carville to her Bill Clinton. In addition to engineering her victories, he’s also successfully coordinated campaigns for leftist presidential candidates in the Dominican Republic, Angola, Peru, and – notably – for both Hugo Chávez and Nicolás Maduro in Venezuela.

According to the charges leveled against him, Santana knowingly allowed himself to be paid for his services to the Rousseff campaign with several million dollars in funds illegally diverted from Petrobras, the state oil company that is currently at the center of Brazil’s biggest corruption scandal ever. Santana’s homes and offices were raided by 300-odd officers; his wife was also taken into custody. The arrests reportedly came as a shock to Rousseff’s supporters, who fear that Santana may work out a plea bargain with prosecutors in which he throws Rousseff under the bus.

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Michel Temer

Even if Santana doesn’t turn state’s evidence, to be sure, the goods the cops have on him may be more than enough to sink Rousseff. If it’s proven that she paid Santana with money pilfered from Petrobras, it could mean the official overturning of her election victory. The Portuguese language has a lovely word for this act of invalidation: cassação. As Americas Quarterly staffer Stephen Kurczy recently explained, impeaching Rousseff would involve action by both houses of Congress – which in early December, in fact, initiated impeachment proceedings, only to see them stall shortly therafter. (The proceedings will supposedly resume soon.) Cassação, by contrast, is a process that only requires a ruling by Brazil’s electoral court, the Tribunal Superior Eleitoral – which, as it happens, is already investigating the funding of Rousseff’s 2014 campaign as part of Operação Lava Jato (“Operation Car Wash”), the probe into corruption at Petrobras. If the court determined that Rousseff and her vice president, Michel Temer, had funded their election campaign with illegal funds, both Rousseff and Temer could be removed from office at once, with Rousseff being temporarily replaced by the Speaker of the House, Eduardo Cunha, until a new election could be arranged.

“We’re on the border of changing eras in Brazil,” political consultant Thiago de Aragão told Kurczy. “Until recently, anyone involved in the PT [the Workers’ Party] was immune. Now people are discovering that it’s not like this. The times are changing.” In fact, they’re changing fast. Only days after Santana’s arrest, another Rousseff intimate suddenly resigned his cabinet position. Tune in tomorrow.  

Dilma Rousseff: decline and fall?

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Dilma Rousseff

Last week we explored the presidency of Brazil’s Dilma Rousseff, who in recent months has seen her throne shaken by the Petrobras scandal – described by the Wall Street Journal as “the biggest corruption case ever in a country with a long history of scandals.” Even Rousseff’s predecessor as head of state, Luiz Inácio Lula da Silva (whose own administration was almost brought down by the 2005 Mensalão scandal), has been under scrutiny in this season of scandal, with authorities looking into shady financial activities involving both Lula and his son as well as into accusations that the former president had lobbied illegally (and profitably) for Odebrecht, a huge Brazilian conglomerate.

In this photo provided by Brazil's Presidency, Brazil's President Luiz Inacio Lula da Silva, left, and Brazil's newly elected leader Dilma Rousseff, make a sign of victory, at the Alvorada palace, in Brasilia, Brazil, Monday, Nov. 1, 2010. (AP Photo/Brazil's Presidency, Ricardo Stuckert) NO SALES
Lula and Dilma, 2010

Even as the Petrobras probes were widening and arrests adding up, Brazil’s economy was in free fall. Brazil’s GDP, which had experienced annual growth of over 5% during the century’s first decade, sunk below 3% in 2012 and 2013 and to 0.1% in 2014. On September 9, 2015, Standard and Poor downgraded Brazil’s credit rating to junk status. Over the course of 2015, Brazil’s economy actually shrunk by 2.7%. Meanwhile, Rousseff’s numbers also dived. In December 2014, her approval rating was at 80%; by March 2015, it was at 34%; by August, 8%. In that month, protesters around the country called for her impeachment. By September, she’d become “Brazil’s most unpopular president in recent democratic history.”

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João Vaccari Neto

In that same month, party treasurer João Vaccari Neto was sentenced to over 15 years in prison for corruption and money-laundering, the latter of which involved over $4 million. Sentenced to prison alongside Vaccari was Renato Duque, who received a more than 20-year term for “inflating contracts at Petrobras” and funneling the excess profits into the coffers of Rousseff’s Workers’ Party. 

RJ - OPERA«√O LAVA JATO/DUQUE/PRIS√O/ARQ - GERAL - Foto de arquivo de 23/06/2005 do ex- diretor de ServiÁos da Petrobras, Renato Duque, durante entrevista na sede da empresa, no centro do Rio de Janeiro. Ele foi preso esta manh„, pela PolÌcia Federal, em nova fase da OperaÁ„o Lava Jato. … a sÈtima etapa da operaÁ„o que investiga um esquema de lavagem de dinheiro suspeito de movimentar R$ 10 bilhıes. A PF tambÈm prendeu executivos e faz busca e apreens„o em cerca de cinco das maiores empreiteiras do PaÌs, o braÁo financeiro do esquema de corrupÁ„o na estatal. 23/06/2005 - Foto: MARCOS DE PAULA/ESTAD√O CONTE⁄DO
Renato Duque

Not long ago, in response to state employees and business executives who’ve blown the whistle on the massive government corruption on her watch, Rousseff famously said: “I do not respect informants.” She cited with pride her refusal, back in her Marxist guerrilla days, to rat on her comrades under torture. Her remarks, of course, reflect a curious attitude (to put it mildly) toward corruption – and, indeed, toward the very concept of public service and stewardship of the people’s resources. In October 2015, maintaining that the mounting accusations against her in connection with the Petrobras scandal were utterly false, she declared: “I do not intend to leave power.”

dilma_lulaTo be sure, on October 19, a parliamentary commission (consisting mostly of pro-government legislators) issued a report purportedly clearing Rousseff and Lula of personal involvement in Petrobras-related crimes. But that report didn’t end the controversy, and nobody expected it to. Rousseff remains under a cloud, and continues to hold on to power by a thread; in late December, Reuters reported that the lower house of Brazil’s Congress would probably decide by March whether to recommend Rousseff’s impeachment.

Meanwhile her administration’s corruption has dramatically altered Brazil’s image on the world stage. Writing in Forbes on October 22, Kenneth Rapoza summed up  the whole messy situation by noting that while Brazil, according to Transparency International, had been the “least corrupt” of “the big four emerging markets” (not really much of an accomplishment, given that the other three are Russia, China, and India), “2015 has shaped up to be the year that threw all that off a cliff.” The Petrobras scandal, wrote Rapoza, had “made Brazilian politics into Latin America’s Greece.”