Enemies of reform in Brazil

Dilma Rousseff

Last August, the socialist president of Brazil, Dilma Rousseff, was removed from office for corruption. As we’ve noted on this site, fellow socialists came to Rousseff’s defense, with David Miranda (husband of notorious Edward Snowden helpmeet Glenn Greenwald) arguing in the Guardian that Rousseff was the victim of corporations and rich people who don’t like socialism.

But in the weeks leading up to Rousseff’s removal, millions of Brazilians took to the streets to protest her corrupt government and the deep and lingering economic recession over which she had presided, and to demand her departure from office. Ideologically, the protests were not unlike those currently rocking Venezuela (which, of course, is in far worse shape than Brazil): people were sick of having their freedom squelched and their economy mismanaged.

Michel Temer

Rousseff, a member of the Workers’ Party, was replaced by her vice president, Michel Temer, who belongs to the more conservative Brazilian Democratic Movement Party. Now, Temer is no saint. Like Rousseff before him (and like many others who still hold high positions in his government), he’s been implicated in the massive “Lava Jato” corruption case surrounding the federally owned oil company, Petrobras.

Here and below: some images from the General Strike

During his brief tenure, though, he has at least sought to rescue Brazil from the consequences of his predecessor’s socialist policies. Taking office in the midst of an economic crisis, he warned that Brazil’s economy faced a “meltdown” unless “severe fiscal discipline and belt tightening” were introduced.

Pronounced himself the head of a “national salvation government,” he began instituting the kind of reforms – including significant changes in public employment contracts and pension arrangements – which, although uncomfortable in the short term for many working-class Brazilians, sought to correct policies that simply could not be sustained in the long term without doing to Brazil something similar to what chavismo has done to Venezuela. Indeed, Temer’s reforms might well have helped Brazil, which has long been looked to as a nation of immense but unfulfilled economic promise, to finally develop, within a few years, a robust First World economy dominated by a large and prosperous middle class.

But many workers, unsurprisingly, weren’t happy with Temer’s new policies. The socialists felt threatened to their core. And the labor unions were outraged. On April 28, a new set of public protests began. This time, however, it wasn’t a matter of angry citizens taking spontaneously to the streets. This was a nationwide general strike, the first in Brazil since 1996, called by the labor unions. Schools were closed. So were most businesses. Public transport came to a near-total halt. The entrances to many airports were blocked. Media described the nation as “paralyzed.” There was widespread violence. Cars and trams and buses were burned. In the Sao Paulo neighborhood where Temer owns a house (he currently lives in the vice-presidential residence in Brasilia), protesters “broke up sidewalks and lobbed chunks of concrete at police.”

While socialist leaders celebrated the general strike as an effective pushback against Temer, others disagreed. Yahoo News, for example, quoted landscape architect Marcelo Faisal as saying that “reforms need to take place” and that the strike hadn’t (in Yahoo’s words) “lived up to the hype.” A shipping news website seconded this view, reporting with relief that the strike had “impacted the country’s ports, especially the largest port of Santos, less than originally feared.” Doubtless we haven’t heard the last of the enemies of reform in Brazil, but it may well be that despite their occasional noise-making, the necessary reform will, after all, be able to proceed. And in the end that will likely be good news for almost everyone in that huge and promising country.

Exit Rousseff

dilma-rousseff (1)
Dilma Rousseff

Well, it’s over. On Wednesday, Brazilian president Dilma Rousseff was removed from office.

Back in January, we wrote about the increasing calls for Rousseff’s impeachment by ordinary Brazilians who had lost faith in her government’s disastrous socialist policies, who were disgusted by the massive scandal surrounding the government oil firm, Petrobras, and who – bottom line – were determined not to let her turn their country into another Venezuela.

carvalho
Olavo de Carvalho

Brazilians, commented Romanian-American political scientist Vladimir Tismaneanu, were turning out to be less susceptible to utopian promises than their neighbors in Venezuelan and Argentina. Philosopher Olavo de Carvalho observed that Brazilians weren’t just rejecting Rousseff – they were rejecting “the whole system of power that has been created by the Workers’ Party, which includes intellectuals and opinion-makers in the big media.”

dilma1
Dilma the terrorist: a mug shot

Today, on the other side of the Brexit vote and the GOP’s nomination of Donald Trump, it’s hard not to wonder whether the grassroots Brazilian effort to oust Rousseff is part of a spreading global thumbs-down for corrupt, supercilious socialist elites. If so, good show. 

As it happens, we spent that whole week in January on Rousseff, recounting her beginnings as a rich girl who joined a revolutionary terrorist group called COLINA; her entry into politics (a career in which, from the outset, she distinguished herself by her combination of administrative incompetence and genius for making and exploiting connections); and, finally, her increasingly disastrous tenure as president, capped 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.”

kim
Kim Kataguiri addressing an anti-Rousseff rally

We also profiled one of the leaders of the anti-Rousseff movement, 20-year-old Kim Kataguiri, whose activism was spurred when one of his college teachers praised the socialist policies of the ruling Worker’s Party. Kataguiri responded by making a series of You Tube videos promoting free-market capitalism and founding the Free Brazil Movement, which has grown like kudzu.

lularousseff
Rousseff with Lula

In March, we noted the arrest of a Rousseff sidekick, the imprisonment of two more of her cronies, and the resignation of her justice minister; in April, we reported on a government raid on the home of former president – and fallen saint – Luiz Inácio Lula da Silva. (We also noted Rousseff’s unsuccessful, and patently ludicrous, attempt to shield him from prosecution by naming him as her chief of staff.) Not long after, we reported that Marcelo Odebrecht, the CEO of Brazil’s biggest construction firm – and, naturally, a close associate of Rousseff’s – had sentenced to 19 years for bribing authorities in connection with Petrobras contracts.

GREENWALDMIRANDA_2648116b
Glenn Greenwald and David Miranda

Later in April, we learned that notorious journalist Glenn Greenwald (of Edward Snowden scandal fame) and his husband, David Miranda, were on Team Rousseff, with Miranda signing his name to a Guardian op-ed accusing Rousseff’s opponents of seeking to engineer (what else?) a “right-wing coup.” In a July profile of callow, reliably far-left Salon columnist Ben Norton, we pointed out that he’d used the same exact words as Miranda, calling Rousseff the victim of a would-be “right-wing coup.”

evo-morales1
Evo Morales

And now – well – here we are. She’s out. Congratulations to the people of Brazil. Needless to say, this doesn’t mean an instant turnaround for their country –that’ll take serious, comprehensive reform – but it’s a necessary start. 

Oh, and then there’s this news. In reaction to the “right-wing coup” in Brasilia, three of Rousseff’s fellow socialist economy-destroyers – Rafael Correa of Ecuador, Nicolás Maduro of Venezuela, and Evo Morales of Bolivia – all recalled their ambassadors. Well, birds of a feather and all that. Let’s hope their days in power are numbered, too.

The tarnishing of Brazil’s “golden boy”

andre-esteves-arrest-btg-pactual-ptrobras
André Esteves

To an extraordinary extent, the Brazilian investment bank BTG Pactual – described by Dan Horchjan of the New York Times as one of the rare Latin American firms of its kind that rival the top Wall Street and European banks – owes its existence, and its years of spectacular success, to a single individual: its self-made founder and CEO, André Esteves. As people in his line of work go, he’s been an unusually prominent figure in Brazil. “More than any other financier,” Horchjan wrote recently, Esteves “was the face of Brazil’s global ambitions during the country’s recent, short-lived boom – in a hurry to grow and unafraid to compete against anyone, anywhere.” Esteves, whom Bloomberg has called the “golden boy” of Brazilian banking, used to say that the letters BTG in the name of his firm stood for “better than Goldman.”

huw
Huw Jenkins

To be sure, the company has had its share of controversies. In 2007, Esteves was convicted of insider trading. In 2013, BTG Pactual partner Charles Rosier was found guilty in the largest insider-trading case in French history. Other accusations of questionable conduct have been made by high-profile observers but not acted upon. In 2006, for example, Esteves sold BTG Pactual’s predecessor, named simply Pactual, to UBS, the Swiss financial-services company, for $2.6 billion (becoming Brazil’s youngest self-made billionaire), only to buy it back three years later for a smaller sum and combining it with his new firm, BTG, to create BTG Pactual. More recently, Esteves and a BTG Pactual director, Huw Jenkins, were sued in a Hong Kong court for $20 million for making “fraudulent misrepresentations” to secure a deal. Three times since 1999, BTG Pactual has been taken to court by Brazilian authorities for shifting money around to mask profits and thus shirk taxes.

Brasília - Senador Delcídio do Amaral coordena o 1º Fórum Nacional de Infraestrutura. Em debate, transporte, energia elétrica, combustíveis, mineração, telecomunicações, saneamento, entre outros(José Cruz/Agência Brasil)
Delcídio do Amaral

But all of this is now mere background – perhaps even just a series of footnotes. We talked yesterday about the arrest and conviction of Latin America’s #1 construction contractor, Marcelo Odebrecht, as part of Operation Car Wash, the massive probe into corruption surrounding Brazil’s state-owned oil firm, Petrobras. After his arrest last June, Odebracht tried to slip a note to his lawyers asking them to destroy e-mails that implicated Esteves. The note found its way into the wrong hands, so that Odebrecht inadvertently ended up fingering Esteves. Esteves’s name was also mentioned in a recorded conversation in which suspects in Operation Car Wash – notably Delcidio do Amaral, the top-ranking Senator in the Workers’ Party – discussed plans to pay a potentially unfriendly witness, Nestor Cervero, the former head of Petrobras’s international division, to leave the country. And police found a note suggesting that BTG Pactual had bribed a congressmen to the tune of millions of dollars. On November 25, Esteves was arrested – and so was Amaral, who became the first sitting legislator to be swept up as a result of the Petrobras probe.

marcelo
Marcelo Odebrecht

In a January report on his downfall, the Times‘s Horchjan highlighted “its apparent senselessness.” He quoted analyst Luis Miguel Santacreu as saying that BTG Pactual’s deals with Petrobras and the Brazilian government “were relatively small and had nothing to do with the bank’s core business, which was very profitable….They didn’t need any of these deals to keep on growing.” Felipe Monteiro, a French professor of strategy, made the same point in a comment to Bloomberg: “He epitomizes the idea of a private, successful, entrepreneurial generation of Brazilian bankers,” and so his involvement in “the most classic type of old politics is somehow strange.” It’s especially strange given that BTG Pactual actually lost money on its government deals even as it was turning tidy profits on its core, non-state-related business.

As Marcelo Odebrecht’s ruin sent the Brazilian construction sector tumbling, so the destruction of Esteves’s career shook the country’s financial sector to its roots. Now BTG Pactual’s shares are worth half of what they were. Its bonds are considered junk.

A desperate move in Brazil

santana2
Joao Santana

On February 23, as we noted yesterday, Joao Santana, the James Carville to Dilma Rousseff’s Bill Clinton, was unceremoniously arrested in connection with the massive police probe into price-fixing, bribery, and kickbacks at Petrobras, the Brazilian state petroleum firm. Only six days later, Brazil’s justice minister, Jose Eduardo Cardozo, resigned. Why? Because he, too, had been implicated the corruption? No – because members of the ruling Workers’ Party were furious at him for having failed to put an end to the corruption investigation, known as Operação Lava Jato (Operation Car Wash). Cardozo, a veteran member of the Workers’ Party who has previously served as congressman and mayor of São Paulo and who has long been counted as a “close and reliable friend to the president” and as one of her “most faithful champions,” was the second member of Rousseff’s cabinet to leave in recent months; the first was Joaquim Levy, who resigned in December from the position of Minister of Finance.

cardozo3
Jose Eduardo Cardozo

Cardozo’s resignation came in the wake of news that the probe had broadened to included none other than Luíz Inácio Lula da Silva, Brazil’s widely revered ex-president, who was in office from 2003 to 2010. According to reports, courts were on the verge of subpoenaing Lula’s financial records. Cardozo’s refusal to interfere in police efforts – and thus keep the damage from spreading to more and more fellow Workers’ Party members – spelled the end of his tenure at the Ministry of Justice. Although Brazilian police are technically under the ministry’s authority, the Minister of Justice has no legal authority to interfere with their activities.

dilmalula
Rousseff and Lula in happier times

Operation Car Wash has already taken down a long list of top business leaders and Workers’ Party politicians. But as the probe closed in on Lula, the panic in the circles surrounding Rousseff intensified – as did outrage at Cardozo for failing to rein in what loyalists insist on describing as a political witch hunt. Lula, who had already been confronted recently with questions from the police about his children’s shady financial activities, is now being scrutinized over renovations performed at two of his properties, a luxurious beach-front apartment and a rural estate. The renovations were performed by construction firms implicated in the Petrobras corruption; Lula insists, however, that the two properties don’t belong to him.

cesar
Wellington Cesar

Is Cardozo totally out of the government? Far from it. In a neat twist (leave it to corrupt autocrats to come up with moves so rich in poetic irony), he’s been shifted to the job of Attorney General – a position in which he’ll be tasked with protecting Rousseff & co. from the very same investigators who’ve been allowed to proceed with their work under his authority. Meanwhile, Cardozo’s replacement at Justice, one Wellington Cesar Lima e Silva, is expected to lean on those investigators to lay off Lula – and, of course, the president herself. 

It’s looking likelier by the day, however, that any efforts to fend off the fuzz may be in vain. On March 1, the media reported on a plea bargain in which eleven officials of Andrade Gutierrez, Brazil’s second-largest engineering firm, admitted to having paid over $1.27 million under the table to suppliers for Rousseff’s 2010 campaign. As Reuters put it, this testimony represented “the first direct link between the widening ‘Operation Carwash’ investigation into bribes and political kickbacks at state-run oil company Petrobras and the election of Rousseff.”

The sands are shifting fast in Rousseff country. Stay tuned. 

 

Dilma Rousseff: decline and fall?

dilma-rousseff (1)
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.”

vaccari
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.” 

Brazil: rejecting utopianism

We’ve spent a good deal of time on this site profiling the chavistas in Venezuela and the Kirchnerites in Argentina, but we’ve devoted little or no attention to their counterparts in the massive land between those two countries – namely, Brazil.

dilma-rousseff1-600x400
Dilma Rousseff

This isn’t because Brazil is lacking in world-class useful stoogery. On the contrary: under Dilma Rousseff, who became president in 2011, the nation has seen its liberties threatened, its treasury raided by government loyalists, and its economy damaged to a degree no one could have imagined, say, a decade ago.

No, the damage may not yet approach the levels found in Venezuela or Argentina. But the situation is already bad enough to have made life far tougher for Brazilians than many of them expected a few years ago, under Rousseff’s predecessor, Luiz Inácio Lula da Silva, when their country looked as if it was climbing very quickly out of poverty and into the ranks of rich, developed nations.

carvalho
Olavo de Carvalho

How did this dramatic decline and fall come to pass? We’ll get into the details of it later this week. Suffice it for now to say that last March 15, a massive protest was held demanding Rousseff’s impeachment and an end to rule by her corrupt, autocratic, and marxisant Workers’ Party. It was the largest anti-government demonstration in the country’s history, with as many as three million participants, one of whom held a sign reading We won’t be another Venezuela. Researcher Alessandro Cota called the rally “a new beginning for Brazil and probably the end of the dreams of all those who wanted to turn the largest country of Latin America into a socialist republic.” Philosopher Olavo de Carvalho said:

Never and nowhere has a government been so completely rejected by its own population. But it is more than that. It is not only the rejection of a government, or a President. It is the rejection of the whole system of power that has been created by the Workers’ Party, which includes intellectuals and opinion-makers in the big media. People are no longer afraid of going against the Workers’ Party. 

vladimir-tismaneanu-2009
Vladimir Tismaneanu

And Vladimir Tismaneanu commented that “the house of cards built by revolutionary Dilma Rousseff … is coming down” – because, he maintained, Brazilians are proving to be less susceptible to utopian far-left promises than Venezuelans and Argentinians. “The hyper-corrupt bureaucracy of the Workers’ Party,” argued Tismaneanu, “is coming face to face with a resurgent civil society…millions of Brazilians feel the need to expose twaddle, nonsense, irresponsible foolishness, cynical demagoguery masquerading as a springboard for collective bliss.”

Roma - Itália, 19/03/2013. Presidenta Dilma Rousseff durante encontro com a Presidenta da Argentina, Cristina Kichner. Foto: Roberto Stuckert Filho/PR
Rousseff with Cristina Kirchner, Rome, 2013

If any of this is news to you, don’t worry: you’re not alone. While at least some news media in North America and Europe have been relatively frank about the disaster that is Venezuela’s so-called Bolivarian Revolution and about the nightmare that was Kirchnerism in Argentina, many of those same news media have tended either to ignore or to whitewash the deplorable record of Brazil’s current president – partly because she’s not quite as outrageously outspoken in her ideological extremism as Hugo Chávez and his successor, Nicolás Maduro, and partly because, for all her incompetence and corruption, she hasn’t – unlike Cristina Fernández de Kirchner in Argentina – yet led her country into sovereign-debt default.

The key word there, of course, is yet.

More tomorrow.