Brazil's Long History with Corruption

April 22, 2016

Corruption and scandal are not new to Brazil. In fact, the current corruption scandal involving Petrobras, businessmen, and politicians is just the most recent in a country with a long history of corruption. In Brazil, corruption has become normalized. Some of the largest corruption scandals are explored here, namely scandals during the Lula and Collor presidencies.

Rousseff Presidency: In March 2014, Operation Lava Jato (Car Wash) uncovered the biggest corruption scandal in Brazilian history, involving dozens of businessmen, politicians, and millions of reals. Operation Lava Jato was an investigation into Petrobras, Brazil’s largest oil production company, a company that was named 2008’s most ethical global oil and gas company (Bowater, 2015). Despite this global belief in Petrobras’ ethics, the corruption scheme can be dated all the way back to 2004. Operation Lava Jator revealed that the heads of large construction firms, empreiteiras, had organized an illegal alliance to obtain overpriced contracts with Petrobras, taking private benefits in the process. The alliance bribed Petrobras’ top employees to ensure that only alliance companies could receive Petrobras contracts (Fuentes, 2016).  

Additionally, politicians began to give out Petrobras jobs, and in return received kickbacks from Petrobras. Money was never given directly, but instead laundered through offshore accounts. Some of this money has recently been tied to the another scandal: the Panama Papers. At least 57 people linked to Operation Lava Jato have been tied to offshore accounts with Mossack Fonseca. In January, the general manager of Mossack Fonseca was accused of ordering Mossack Fonseca staff to destroy and hide evidence relating to Operation Java Lato (Gallucci, 2016). The Petrobras scandal is so linked to Mossack Fonseca that Fonseca, who had been a top advisor to Panamanian President Juan Carlos Varela, was forced to take a leave of absence in March, due to the serious allegations of involvement.

Since the news of the 10 year bribery and kickback scheme broke in 2014, Brazil has been rocked by anti-government demonstrations and investigations into leading politicians. President Dilma Rousseff has been targeted by the majority of these demonstrations and charges by the opposition. Furthermore, there are some allegations that Rousseff illegally used Petrobras funds to finance her re-election campaign (Winsor 2016). However, Rousseff is not directly implicated in the scandal. Though she led the Petrobras board for several years during the time in which these kickbacks and bribes occurred, her name does not arise in the Java Lato investigation. Former President Luiz Inácio Lula da Silva, or Lula, has also been implicated. President Rousseff, in March, appointed Lula to her presidential cabinet, in a move that many believe was to protect him from prosecution in the scandal.

Since 2014, 86 people have been convicted of crimes tied to Petrobras, the majority of them politicians and businessmen (Beauchamp, 2016). Most recently, a committee of Brazilian politicians has voted that proceedings to impeach President Rousseff should commence (BBC News). For President Rousseff, it appears as if her days are numbered. Public outcry is at an all time high, and the Brazilian government needs someone, rightly or wrongly, to take the fall.

Lula Presidency: Former President Lula, recently implicated in the Petrobras scandal, is no stranger to allegations of corruption. Serving as president from 2005 to 2011, Lula was beloved by the majority of the Brazilian population, even leaving office with a staggering 80% approval rating (vlogbrothers, 2016). In 2005, Lula was implicated in the mensalão scandal. The mensalão scandal involved allegations that members of Lula’s party, the Workers Party (PT), were using state funds to buy support and votes for then President Lula’s initiatives. Congressmen within coalition parties were given $10,000 to $12,000 a month to vote the way that President Lula wanted them to vote, as Lula’s government was a minority government (vlogbrothers, 2016 and BBC News, 2013). Lula, however, was never directly implicated in the corruption scheme. Instead, his chief of staff, Jose Dirceu, was accused of creating the plan. He was forced to resign and was later impeached by Congress.

In all, 38 people went on trial, 37 of them went before the Brazilian Supreme Court in 2012. Of the 37, 25 were convicted, including Lula’s chief of staff, Jose Dirceu. Mr. Dirceu was sentenced to 10 years and 10 months in jail (BBC News, 2013). Mr. Dirceu was only forced to serve one-sixth of his sentence in prison, with the remainder under house arrest and court surveillance (Wall Street Journal, 2012). In 2014, the Supreme Court agreed to retrials for any of the defendants who received at least four votes for acquittal during the original trial. This would be especially important for Mr. Dirceu, who could potentially see his sentence reduced by six years. The retrial process undermines the original effort to bring corrupt politicians to justice, once again proving the normalization of corruption in Brazil. Retrials have yet to be decided, though. In what seems to be a series of corruption after corruption, Mr. Dirceu was arrested at his home in August of 2015 for his ties to the Petrobras oil scandal (Wall Street Journal, 2015). In April of 2016, the Ministério Público Federal was seeking an indictment against Mr. Direcu.

Collor de Mello Presidency: In 1992, Brazil made history. Brazil became the first Latin American country to have a popularly elected president impeached for corruption. Collor was accused of corruption in May 1992 by his younger brother, Pedro Collor de Mello. Pedro Collor accused his brother of “illegal enrichment” (Brooke, 1992). Following an investigation by a Parliamentary Commission of Inquiry (CPI) of September 1992, the CPI found determined that “Collor's former campaign fund raiser, Paulo Cesar Farias, controlled an extensive network that facilitated public contracts and influenced government decisions in exchange for kickbacks and 'commissions'. Members of the CPI estimate the total amount of money involved at about two billion dollars” (Geddes and Neto, 1992). Collor, it was stated, used phantom checks, or checks opened by Farias and his associates with false identities, to make deposits into his bank account. Collor used these checks for personal use, namely to make upgrades to his home and buy an expensive car. The evidence presented by the CPI showed the Collor and Farias created a fake organization that could take in large amounts of cash and investments in the form of kickbacks and mediation taxes. Due to the corruption charges, Collor was officially removed from office by the Senate on 29 December 1992 and was charged with corruption in June 1993. Specifically, “Collor, Farias and seven others were charged with ‘passive corruption,’ which in Brazilian law means receipt of illicit gains or "undue" advantages while in public office” (Margolis, 1994). In a strange twist of irony, Lula, in regards to the corruption charges hurled at then President Collor de Mello, was on record as saying “You can't negotiate a pardon for a man who stole millions” (Brooke, 1992).

Though charged in 1992, in 1994 the Supreme Court cleared Collor and Farias of the charges, stating that the Attorney General of Brazil had failed to provide enough evidence of the corruption charges. Public outcry was loud, with a number of Brazilians protesting the Supreme Court’s decision. For these Brazilians, the decision to clear Collor was simply another example of Brazil’s historic inability to rid itself of corrupt politicians. Following the Supreme Court’s decision, Herbert de Souza, a sociologist with the Movement for Ethics in Politics, declared the decision as  “one of the greatest political, judicial and ethical absurdities this country has ever seen,” (Margolis, 1994).

For former President Collor, however, the corruption allegations do not end in 1994. Last year, in 2015, he was one of the top politicians named in the Petrobras oil scandal. The allegations that Collor was involved in the Petrobras scandal are just another example of the normalization of corruption in Brazil.

A country that has been plagued by scandal throughout its modern history, even the current corruption scandal investigations are in themselves corrupt. Many of those leading the impeachment process are being investigated under the Java Lato investigation themselves. Ultimately, how the Petrobras story ends will likely set the stage for both Brazil’s tolerance of corruption and their political landscape in the coming years.


References:

 Bächtold, Felipe. “Ministério Público pede a condenação de Dirceu em ação da Lava Jato.” Folha de S. Paulo. 08 Apr. 2014. http://www1.folha.uol.com.br/poder/2016/04/1758906-ministerio-publico-pede-a-condenacao-de-dirceu-em-acao-da-lava-jato.shtml

Beauchamp, Zack. “Brazil’s Petrobras Scandal, Explained.” Vox. 18 Mar. 2016. http://www.vox.com/2016/3/18/11260924/petrobras-brazil

Boadle, Anthony. “Brazil's Top Court OKs Retrials in Landmark Corruption Case.” Reuters. 18 Sept. 2013. http://www.reuters.com/article/us-brazil-corruption-idUSBRE98H13420130918

 Bowater, Donna. “Brazil’s Continuing Corruption Problem.” BBC News. 16 Sept. 2016. http://www.bbc.com/news/business-34255590

“Brazil Impeachment: Vote Deals New Blow to Rousseff.” BBC News. 12 Apr. 2016. http://www.bbc.com/news/world-latin-america-36021230

Brooke, James. “Huge Rally Demands Brazil Chief's Impeachment.” New York Times. 20 Sept. 1992. http://www.nytimes.com/1992/09/20/world/huge-rally-demands-brazil-chief-s-impeachment.html

 Buchanan, Elsa. “Petrobras Scandal: Brazil's Former President Fernando Collor de Mello 'took bribes' From Firm.” International Business Times. 25 Feb. 2015. http://www.ibtimes.co.uk/petrobras-scandal-brazils-former-president-fernando-collor-de-mello-took-bribes-firm-1489438

 “Former Brazil President Chief of Staff Jailed for 10 Years.” The Wall Street Journal. 12 Nov. 2012. http://blogs.wsj.com/corruption-currents/2012/11/12/former-brazil-president-chief-of-staff-jailed-for-10-years/

 Fuentes, Esther. “Understanding the Petrobras Scandal.” Council on Hemispheric Affairs. 07 Apr. 2016. http://www.coha.org/understanding-the-petrobras-scandal/

 Gallucci, Maria. “Panama Papers: Brazilians Embroiled In Petrobras Corruption Scandal Also Linked To Mossack Fonseca Documents Leak.” International Business Times. 04 Apr. 2016. http://www.ibtimes.com/panama-papers-brazilians-embroiled-petrobras-corruption-scandal-also-linked-mossack-2348113

 Geddes, Barbara and Artur Ribeiro Neto. “Institutional Sources of Corruption in Brazil.”  Third World Quarterly. Vol 13, No 4, 1992. http://www.jstor.org/stable/pdf/3992381.pdf

 Magalhes, Luciana and Rogerio Jelmayer. “Brazilian Police Arrest José Dirceu, Ex-Chief of Staff, in Petrobras Probe.” The Wall Street Journal. 3 Aug. 2015. http://www.wsj.com/articles/brazils-federal-police-charge-jose-dirceu-in-petrobras-probe-1438612314

 Margolis, Mac. “Brazil's Ex-President Cleared of Corruption:  Latin America: Judges Find Collor and His Campaign Treasurer Not Guilty of Using Power to Gain Kickbacks.” Los Angeles Times. 13 Dec. 1994. http://articles.latimes.com/1994-12-13/news/mn-8447_1_campaign-treasurer

 “Q&A: Brazil's 'big monthly' Corruption Trial” BBC News. 16 Nov. 2013. http://www.bbc.com/news/world-latin-america-19081519

 Vlogbrothers. “Brazil's Government is Falling Apart...and it's Good News?.” YouTube. 18 Mar. 2016. https://www.youtube.com/watch?v=rFKsY5O7oYs

 Winsor, Morgan. “Why Are Brazilians Protesting Against Dilma Rousseff? Anti-Government Demonstrations Dominated By Educated Youth.” International Business Times. 26 Mar. 2016. http://www.ibtimes.com/why-are-brazilians-protesting-against-dilma-rousseff-anti-government-demonstrations-2342243

About Author(s)

Hilary Heath
Hilary Heath is a second year candidate for a Master of International Development at the Graduate School of Public and International Affairs at Pitt where she is studying Human Security. She currently works as a graduate student intern for Panoramas and is obtaining a certificate at the Center for Latin American Studies.