2017-04-23 By Kenneth Maxwell
Brazil is continuing its long plunge into the murky world of profound political crises.
Past corruption revelations, simmering judicial conflict between the federal judges and the political and private sector elites, and challenges to a system of government and the constitutional arrangements, which emerged when Brazil re-democratized in the mid 1980’s, are all in play.
The crisis in Brazil is self-made.
Although Brazilian intellectuals (and Brazilian politicians) are always prone to blame all their ills on the machinations of nefarious outsiders, particularly on the United States, this one is “made in Brazil.”
The depth of the crisis is existential for the regime. It has profoundly shaken the political and business elites of Latin America’s most important country.
But fixing the crisis of democracy will be fraught with difficulties.
The government of Michel Temer is part of the problem. It lacks legitimacy, is extremely unpopular, and is composed almost entirely of men in the 70’s, who have been for decades been part of the problem.
There are some new leaders on the political scene, but they are political outsiders, most prominently the new mayor of Sao Paulo, Joao Doria, a Trump like figure from the private sector who ran the Brazilian TV edition of “the apprentice.”
Meanwhile the economic crisis continues.
Brazil is suffering its worse economic recession in over half a century. The nation’s fiscal problems are also critical: A huge and bloated obligation to pensions for example which the country can ill afford, but where reforms are strenuously, and at times violently, opposed by those who most benefit from them, particularly the police (the state military and civil police and the armed forces).
But it is clear that the Brazilian federal government, and the governments of the Brazilian states, can ill afford these escalating obligations in the long term.
Already Rio de Janeiro, Rio Grande do Sul, and Minas Gerais, three of the most important Brazilian states are bankrupt, and have difficulty in paying their civil servants and their police forces.
A police strike in the southeastern state of Espírito Santo in February led to widespread looting, dozens of murders, and a breakdown of order on the streets, and forced President Michel Temer to send in 200 troops.
The depleted public finances have crippled basic health services, education, and public security in other states as well.
The political parties (and there are any of them) are all now revealed to have been involved since the end of military rule in the mid-1980’s in cozy clandestine cartels where payoffs and kickbacks, and toxic relationships between the public sector, politicians, and state enterprises, linked them all in a downward spiral, which has undermined and subverted the very functioning of the democratic state.
Because Brazil is now a major international player in the petrochemical and petroleum industries, in the export of raw materials, and in agricultural-business, these shady cartels have all had international ramifications, which has made hiding their dealings (legal and illegal) from international scrutiny much more difficult.
In the end this has contributed to their revelation to public view.
And all of this has been helped by the simultaneous grown of the internet in Brazil. Brazil is now the second largest user of Facebook in the world. Very little that passes does not very soon become public.
The “car-wash” (“Lavo-Jato” in Portuguese) got its name from a money laundering operation at a petrol station in Brazil’s capital, Brasilia. The investigation by the Federal Police of Brazil, Curitiba Branch, and judicially commanded by Federal Judge Sergio Moro, revealed corruption at the highest levels of government and at the state-controlled oil company Petrobras, where executives were accepting bribes to award contracts.
The investigations have already led to large (and expensive) legal settlements for Petrobras in the U.S. and in Switzerland.
The investigation also led to the activities of the large Brazilian multinational construction company Odebrecht, a Brazilian conglomerate involved in engineering, construction, chemical and petrochemicals, with operations in South and Central and North America, Africa, the Caribbean, Europe and the Middle East.
It is one of Brazil five largest private sector manufacturing companies, and owns Braskem, one of the county’s largest petrochemical companies.
In June 2015 the CEO Marcelo Odebrecht was arrested. On March 7, 2016, Judge Moro sentenced him to 19 years and 4 months in jail for arranging US$30 million in bribes to executives of Petrobras in return for contracts and influence.
Odebrecht has been involved in corruption fueled deals in Cuba, Peru, Angola, the Dominican Republic, where it will pay US$ 184 million, twice what it paid in bribes for public contracts between 2001 and 2014. In the U.S. the Department of Justice released documents detailing US$788 million paid by Odebrecht in 12 counties in Latin America and Africa.
On April 17, 2017, Judge Raymond Dearie, of the U.S. Federal Court in Brooklyn ordered Oderbrecht to pay a fine of US$2.6 billion for bribing public officials abroad: US$ 2.39 to Brazil: US$ 93 million to the US: and US$116 million to Switzerland. This is the largest settlement in the U.S. since Siemans settled for US$ 1.6 billion in 2008.
These revelations have been helped in part by the new global transparency of financial transactions and off-shore bank accounts. It has been added as well by publicity about them though leaks to the press and over the internet, and as a result of Swiss-leaks, the Panama Papers revelations (and the use of the British “overseas territories” in the Caribbean island “fiscal paradises” for off-shore and clandestine banking operations), and the new banking transparency in Switzerland where many of the corrupt Brazilian politicians had parked their ill-gotten cash.
The “car wash” investigation reached new depths just before Easter when the list of those being investigated was released by the Brazilian Supreme Court justice, Luiz Edson Fachin, who had assumed the responsibility for the case on the supreme court following the death of Justice Teori Zavascki, in a plane crash when approaching the airport in the Rio de Janeiro’s colonial tourist city of Paraty.
Justice Fachin’s “list” included 8 ministers in the government of Michel Temer, who had become president of Brazil after the impeachment of Dilma Rousseff. It also included 24 senators, 3 governors, and 39 Federal deputies. The ministers in Temer’s government include Eliseu Padilha, who is his closest political ally and is the head of his “casa civil” (the head of his presidential staff), Moreira Franco (Secretary-General of the government), Blairo Maggi (Agriculture), Aloysio Nunes (Foreign Affairs), Helder Barbalho (National Integration), Marcos Pereira (Industry) and Gilberto Kasseb (Communities).
So far all remain in office.
It is also apparent from Marcelo Oderbrecht’s testimony that Michel Temer, former president Dilma Rousseff, Guido Mantega, former minister of finance, Senator Aecio Neves, the leader of the PSDB and former PSDB presidential candidate in the last presidential election when he was defeated by Dilma Rousseff, and Graça Foster, the former head of Petrobras, are also involved.
All strenuously deny the allegations.
But like so much in this case the videotaped testimony of those imprisoned by Judge Moro is now available on the Internet, much of it released prior to the Easter weekend. Brazilians now have the opportunity of watch and to make up their own minds about who is (and who is not) telling the truth.
Meanwhile, Dilma Rousseff has been visiting American university campuses (of all places given the history of her government’s polices and its relationship with Washington during her term in office), where she had been received a martyr for democracy.
But the key target in Brazil remains former Brazilian president, Inácio Lula da Silva.
Despite the multiple scandals that have engulfed Brazil and the Worker’s Party and many of his closest associates over the past three years, Lula he remains, according to the most recent public opinion polls, the most popular candidate for the next presidential election in 2018.
But the noose is tightening.
Last week the patriarch of the Oderbrecht familty, Emilio Oderbrecht, claimed in testimony before Judge Moro that “I was, basically, not the owner of the government, I was the stooge of the government.” (Eu, no fundo, nao era o dono do governo, Eu era o otario do governo”).
And Jose Aldemario Pinheiro, known as Leo Pinheiro, ex-president of OAS, a major privately owned Brazilian multinational conglomerate, involved in civil construction of highways, airports, hydro-electric power plants, dams and ports, said in testimony that Lula knew off payments to the “caixa dois.” These are the black boxes of Brazilian politics where corrupters meet the corrupted in off-the-books payments for political campaigns, and expect to receive preferential treatment, favorable legislation, and bloated government contracts, where they could often skim an extra 5 per cent over costs.
Moreover, Leo Pinheiro also said that OAS had paid for Lula’s luxury triplex apartment in Guaruja, a tourist coastal town known for its beaches in Sao Paulo.
Lula has adamantly denied that he even owns the triplex apartment in question or knows anything about these valuable freebees. Though photographs have emerged of Lula and the late wife, Leticia, who died in early February (they had been married for 43 years), visiting the apartment and ordering improvements.
Leo Pereira also testified that Lula had at a secret meeting in May 2014, instructed him to destroy all evidence of their relationship because of the “Lava-Jato” investigations.
Lula’s supporters dismiss all these allegations and leaks as being part of a plot to remove him as a presidential contender.
But Lula has been called to testify before Judge Moro on May 3. Also Judge Moro has ordered that Lula be present during all testimony the 87 witnesses called by the lawyers for the prosecution and by the defense.
This May will be an “interesting” month for other reasons as well. The Brazilian Supreme Court is scheduled in late May to decide on restrictions on the “foro priveligiado”. That is the law, which in effect protects member of the government and members of congress by restricting the cases only to the Supreme Court. A majority on the court is apparently in favor of lifting these restrictions so that lower federal courts can take on these cases, but this opposed by at least two members of the court.
The web of corruption revealed by the “car wash” investigations and the plea bargaining with the large private sector company owners and executives, and with the money launderers and publicity agents, in order to obtain reduced sentences in return for credible and proven testimony (the “delacoes premiados” in Portuguese), have also implicated other leaders of the main opposition party the PSDB.
In addition Aecio Neves, including the current governor of Sao Paulo, Geraldo Alckmin has been implicated as well.
But above all it has involved Jose Serra, the former mayor and governor of Sao Paulo, former presidential candidate for the PSDB, and former foreign minister under Temer, until he resigned to return to his senatorial seat from Sao Paulo, ostensibly he has claimed because of “back problems”
The next major shoe to drop in Judge Moro’s investigations is the potentially devastating testimony of Antonio Palocci, who was Lula’s former long term intimate colleague, his former finance minister, campaign chairman, and PT insider and bigwig. Palocci if anyone (apart from Jose Dirceu, Lula’s former factotum, who is also held in jail by Judge Moro), certainly knows where the bodies are buried.
He has indicted in testimony before Judge Moro that: “I believe I could open the way for what might be another year of work – but work that would be good for Brazil.” Palocci could well make the plea bargain of all plea bargains, if he strikes a deal to speak on the record.
And what he has to say will be instantly available on the Internet as well.
Much of the focus of the investigations has been has been on the so-called “caixa dois” that is the black box of undeclared contributions to the political campaigns at all levels of government, from the municipal, to the state, to the federal, as well above all to the presidential campaigns.
Odebrecht kept a list of the nicknames it used for the recipients of these off-the-book political donations. Emilo Odebrecht said in his testimony before Judge Moro that this had been going on for thirty years. And he was surprised he said that anyone was surprised by these cozy relationships between private business, state enterprises, and government officials.
Undoubtedly it began much earlier under the military regime (and probably much earlier than that).
But Emilio Oderbrecht should know all about this from the history of his Bahia based enterprises, and the intimate relationship he enjoyed with the “boss” of Bahia and national power broker, Antonio Carlos Magalhães, whose son is now the the mayor of Salvador, Bahia’s capital.
The one bit of good news is that parts of the system do work in Brazil.
It is Brazilian investigators and judges, and the supreme court, which have all acted, and have brought the perpetuators of these crimes to justice. Leading politicians and leading businessmen have been jailed, and many sentenced to long periods in prison.
But it does appear the scale of corruption increased exponentially under the PT governments after 2003. Though the “delações privilegiado” have already (reportedly) also implicated the other great icon of democratic Brazil, former two term PSDB president, Fernando Henrique Cardoso (who has also always been very associate of Jose Serra.)
Like, Lula, who succeeded him as a two term president of Brazil, Fernando Henrique Cardoso (FHC) also adamantly denies these allegations. The investigators have set their sights on the banking and financial institutions which have turned a blind eye to money laundering, and to the parts of the judiciary which tolerated these shady dealings.
But already the lives of federal investigators and judges have been threatened. And such threats are not to be taken lightly in Brazil.
But the sad truth is that the “new republic” established in the mid 1980s has been paralyzed by these multiple scandals, betrayed by the very politicians from both sides of the political spectrum who promised so much, and offered so much hope, but in the end, unfortunately for Brazil, delivered so little.