Corruption in Brazil

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Corruption in Brazil exists on all levels of society from the top echelons of political power (as seen in the Mensalão Scandal and the Operation Car Wash and the Petrobras scandals) to the smallest municipalities.[1][2][3] The Operation Car Wash shows central government members using the prerogatives of their public office for rent-seeking activities, ranging from political support to siphoning funds from state-owned corporation for personal gain. Specifically, mensalão typically referred to the practice of transferring taxpayer funds as monthly allowances to members of congress from other political parties in consideration for their support and votes in congress. Politicians used the state-owned and state-run oil company Petrobras to raise hundreds of millions of reais for political campaigns and personal enrichment. Corruption in Brazil is nothing new, although the scale and systematic implementation of political corruption over the last decade[when?] has been unprecedented.[citation needed]

All types of corruption exist. Clientilism, cronyism and nepotism are widespread in Brazil, and many critics mention how some of the members of Brazilian Supreme Court are seen openly mingling with politicians. Bribery (called propina or suborno in Portuguese) is also rife in the police force and throughout the Brazilian bureaucracy.[citation needed] But one of the most common types of corruption in Brazil is embezzlement of public funds through overbilling, called superfaturamento in Portuguese (literally "super invoicing"). This technique allows individuals to make financial gains, and also finance political campaigns (as seen in the Petrobras scandal), and is closely linked to public contracts with private enterprises.[citation needed] Construction is a prime example, for example in building roads, sewage, and public buildings. It is estimated that 30% of all Brazilian public funds are embezzled this way each year.[4] Petrobras president Aldemir Bendine in 2015 estimated the companies losses to corruption scandals at $2 billion US. The company's stock declined, although it later began to recover.

The scale of corruption in Brazil is immense, but largely under-reported in the media and historically not investigated, prosecuted or punished, so it is difficult to estimate just how large the problem is. The Car Wash (Lava Jato) investigation may be changing this trend. Corruption in Brazil increases the already enormous Brazilian shadow economy[5] which some sources estimate at 16.1% of the gross domestic product,[6] a number that probably needs to be adjusted up considerably if corruption as such is included as part of the shadow economy.

According to Transparency International's 2015 corruption index, which ranks countries according to people's perception of confidence and corruption, Brazil ties with Bosnia and Herzegovina, Burkina Faso, India, Thailand, Tunisia, and Zambia, ranking 76th among 168 countries.[7]

Corruption was cited among many issues that provoked the 2013 protests.[8]

Corruption directly affects the well-being of Brazilian citizens since it reduces public investments in health, education, infrastructure, security, housing, among other essential rights, expanding social exclusion and inequality.[citation needed]

Political corruption

Political corruption is widespread in Brazil at the national level and at the state and municipal level.[citation needed] The national level involves the executive, the ministries, the Senate and the Congress in addition to state-owned companies. The state and municipal level includes all 27 states and their administrations, plus all city councils.

Petrobras and its involvement in Operation Car Wash and the Mensalão scandal serve as important examples of the close links between Brazilian politics and political corruption in Brazil. Politicians and political parties use it to finance elections,[9] get votes, get a political base in congress and personally enrich themselves. A broad spectrum of congress members from all the major political parties, but controlled by central figures in the government, interfered with internal buying procedures in Petrobras and distributed contracts to private firms in return for a "commission". Virtually all major contracts for the state-owned oil company passed through this process, so Petrobras regularly overpaid for services. This money was distributed to the political parties as well as to individual politicians and to key Petrobras employees.

This type of corruption is called "superfaturamento"—overbilling—in Brazil, and is a very common practice for politicians and civil servants in charge of contracting and buying for public institutions. You can see examples of this even in small primary schools[10] where products like pencils and notebooks are bought with padded invoices, as well as in grand-scale construction such as public buildings,[11][12][13] roads,[14] power and sewage systems, metro-systems,[15] football stadiums[16][17][18][19](not least in connection with the World Cup in 2014), etc. A particularly symbolic example is the city of Brasilia itself, which historians believe was systematically overpriced when built in the early 1960s.[20]

Mensalão scandal

While Lula was in office reports surfaced of payments made to deputies in return for a pledge to support the government with their votes in Congress. According to investigators more than a dozen construction companies bribed or gave kickbacks to corrupt politicians in return for profitable contracts with state-owned petroleum company Petrobras. Former president of Grupo OAS (pt) Jose Aldemario Pinheiro and OAS executive Agenor Medeiros each were sentenced to 16 years incarceration on 6 August 2015. Three other OAS employees received shorter sentences.[21]

Operation Car Wash

Operation Car Wash is an investigation being carried out by the Federal Police of Brazil, Curitiba Branch, and judicially ordered by Judge Sérgio Moro on March 17, 2014. Initially a money laundering investigation, it expanded to cover allegations of corruption at the state-controlled Petrobras, where executives took bribes for awarding contracts to construction firms at inflated prices. The operation has included more than a hundred search warrants, temporary and preventive detention and coercive measures, with the aim of ascertaining a money laundering scheme suspected of moving more than R$38.1 billion" (approximately US$11.3bn) as of November 22, 2016. Because of the unusual nature of its actions, defendants' lawyers accuse the operation of "selectivity" and "partiality", and of being "a criminal case that violated minimum rules of defense for a large number of defendants".[22]

Throughout the investigation, former Brazilian president Dilma Rousseff, who chaired the board of Petrobras from 2003 to 2010, denied knowledge of any wrongdoing [23] The Brazilian Supreme Court authorized the investigation of 48 current and former legislators, including former president Luiz Inácio Lula da Silva, in March 2016.

Operation Car Wash has greatly impacted Brazilian politics, resulting in the arrest of several important political figures, including:

Legal framework

To counteract widespread corruption in the private and public sector, Brazil enacted the Clean Company Act 2014 (Law No. 12, 846), which held companies responsible for the corrupt practices of their employees and liable without a finding of fault. Bid rigging and fraud are prohibited in public procurement, as well as bribery of Brazilian public officials. If found guilty of corruption the companies can be suspended, dissolved or fined.

See also

References

  1. ^ "Desvios com fraude na merenda podem chegar a R$ 2 milhões, diz MP". Ribeirão e Franca (in Portuguese). 2016-03-30. Retrieved 2017-02-01. 
  2. ^ "Polícia flagra desvio de merenda escolar no interior de São Paulo". Jornal O Expresso. 2016-02-28. Retrieved 2017-02-01. 
  3. ^ "PSDB vê superfaturamento em compra de kits escolares". www.ovale.com.br. Retrieved 2017-02-01. 
  4. ^ "Folha de S.Paulo - Editoriais: O custo da corrupção - 09/03/2010". www1.folha.uol.com.br. Retrieved 2017-02-01. 
  5. ^ Tanzi. "Brazilian Shadow Economy" (PDF). 
  6. ^ Reporter, Contributing (2015-06-26). "Brazil's Informal Economy was Worth R$826 Billion in 2014 | The Rio Times | Brazil News". The Rio Times. Retrieved 2017-02-01. 
  7. ^ 2015 Corruption Perceptions Index
  8. ^ What's REALLY behind the Brazilian riots? CNN June 14, 2013
  9. ^ "Financiamento de campanha motivou desvios na Petrobras, avalia Toffoli". 
  10. ^ "PSDB vê superfaturamento em compra de kits escolares". 
  11. ^ "Para lembrar o escandalo de superfaturamento na construcao do Forum Trabalhista de Sao Paulo". 
  12. ^ "TCU identifica superfaturamento na obra do aeroporto de Macapa". 
  13. ^ "TCU vê indícios de superfaturamento de R$ 3,4 bi em obras de Belo Monte". 
  14. ^ "Governo investiga 7 servidores por superfaturamento em obra de rodovia". 
  15. ^ "Alstom pagou R$ 48 mi em propina e superfaturamento, diz ex-executivo". 
  16. ^ "Tribunal de Contas aponta superfaturamento de R$ 67 mi em obra do Maracanã". 
  17. ^ "Ação da PF investiga Odebrecht em suspeita de desvio em estádio da Copa". 
  18. ^ "Estádio de Brasília foi superfaturado, aponta Tribunal de Contas". 
  19. ^ "Obras de estádios da Copa-2014 são citadas em delação da Lava Jato". 
  20. ^ "Governo de Juscelino Kubitscheck". 
  21. ^ "Brazil businessmen sentenced to 16 years over Petrobras scandal". BBC. August 6, 2015. Retrieved July 26, 2017. 
  22. ^ http://pradella.jusbrasil.com.br/noticias/297190364/leia-o-manifesto-dos-advogados-que-comparam-lava-jato-a-inquisicao Pradella, Thiago de Carvalho. Leia o manifesto dos advogados que comparam Lava Jato à Inquisição. JusBrasil. January, 2016.
  23. ^ Costas, Ruth (21 November 2014). "Petrobras scandal: Brazil's energy giant under pressure". BBC. Retrieved 12 May 2015. 
  24. ^ Jelmayer, Rogerio (2015-04-15). "Brazil Police Arrest Workers' Party Treasurer Joao Vaccari Neto". Wall Street Journal. Retrieved 27 August 2015. 
  25. ^ MAGALHAES, LUCIANA (3 July 2015). "Brazilian Police Arrest José Dirceu, Ex-Chief of Staff, in Petrobras Probe". WSJ. Retrieved 9 September 2015. 
  26. ^ Romero, Simon (2015-08-21). "Expanding Web of Scandal in Brazil Threatens Further Upheaval". New York Times. Retrieved 9 September 2015. 
  27. ^ "Brazil speaker, former president charged in Petrobras corruption". Retrieved 22 December 2016. 
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