In a dramatic marathon session on August 2, 2017, Brazil’s National Congress voted against putting President Michel Temer, who had ascended to the office only one year earlier, on trial for corruption. The lawmakers spared Brazil yet another cycle of impeachment of a tainted, deeply unpopular leader.
Most members of congress had apparently decided that four years into its unprecedented crisis, Brazil could ill afford more political upheaval. Its economy, in particular, required reform and the uncharismatic Mr. Temer had proven surprisingly effective in instituting change. As shouting matches broke out on the floor of the congress’ lower house, however, other lawmakers were tossing fake bills in the air, bitterly denouncing what they described as a culture of deep-seated, brazen corruption in Brazilian politics.
Lula and Rousseff
The crisis exploded while Mr. Temer’s predecessor, Brazil’s first woman president, Dilma Rousseff, was in office. Ironically, she had initially won widespread support for her valiant stance against corruption. In office since January 2011, President Rousseff quickly had several cabinet ministers resign over allegations of ethical breaches and neared the end of her first year with the highest public approval ratings in history, noted GIS expert Dr. Joseph S. Tulchin in November of that year. “She has dealt with these corruption charges very differently from her predecessor,” seconded Eduardo Lins da Silva, GIS’ leading Brazil expert. “She is much less complacent,” he wrote.
By July 2012, the plot had thickened: more members of Ms. Rousseff’s cabinet were forced out, and now her mentor and founder of the Workers’ Party (Partido dos Trabalhadores, or PT), former President Luiz Inacio da Silva (2003-2010), affectionately nicknamed Lula, was also embroiled in a scandal. “Will this be a setback for the coalition government which pledged to clean up corruption?” asked Dr. Tulchin in his “Corruption allegations run deep into Brazil’s government” report.
The former president’s problems stemmed from Brazil’s Supreme Court trial of 38 officials accused of involvement in what then was thought to be one of the largest corruption scandals in the country’s history. The defendants were accused of using public money to pay members of congress for their votes on crucial issues during the first term of Mr. Lula’s presidency. Among those on trial were key figures in his administration, including his former chief of staff, who was charged with having been the leader of a multimillion-dollar corruption scheme.
“Although conviction of his previous associates might not hurt Mr. Lula directly, it would give the opposition parties a considerable weapon” to attack him and the government observed Mr. da Silva in his September 2012 report on the new tests faced by Ms. Rousseff – the former president’s longtime associate and protege.
By the summer of 2013, the country’s economic outlook began to darken. “Brazil is losing its reputation as the ‘new China’ as its economy starts to falter. The latest figures show the growth rate for 2013 is forecast at around 3 percent at the most. In 2010, it was 7.5 percent. Agricultural exports are holding up but sales of some commodities, particularly iron ore, have fallen as China’s economy itself slows down,” Mr. da Silva warned in a report “Brazil’s economic bubble looks set to burst”.
The oil business was a major factor behind Brazil’s unfolding drama.
“Latin America has 20 percent of world reserves, but only 13 percent of world production. The hydrocarbon industry’s underperformance in Latin America, despite a decade of record high oil prices, is the result of largely political challenges rather than geological limitations,” wrote GIS expert Dr. Francisco J. Monaldi in a revealing report in July 2013.
The discovery of huge new reserves in deepwater off Brazil’s shore electrified its society and brought in what Dr. Monaldi described as an increase in “resource nationalism.” The “government changed future offshore contracts, increasing the state-take and making the national oil company Petrobras the operator of all fields. This marginalized other companies,” he explained.
The politicians’ favors for Petrobras, it turned out, came with a hefty price tag.
The combination of a worsening economic outlook with growing anger at the corrupt elites began to breed huge protests in Brazil.
State Within a State
President Rousseff was preoccupied with securing her reelection in 2014. “Two-thirds of Brazilians wanted change, according to public opinion polls, but the two strongest opposition candidates for the presidency at that time …did not seem to appeal to voters,” wrote Mr. da Silva shortly before the balloting. In late October 2014, the incumbent president was reelected by a thin margin.
“Brazil suffers from the corruption of power and the result disappointed many who had hoped that change could break the culture of patronage and corruption. Dilma Rousseff’s party has won its fourth, uninterrupted term in power,” commented GIS’s founder, Prince Michael of Liechtenstein, in October 2014. He quoted Walter Russell Mead, editor-at-large of The American Interest, a Washington-based international affairs magazine: “Rousseff’s reelection as Brazil’s president could allow her Workers’ Party to become a corrupt state within a state.”
Less than half a year later, the once immensely popular president and the PT began to sink. Mr. da Silva thus described the situation in his April 16, 2015 GIS report:
“Brazil’s President Dilma Rousseff … faces calls for her impeachment and public demonstrations as she experiences a perfect storm of problems. Major falls in the price of oil and commodities, the worst drought for 80 years, government economic policies and corruption in Brazil’s energy giant Petrobras, have all contributed to a big drop in popularity.”
Petrobras is a state-controlled, publicly traded company holding a quasi-monopoly over Brazilian oil and gas production. Its legal trouble began in 2014, when Brazil’s Public Prosecutor’s Office launched investigations into whether executives from the oil giant and some of Brazil’s largest construction firms had colluded to inflate contract prices. Some of the money was siphoned to lawmakers and other officials to fund political campaigns. Many executives struck plea bargains with investigators and implicated political figures.
Prosecutors claimed that the company had bribed PT politicians to the tune of almost $1 billion. President Rousseff was not accused of any wrongdoing, but the fact that she had chaired Petrobras’ board from 2003-2010, as President Lula’s energy minister, was damaging enough in the public’s view. Calls for her impeachment intensified.
Arrests and Indictments
By the fall of that year, Brazil was facing its worst crisis in 70 years. “Its economy is mired deep in a recession that will last at least until 2017. The political scene is in disarray, with a president who was reelected just a year ago now chastened by approval ratings in the single digits,” wrote Mr. da Silva in his October 2, 2015 report.
The biggest drag on the government was “Operation Car Wash,” a joint endeavor by the Public Prosecutor’s Office and the Federal Police to uncover corrupt practices between government officials and large private corporations. “The Petrobras portion of the investigation has already resulted in the arrest and indictment of about 120 people,” reported Mr. da Silva. He continued: “Among them are some of the wealthiest individuals in the country, including owners and executives of the country’s most important construction companies … as well as key political leaders: members of congress, former cabinet members and former state governors. Currently, the speaker of the Chamber of Deputies (Brazil’s lower house of congress), the president of the Senate and two members of Ms. Rousseff’s ‘kitchen cabinet’ are formally under investigation.”
No formal accusations were made against President Rousseff, but requests for her impeachment were sent to the Chamber of Deputies. The president also faced a probe by a federal audits court over whether her administration’s “creative accounting” methods broke the law.
Vice President Temer, head of the biggest party in the ruling coalition, the Brazilian Democratic Movement Party (PMDB), stood to gain the m