Brazil’s ponderous justice system poses little danger to Temer’s public spending reform
Talk to any politician in Brasília these days and he or she will inevitably mention the “total confusion” reigning in Congress from investigations into a scandal at Petrobras, Brazil’s stateowned oil group.
The subject of the probe has expanded from kickbacks at the oil company into a broad police inquiry into entrenched corruption across Latin America’s biggest country. It received a boost this month when Rodrigo Janot, chief public prosecutor, sought Supreme Court permission to investigate 83 politicians.
However, markets barely responded, despite Congress reacting with alarm to the “Janot list”. It has not been made public but local media report that it contains five ministers of the pro-business government of President Michel Temer and many members of his coalition.
The reason investors remained sanguine was that they have seen this film before, analysts say. A similar list produced two years ago requesting permission to investigate 50 politicians has resulted in cases against only four of them with no convictions, according to newspaper Folha deS Paulo.
“The first big question is how the Supreme Court will react in terms of the speed of processing these cases,” said Thomaz Favaro, a political analyst at Control Risks, a risk consultancy, of the new list .“The precedents are not good .”
Any threat to the Temer government and its allies in Congress would normally worry investors, who are banking on its proposed reforms to bring Brazil’s ballooning budget deficit back under control and end a recession in the continent’s most important economy.
Brought to power by the impeachment of his leftwing predecessor, Dilma Rousseff, last August, Mr Temer’s “interim” government has already passed a reform to limit real budget spending increases to zero for up to 20 years. It is seeking to deliver a pension reform that economists believe is essential if public expenditure is to remain within the new ceiling.
Markets have cheered the reforms. Over the past 12 months, the stock market has risen 26 per cent and Brazil’s currency, the real, has gained about 17 per cent. “Slowly but steadily the Brazilian economy is moving towards a better macro equilibrium,” said Goldman Sachs economist Alberto Ramos in a research note.
The ability of the Temer government to maintain this momentum, however, depends in part on the Petrobras investigation, known as Operation Car Wash, analysts say.
The new list of 83 politicians pr offered for investigation this month is based on plea bargains from 77 executives of Odebrecht, Brazil’ s biggest construction company. Responsible for many of Petrobras’s big projects, and for other state-led programmes such as building stadiums for the 2014 soccer World Cup and the 2016 Rio de Janeiro Olympics, Odebrecht was at the centre of what the US Department of Justice last year described as “an unparalleled bribery and bid-rigging scheme”.
In spite of the potentially damaging evidence contained in the Odebrecht testimonies, analysts believe it could take years before those politicians implicated could face charges, much less be convicted. In Brazil, only the Supreme Court can try sitting congressmen and its permission is required before they can be investigated.
Analysts point to the precedent of the mensalão, a vote-buying scandal that involved the most senior members of leftwing former president Luiz Inácio Lula da Silva’s ruling clique. This took eight years to reach a conclusion. Then there is the 2015 list of 50, which has since been largely forgotten.
The reason for the slowness is that Brazil’ s Supreme Court was conceived in the model of its US counterpart as an institution that would resolve the highest constitutional issues. In practice, however, it has become the court of appeal for a staggering variety of cases, drastically overburdening its 11 judges, analysts say. Whereas the US Supreme Court might deal with 100 cases a year, Brazil’ s deals with 100,000.
“This was to be a Supreme Court with 11 judges to discuss difficult constitutional questions and not one that would have to deal with proof and all the elements that a criminal court requires and which the lower courts are better at dealing with,” said Michael Freitas Mohallem, a professor at FGV Direito Rio, a law school in Rio de Janeiro.
With the next election due in 2018, and many of those implicated in the corruption investigations already nearing the end of their careers, they might already be out of office or even dead by the time their cases reach trial.
Meanwhile Mr Temer’s most important reforms, such as overhauling the pension system, are expected to pass Congress by this year’ s third quarter.
Under pressure: Michel Temer speaks during an American Chamber of Commerce meeting in São Paulo yesterday