Brazil Adopts Publicly Funded Elections to Combat Corruption
Tired of election scandals and the same criminal elite staying in power, Brazil made a historic decision last month to set up its own election campaign fund.
On October 4, 2017, Brazil’s lower house of Congress put its stamp of approval on a bill that recently passed the country’s Senate. That bill authorizes setting aside 1.7 billion reals ($542 million U.S.) as a taxpayerfinanced campaign fund. It will be used to help pay campaign expenses for the 2018 general election.
The reason the funds are so badly needed stems from what started out as a corruption investigation into a money-laundering operation at a car wash. That investigation, headed up by lead prosecutor Deltan Dallagnol, bears the name Lava Jato (Car Wash) because of its beginnings. Since Dallagnol’s work began in earnest on the case, the originally-narrowlyfocused investigation has ended up with more than 70 political leaders, senior corporate officials and lobbyists being charged with bribery, tax evasion or misdirection of public funds. There are even allegations that Brazilian President Dilma Rousseff accepted a $5 million bribe from Petrobras, a stateowned oil company.
Construction companies, Swiss bank companies, a Dutch offshore oil platform construction company and even contractors involved in the Brazil Olympics have all been ransacked as the justice department looks for where the corruption may lie. Those charged in the case include
• André Esteves, former head of BTG Pactual, an investment bank
• Marcelo Odebrecht, CEO of construction and real estate giant Odebrecht
• Otávio Marques de Azevedo, CEO of Andrade Gutierrez, a major Brazilian conglomerate focusing on construction and engineering
• Renan Calheiros, head of the Brazilian Senate
• João Vaccari Neto, treasurer of the ruling Workers’ Party
In announcing the arrests of Odebrecht and Marques de Azevedo, federal prosecutor Carlos Fernando dos Santos Lima said, “We have money-laundering professionals in Brazil, and we have no doubt that Odebrecht and Andrade Gutierrez headed the cartel scheme inside Petrobras.” He went on to say, more generally, “I do not see how the companies can claim innocence given how much evidence we have.”
The specific scheme involved included an estimated $800 million in bribes and other campaign funds. Odebrecht and Marques de Azevedo laundered the money involved through a series of secret bank accounts in Switzerland, Monaco and Panama. They then used that money to pay bribes to Petrobras’ senior executives as a quid pro quo for inflated contracts and to get funds to the ruling Workers’ Party.
In the face of these scandals, the federal government has banned all corporate donations from future elections. With the investigation digging very deeply into banking and other money-transfer activities, it is believed that under-the-table monies going to support political campaigns will also be tough for any group to manage. The impact of this has been to prevent almost all free money from the country from being used in political campaigns.
The new Brazilian campaign finance law was itself funded by another sort of corruption: pork barrel appropriations that the country could far more easily live without than a fair set of elections. The 1.7 billion reals allocated by the law will be used to buy television and radio advertising and campaign time for parties. It will also only be allocated to parties with a member count of 35 or higher, to eliminate very small groups from siphoning off funds.
A Lesson from California
If Brazil wanted to take this a step further, one idea might be to copy the political campaign transparency bill recently passed in California. Last month, Governor Jerry Brown signed off on Assembly Bill 249, which requires clear disclosure of political contributions in print, television and online advertisements.
That bill was driven by one of the unfortunate consequences of the U.S. Supreme Court Case Citizens United vs. FEC. The ruling on that case said that corporations could make independent contributions to political campaigns because, as some have interpreted the decision, “corporations are people too.” It also allowed for the creation of super PACS (political action committees), which have unlimited spending limits for advertisements. That court decision is credited as being one of the major reasons campaign spending in the United States increased by more than $1 billion between 2012 and 2016.
According to the new California law, not only must there be full disclosure as to where the money for a political advertisement came from but it will no longer be possible for major contributors to hide behind some unknown committee name. For television ads, the images must include a display of the names of the top contributors who paid for them. For radio ads, a clear spoken voice must cover the same content. In digital ads, the text “Who funded this ad?” must be present, hyperlinked to a list of the specific donors for the campaigns.
The New Constitutional Amendment Regulating Ruling Coalitions in Brazil
Besides the arrangement for public money, a related challenge for Brazil was the need for whoever had won elections in the past to pull together a reasonable ruling coalition to go forward. Those coalitions were considered corrupt and unstable as highly-contradictory self-interests ruled the many players in the eventual winning combinations.
As a result of this, the Brazilians also passed an unusual constitutional amendment on October 4, the day the election finance law was passed. It now requires that the eventual ruling coalitions must be put together with parties with similar platforms. It will go into effect as of the 2022 election.
These two new pieces of legislation may help turn Brazil around in the long run. In the near term, the bribery and money-laundering scandals that are now heading toward trial may show – by the convictions they eventually produce – that the once criminal organization known as the Brazilian government may one day actually serve the needs of its people instead of the criminal elite.
If the reforms are successful, they may encourage other countries to establish public campaign financing to keep the wealthy from buying elections.