Graft scandal a blow to country’s reputation
Brazil’s 7- 1 loss to Germany in the soccer World Cup semifinal last year sent this famously happy country into a tailspin of depression.
Today, Brazilians are being whipsawed by another national trauma that has far graver consequences for their nation and its reputation as an emerging global economic power. Latin America’s largest economy has been piling up unenviable world records for political and corporate graft.
Auditors say a scam at Petroleo Brasileiro SA, the once hugely admired state- owned oil company, was so big they still cannot figure out how much money has been pilfered.
But there is general agreement that $ 1 billion US is a good starting figure for the brazen slow- motion heist at Petrobras, dubbed Operacao Lava- Jato ( Operation Carwash) because it “scrubbed” the stolen money.
The government of President Dilma Rousseff, who was the company’s chairwoman from 2003 to 2010, when much of the suspected illegal activities took place, may not survive. She has not been directly implicated in the colossal scandal — at least, not yet.
Already under investigation are Petrobras executives, some of the construction firms the company did business with — and 32 members of Rousseff’s governing coalition. They are suspected of bribery, paying kickbacks, money laundering and illegal funding of political campaigns. Among them: the treasurer of her ruling Workers Party and the speakers of the upper and lower houses. Many are already in jail or expected to end up in the dock soon.
Only two years ago, Rousseff had a sky- high public approval rating of 79 per cent. Today, only 13 per cent of voters reckon she is doing a good job. More than one million people took to the streets a few days ago to call for her impeachment only months after voting her in for a second term.
Paolo Roberto Costa, the first senior Petrobras executive to confess, acknowledged three per cent of the money its refining arm spent on contracts went to executives or politicians as kickbacks. Now in jail as part of a plea bargain, he has been telling prosecutors which executives and politicians received what.
The oil company’s fall from grace is palpable outside its gloomy, fortress- like headquarters in Rio’s business district, where anti- Petrobras and antigovernment graffiti are scrawled on the sidewalk.
“The Petrobras mess was not built in a day. It was 50 years in the making and something should have been done about it long ago,” said a middle- aged man with company ID dangling around his neck.
“It is hard to trace all the thefts or know how much was stolen because there are so many subsidiaries. What I know myself is that a lot of executives own expensive properties overseas.”
“No matter how much bad comes out about our company’s leadership, Brazilians still know that this is a good company with lots of good people,” added the man, who said he had worked at Petrobras as an engineer for 18 years,
Flavio Medelush, whose parents emigrated to Brazil from eastern Europe, said the scandal cut more deeply than outsiders could understand.
“This is far bigger than our soccer team doing badly,” he said. “Everyone talks of this constantly because it involves so many politicians who either closed their eyes to what was going on or profited from it.
“Petrobras was supposed to be our future. It has turned into a symbol of how disastrously corrupt our country is.”
The 21st century was not supposed to have unfolded this way. Petrobras, which was valued at $ 250 billion five years ago, was the Brazilian economy’s crown jewel. The company, which has had great success tapping huge oil and gas reserves in the Atlantic Ocean, was expected to lead Brazil’s rush to become one of the world’s most important economies.
Today, with energy prices in free fall, it is hard to guess Petrobras’s worth. Its stock has lost more than 60 per cent since last fall, rating agencies have downgraded its bonds to junk and it has about $ 170 billion in debt. Given such dire figures, it is not surprising that the Brazilian real lost seven per cent of its value this month.
Brazil is not the only member of the BRIC group ( Brazil, Russia, India and China) that has stumbled badly recently. Russia’s heavily oil- dependent economy is in difficulty and growth in China has dropped sharply. Only India continues to meet expectations.
What they all share is political and corporate malfeasance on a grand scale. Chinese President Xi Jinping, has made stopping corruption a national crusade.
This week, Rousseff, who insists she knew nothing about the massive, dishonest schemes which took place on her watch, announced an anti- corruption drive. Her government tabled legislation that would make it illegal for political parties to finance themselves through slush funds and would empower courts to seize the assets of those convicted of corruption, including politicians who live well beyond their declared means.
It is unlikely this will save her reputation, but it might be a good starting point for cleaning up Brazil’s reputation as a dirty place to do business.