In the film Jerry McGuire, Tom Cruise exhorts, “Show me the money.” In Brazil, a similar cry is fanning out across the country – where are the billions of dollars lost in the Lava Jato scandal?
Today, just ten months after impeaching and removing from office its president, Dilma Rousseff, the country faces another possible impeachment proceeding of Rousseff’s vice president, Michel Temer, who is the interim president.
Brazil’s political parties, nearly 30 of them represented in federal congress in Brasília, can only function by forming coalitions. President Temer’s party (PMDB) and Rousseff’s party (PT) once formed a powerful coalition that resulted in Temer running on the same ticket with Rousseff in 2014, when she was elected for her second term.
Rousseff was elected as Brazil’s first female president, the hand-picked successor of former president Lula, the co-founder of PT, and one of Brazil’s most charismatic presidents. However, now Temer and PT are on opposing sides.
As the bond between Temer and Lula has broken, their rancorous split has succeeded in splitting the country. Not a day goes by without protestors carrying signs declaring, “Temer Out” in support of his impeachment, or “Lula in Prison” to encourage federal prosecutor Sérgio Moro to pursue Lula on no less than five separate criminal indictments.
Ironically, Temer is indebted to PT, as the removal of Rousseff is the sole reason Temer became president last year. However, Temer is now fighting for his political life by distancing himself from PT and the Lava Jato investigation, which has already ensnared hundreds of businessmen and politicians in its sticky web of bribes, kickbacks, payoffs, hush money, and offshore money laundering.
The scale of the Lava Jato scandal is so grand it’s impossible to estimate its cost. As an example of the amount of money involved, one currently jailed businessman has agreed to return US$ 100 million he received in illegal money. Also, the courts recently fined a large corporation for its involvement to the tune of US$ 3.2 billion.
While Lula and his lawyers battle Sérgio Moro in Curitiba, trying desperately to keep Lula out of jail long enough to run for president again in 2018, Temer fights to avoid impeachment. For the Brazilian populace, these are confusing and terrifying times, to say the least. Amid record unemployment levels and a two-year recession, it takes more than a scorecard to tell the good guys from the bad guys.
Many Brazilians are demanding Temer’s impeachment, while others support his continuing in office. Some are expecting Lula’s imprisonment, while others expect Lula to return as Brazil’s next president.
Lula and PT supporters believe the gains recorded by the poor and working class during the 14 years of the PT administration outweigh whatever financial skullduggery PT is guilty of, especially as it’s becoming clearer through the Lava Jato investigations that Lula was running the country in the manner of ‘business as usual.’
Thanks to the creation in 2012 of the judicial weapon of plea bargaining (delação premiada), politicians and wealthy businessmen, such as 77 indicted Odebrecht executives, are being provided the opportunity to tell the truth finally about the extent of corruption in Brazil, which covers every aspect of the country’s economy from meatpacking to infrastructure, including World Cup and Olympic stadiums.
Only recently has Brazil’s legal system had sufficient power to place politicians and businessmen in jail like Eduardo Cunha, former Speaker of the House or billionaire Marcelo Odebrecht, former CEO of the company that bears his name and is the largest construction company in Latin America. Mr. Odebrecht has been in prison for over a year in Curitiba under the watchful eye of Sérgio Moro.
Meanwhile, with Congress accepting a request by the Brazilian Bar Association for interim president Temer’s impeachment, Brazil faces the prospect of impeaching two presidents during the same term. This political upheaval has not only divided the country, but it has wreaked havoc on the financial markets.
Immediately following a Temer debacle in May resulting from a secretly taped conversation with an indicted Joesley Batista, an agribusiness mogul, trading on the São Paulo stock market was halted from sliding further by the automatic electronic trigger.
Brazil’s currency, the real, fell sharply against the dollar after Batista’s revelations. A few days later, the Banco Central (equivalent to the US Federal Reserve) stepped in and lowered the prime lending rate (Selic) by a full percentage point, which stabilized the real, at least for now.
As if that weren’t enough, the stock market in Brazil had been solid for the last six months, thanks primarily to financial reforms instigated by Temer and his allies. This explains why many Brazilians, particularly in large urban centers like São Paulo, do not want to see Temer impeached – it’s bad for business.
While unemployment remains dangerously high (13.7%), inflation has dropped to a 10-year low, and until the threat of Temer’s impeachment, the real had been holding steady on world currency markets.
On the other side of the political fence are those supporters of PT who would like nothing better than to see Temer impeached. They blame him and his supporters for Rousseff’s impeachment and believe Lula should be re-elected in 2018.
(If Lula remains free from jail, he would be entitled by law to run again next year, even after already serving two terms as president.) In one famous incident, the director and actors of a Brazilian film, including Sônia Braga, showed their support for PT on the red carpet entrance to the Cannes Film Festival in May 2016.
As strong as Lula’s support is among the rural population, the working class, and the Unions, an equal number of Brazilians would like to see Lula in jail. Besides the obvious dirty questions surrounding the relationship between Lula and Odebrecht/Petrobras/BNDES, etc., many Brazilians believe his leftist policies overly supported social welfare programs, thereby bankrupting the government when economic growth began to slow in Lula’s second term and finally crashed with a massive recession under Rousseff.
Although trained as an economist, Dilma Rousseff lacked Lula’s leadership skills, owing to the fact that she had never held elected office.
Then there are still others who support the social welfare programs of Lula’s PT party, but believe the corruption scandals uncovered by Lava Jato are responsible for bankrupting the country. They would like to see new elections this year without Lula or Temer involved.
If you’re still with me, here’s more of this labyrinth: Lava Jato is far from over. There are still those 77 Odebrecht executives I mentioned earlier who are waiting to finalize their plea arrangement, making it the largest plea bargain in world history.
Also, let’s not forget Eduardo Cunha, currently jailed, who in his powerful role as Speaker of the House was in charge of initiating the impeachment proceedings against Dilma Rousseff.
According to the recently surfaced secret tape of Temer, which sparked the public outcry for his impeachment two weeks ago, Cunha has apparently been receiving a great deal of “hush money” while in prison.
Joesley Batista, CEO of JBS, made the tape of Temer as part of his plea bargain. With Temer in the crosshairs, it’s likely those payments to Cunha in jail have stopped, which means Cunha could join his colleagues in search of the perfect plea bargain and begin “singing like a canary.”
Similarly, we’ll soon be hearing more gory bribery details from billionaire Marcelo Odebrecht in his plea bargain with Sérgio Moro. (Moro has thus far found a way to keep Marcelo in prison for over a year, but Marcelo is tired of beans and rice in Curitiba’s prison and ready to sing.)
While the country and the rest of the world is already overwhelmed by the scope of Lava Jato, this may only be the tip of the iceberg, although just the tip appears to be sufficient to remove two presidents in the same term.
What is certainly most devastating about Lava Jato is the unavoidable realization that corrupt ties between powerful politicians and large corporations, accompanied by impunity and nepotism, are not new to Brazil. The entrenched system of oligarchy has been in place in Latin America since colonial days and slavery, thanks to the Spanish and Portuguese monarchies.
Needless to say, it’s more than a challenge searching for the labyrinth’s exit. Brazilians, particularly young people, have been mobilizing on the streets thanks to social media. They have provided a powerful incentive to politicians to check their ways, and strong federal prosecutors are providing additional incentive with the previously unknown prison experience.
The central enigma that lies unspoken in the thousands of news stories about Lava Jato, the largest political scandal in Brazil’s history, is this: Why is Brazil’s political system so corrupt? If there’s one theme all Brazilians can agree on, a rallying point to unite left and right, rich and poor, it’s anti-corruption.
Together, honest judges and mobilized youth have the power to change history in Brazil. However, there are no easy fixes. Social movements have a history of morphing and sometimes producing the opposite results than originally intended.
For example, a populist movement focused on anti-corruption could produce a strong government with fewer democratic values and less freedom – in other words, a giant swing to the right from the days of the leftist PT.
This possibility is evident on the street from protestors who support a return to a military government or a far-right presidential candidate, such as Congressman Jair Bolsonaro.
Additionally, if Temer leaves office this year, since there is no sitting vice president, the Brazilian Constitution states Congress chooses his replacement.
That opens a Pandora’s box of political maneuvering: Is there an honest presidential candidate with the power to form a productive coalition in Congress among his/her dishonest peers?
Equally vexing, can Brazil’s economy survive all the social/political upheaval? (The current situation is so grave that Brazilians living in New York were seen protesting in Union Square.)
As of this week, (who knows what next week will bring?) here’s the layout of the labyrinth:
It’s not likely Temer will be impeached because the process would need to be officially initiated by the current Speaker of the House, Rodrigo Maia, who is a trusted friend of Temer’s.
If Temer is removed from office, it is more likely to occur through the Superior Electoral Court, which on June 6 began deliberating the case of illegal campaign financing in the 2014 election that brought Dilma Rousseff and Temer to lead the country.
If Temer is removed, most Brazilians are opposed to the idea of Congress selecting the next president and would prefer to see direct elections held. However, that would require a constitutional amendment, which would need a 3/5 vote of approval in both the Senate and Lower House.
Both pro- and anti-PT forces are pushing for open elections before those scheduled in October 2018. Pro-PT supporters are clamoring for an election now because Lula leads all other potential candidates, according to a recent DataFolha poll.
However, if an election is delayed for a few months, there may be enough evidence of criminal intent connected to Lula to suspend him from running for office.
(This comes in the form of a Court mandate, which has been levied against one or two other convicted politicians whereby a politician avoids jail by accepting a disqualification from holding elected office for eight years.)
All five of Brazil’s living former presidents are under investigation thanks to Lava Jato. Additionally, 44 of Brazil’s 88 senators, plus 155 federal deputados (representatives) are under investigation. One third of President Temer’s Cabinet ministers are subjects of investigation or already indicted.
In the most recently finalized plea bargain with JBS, Brazil’s largest meatpacking company, executives from JBS stated they made illegal payments to 1,829 politicians from 28 political parties, of whom 179 became federal deputados, 28 became senators, and 16 became governors.
There is no excuse for uninformed voters to support corruption and re-elect indicted politicians. In a recent study, the literacy rate in Brazil has climbed above 90 percent. Additionally, seventeen percent of Brazilians have college degrees, and the most populated state, São Paulo, has 500 universities.
What Lies Ahead?
Resignation: Temer feels too much pressure from within his own party and recognizes he lacks the power to push through the economic reform policies he’s been championing, such as a major overhaul of the pension system, and he chooses to resign. This scenario is the least likely.
Impeachment: Rodrigo Maia must propose it in the Lower House and the process, whether it succeeds or fails to remove Temer, would take months. This is an unlikely scenario, also.
Removal: The Superior Electoral Court annuls the 2014 election that made Temer vice-president. Illegal campaign contributions are traced back through Lava Jato and the Court strips Temer of his elective mandate. This is a more likely scenario than Temer’s impeachment or resignation.
However, there is the possibility that the Court will decide it lacks sufficient evidence to prove Temer knew about the illegal contributions and instead place the blame on PT. The Court could also rule Temer knew about the illegal contributions but this is not grounds for removing him from office.
If ruled against, Temer can also file an appeal. In other words, the Court may quietly recognize, for one reason or another, that there are advantages to keeping Temer in office.
Open Elections: Many Brazilians support this resolution to the current situation, whether they are left, right, or center. However, a direct election would require a constitutional amendment and thus a problematic vote by all of Congress, which has no motivation to follow this course and surrender the opportunity to choose the president.
Open elections are only likely if Temer is removed and there are massive demonstrations this year that mobilize millions into the streets in support of an election.
Social Unrest: Should the Electoral Court decide not to remove Temer, believing Temer to be Brazil’s best bet for economic recovery, social protests could follow.
(Another general strike is already being planned for June 30. Organizers of the general strikes are in favor of Temer’s departure.) Should mass demonstrations turn violent, as happened in May when the military was called out in Brasília to support police and security forces, the decision by the Electoral Court to keep Temer in office would backfire.
The images of large-scale riots in the country’s capital spread across the pages of the international media would have a devastating effect on Brazil’s economic recovery. Economic stability and lowering unemployment are the country’s best bet to avoiding social unrest and returning to some level of normalcy.
Brazilians can only shake their heads in disgust and wonder what happened to the billions of dollars from the Lava Jato scandal. “Show me the money,” and then give it back to the Brazilian people, who have suffered under the crushing weight of endemic corruption since the days of colonialism.
B. Michael Rubin is an American living in Curitiba.
This article appeared originally in Curitiba in English – http://curitibainenglish.com.br