Many months ago I wrote that the situation in Brazil was going to get much worse before it would get any better.
And by the looks of it we are not even half way into this drama…
Corruption had reached almost all levels of society.
And people got fed up with it, and finally decided to do something about it.
The impression I have, and these late events seem to confirm it, is that the Prosecutors are after the former President Mr Luiz Inácio Lula da Silva.
And these arrests are all around him.
Now, if Mr Lula da Silva is arrested, you can safely bet that the Government falls within the week, and that President Dilma Rousseff either resigns or is impeached.
And this seems to be the immediate objective of the persons that are behind the investigations.
Francisco (Abouaf) de Curiel Marques Pereira
(FT) Authorities in Brazil opened a new frontier in the investigation into a vast bribes-for-contracts scheme at Petrobras this week when they arrested one of the country’s richest men at his Rio de Janeiro home after a raid at the investment bank he founded.
When federal police entered the São Paulo headquarters of billionaire financier André Esteves seeking documents relating to corruption at the state-owned oil company, they were surprised to learn he did not have his own private office: in keeping with the meritocratic culture of BTG Pactual, a darling of foreign investors, Mr Esteves sat at an ordinary desk in the middle of the trading floor.
“They insisted that he must have his own room and kept looking for it without any joy,” said a person who witnessed the scene.
Alongside Mr Esteves, prosecutors also arrested a sitting member of Brazil’s powerful senate — Delcídio Amaral, the leader in the upper house of the ruling Workers’ Party, or PT— for the first time in Brazil’s democratic history
The detention of the pair, who both deny any wrongdoing, brings the investigation for the first time directly into the world of Brazilian high finance and the upper echelons of the country’s political scene.
Until now, the Petrobras scandal has been mostly confined to the murky underworld of the oil and gas and construction industries, where former executives are alleged to have conspired with construction bosses, black market money dealers and politicians to extract an estimated R$6bn through fraudulent contracts.
The latest arrests could not have come at a worst time for left-leaning president Dilma Rousseff, who is struggling with twin economic and political crises as Latin America’s biggest country slips into what promises to be its worst recession since the 1930s.
For the president, who is also fighting an impeachment movement against her in congress, the arrests are a reminder that after 20 months the politically explosive investigation, which has already implicated nearly 50 mostly ruling coalition politicians, is far from over.
Indeed, if the group of elite young prosecutors, police and judges behind the probe into the scandal known in Portuguese as Lava Jato, or Car Wash, have their way, it may be only just beginning.
“We are trying to change the system here in Brazil so that the rule will not be impunity but will be a functional system that produces punishment when it is due,” said Deltan Dallagnol, one of the prosecutors leading the investigation. “We could have Lava Jatos all over the country.”
Those arrested include corporate grandees such as Marcelo Odebrecht, head of Brazil’s biggest construction group of the same name, in jail since June. Others include the treasurer of Ms Rousseff`s PT, João Vaccari Neto, and the former chief of staff of ex-president Luiz Inácio Lula da Silva, José Dirceu.
Aside from Mr Dallagnol and the team of prosecutors based in the southern city of Curitiba, the investigations are being led by a group of federal police, including Márcio Adriano Anselmo, the officer who first uncovered the corruption at Petrobras, as well as tax department investigators and a federal court judge, Sérgio Moro.
“There are groups inside the federal police and the MPF [federal prosecutors’ office] that are behaving in a very consistent way to change Brazil,” said Oscar Vilhena Vieira, dean of FGV Direito SP, a law school.
In September and October, analysts speculated that the Supreme Court was moving to diminish the influence of Curitiba over the investigation by redistributing those parts of the investigation not directly related to Petrobras to other cities, such as Rio, Brasília and São Paulo. The fear was these jurisdictions would be less rigorous in prosecuting wrongdoing.
Judge Moro responded by intensifying action on Petrobras, leading to this week’s arrests not only of Mr Esteves and Mr Amaral, but also of José Carlos Bumlai, a cattle rancher said to be close to Mr Lula da Silva.
“After the Supreme Court in October ‘decentralised’ the Lava Jato probe by delimiting the scope of investigations within it to only Petrobras, federal district court judge Sérgio Moro refocused investigations on the company,” said Eurasia Group, in a research note.
The concern for investors in Brazil is that the probe is moving ever closer to the core of the PT, threatening its main powerbroker, Mr Lula da Silva, and by default, Ms Rousseff, analysts say.
Senator Amaral was also close to the former president, Eurasia Group said. The more Mr Lula da Silva felt threatened, the more he would rally the PT’s far left. This in turn would jeopardise efforts by Ms Rousseff to implement a fiscal austerity programme which, while unpopular with the left, is widely seen as required to stem a widening budget deficit and stabilise Brazil`s economy.
“It’s a very bad scenario,” said Silvio Campos Neto, an economist at Tendências, a consultancy. He said his firm was predicting a contraction in GDP growth of 3.2 per cent this year and 2 per cent in 2016.
“Judging by the magnitude of the [Petrobras] process and the scope of the repercussions, it is expected to run throughout 2016,” he said, allotting a 30 per cent chance to Ms Rousseff being impeached.
If Mr Dallagnol has his way, the ramifications of the investigation will last much longer than just a year. The prosecutor said he and his peers are planning to petition congress to make important changes in laws that will make it harder for corrupt white-collar workers to get away with their crimes.
These include closing a loophole that allows white collar criminals to keep appealing in cases until they expire under Brazil`s statute of limitations, as well as increasing penalties.
Said Mr Dallagnol: “A person who commits corruption, he studies the cost and the benefits and here in Brazil you have a lot of benefits and you have no costs.”
Petrobras: Timeline of a scandal
Petrobras makes its first big “pre-salt” discovery off the coast of Rio de Janeiro, raising hopes Brazil will become an oil superpower
Petrobras announces plan to raise capital as part of a deal that increases the government’s stake in the company
Petrobras raises $70bn in what was the world’s largest share offering
Ms Rousseff, who has served as Petrobras chairman since 2003, becomes Brazilian president
Petrobras posts its first quarterly loss in 13 years, partly as a result of the government’s refusal to allow it to raise fuel prices in line with global markets
Petrobras reports gross debts of more than $135bn, making it the world’s most indebted oil producer
Former Petrobras director Paulo Roberto Costa is arrested in connection with an investigation into alleged corruption, which allegedly took place from 2004 to 2012
Brazil’s Supreme Court authorises a request for a congressional inquiry into alleged corruption at Petrobras. Ms Rousseff says Petrobras has become the target of a malicious political campaign
After striking a plea bargain with the authorities, Mr Costa names parliamentarians and other officials as being involved in the alleged corruption
Petrobras’s external auditor refuses to sign off on the quarterly results. Ms Rousseff wins re-election as president
Police in six states raid Petrobras offices and those of some contractors
Petrobas chief executive Maria das Graças Foster says she had offered to resign three times but Ms Rousseff had told her to stay on
Petrobras admits it is unable to calculate how much was stolen from it in the corruption scandal when it publishes its unaudited financial results. Some analysts had expected writedowns of up to $20bn
Ms Graças Foster and five other Petrobras executives resign. Multinationals are accused of participating in Petrobras corruption
Anti-government protests hit Brazil
Petrobras estimates its losses from the scandal at R$6bn, releases its 2014 financial results, averting technical defaul. International investors seek damages against the company
Top construction bosses, including Marcelo Odebrecht, arrested
Ex-president Luiz Inácio Lula da Silva faces criminal inquiry over business dealings overseas
Former aide to ex-president Luiz Inácio Lula da Silva, José Dirceu, arrested. President Dilma Rousseff faces growing impeachment calls
September 2015 November 2015
André Esteves, CEO of BTG Pactual, arrested. Delcídio Amaral, leader in the senate of the Workers` Party,PT, becomes first sitting senator arrested in Brazilian democratic history.