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POLITICS: Politics as usual? Corruption rears its ugly head again

A proposal to reform and clean-up campaign financing so as to make it exclusively public, rather than the current mixed public-private system, has been touted for years in Brazil. Like other political reform proposals, the political parties in congress have shied away from it – until now.

One concrete result of June’s national street protests has been the rapid roll-out of a new anti-bribery law, due to take effect in six months’ time. For the first time, companies will be liable for bribes paid by their employees. Companies found guilty of bribery will face fines of up to 20% of their gross annual revenue for the previous year or a maximum of R$60m (US$27.3m). They could also be suspended from operating, have assets confiscated and even face possible dissolution.

The law covers both bribery of foreign officials by Brazilian companies and bribery of local officials by any company. Brazilian convictions for bribery have increased 30% since 2008, and federal police conducted 289 operations last year, with 1,600 arrests, including 100 public officials. The legislation was required by the Organization for Economic Cooperation and Development (OECD). While not a member, Brazil is a party to the OECD's Anti-Bribery Convention.

The new law comes as fresh corruption scandals are emerging that could have a potent impact on the 2014 election. The first involves the ruling coalition led by President Dilma Rousseff. On 11 August, Federal Deputy Maurício Quintella (Partido da República) said he would ask the federal supreme court (STF) to request the establishment of parliamentary commission of enquiry (Comissão Parlamentar de Inquérito [CPI]) into the state oil giant Petrobras after the local newsmagazine Época alleged that the company funnelled kickbacks to officials from political parties, including the powerful Partido do Movimento Democrático Brasileiro (PMDB), Brazil’s largest party and the senior partner in the coalition.

João Augusto Rezende Henriques, formerly of BR Distribuidora, a Petrobras subsidiary, told Época that he collected a "fee" from companies involved in Petrobras's foreign contracts, of which 60%-70% was passed onto the PMDB. Augusto pointed a finger at the current agriculture minister, Antônio Andrade, and the president of the lower house finance commission, João Magalhães, both of the PMDB and both hailing from the wealthy agricultural state of Minas Gerais, where the alleged scheme supposedly originated.

Equally controversially, Época also alleged that João Vaccari Neto, the treasurer for the ruling Partido dos Trabalhadores (PT), received the equivalent of US$8.0m in kickbacks from the construction giant Odebrecht as part of a Petrobras international contract during Rousseff's 2010 presidential campaign. Augusto alleged that he and Vaccari arranged for the money to be transferred to the Rousseff campaign. Vaccari immediately responded he was not in charge of the Rousseff campaign team’s finances in 2010 and stressed that all donations to the campaign were lawful. But if this case gets off the ground, it could have a toxic effect, not only on the Rousseff government and its partners but also on the big state champions reportedly involved in the alleged scandal.

PSDB also in hot water

The PMDB is not the only party in hot water over corruption allegations. The main opposition Partido da Social Democracia Brasileira (PSDB) is struggling to deal with the so-called ‘Siemens case’ in São Paulo, a state it has governed since 1995. The civic movement for free public transport, Movimento Passe Livre (MPL), which began the June protests, was set to take to the streets of São Paulo again in mid-August in protest at the Siemens case, an alleged rail price-fixing cartel in São Paulo and Brasília.

According to the daily O Globo and other local media, the German company voluntarily provided details of the price-fixing cartel in a deal with the Brazilian authorities to avoid criminal proceedings. Siemens, along with Spain’s Construcciones y Auxiliar de Ferrocarriles (CAF), Japan’s Mitsui, Canada’s Bombardier and Alstom of France were all allegedly involved in rigging prices for the construction and maintenance of metro trains in São Paulo and Brasília. The daily O Estado de São Paulo has also alleged that Alstom paid millions of dollars in bribes to secure lucrative contracts in São Paulo state in 1998.

São Paulo‘s incumbent governor Geraldo Alckmin and his predecessor José Serra, both of the PSDB, have been linked to the Siemens case but have denied any wrongdoing. Alckmin is seeking re-election in 2014, however he is increasingly unpopular. In 2012, he suffered negative political fallout after a spree of extreme violence between criminal gangs and police in the city, as well as a major row about health funding, followed this year by the major street protests across the country’s most populous state; and now these latest corruption allegations.

Rumbling on

Protests have continued in the main cities, albeit on a much smaller scale. Medical professionals have been protesting against the government’s proposed Medical Act, which would regulate doctors’ diagnoses and the prescribing of drugs and treatments; as well as the Mais Médicos program, which would bring in doctors from overseas (including potentially Cuba and Spain) to work in Brazil’s remote, and under-resourced, interior. Activists in São Paulo and Rio de Janeiro and have focused their discontent on the local state governors, Alckmin and Sérgio Cabral (of the PMDB). A late July Ibope opinion poll put the number of those who assessed Cabral’s performance as “good or excellent” at just 12%; for Alckmin it was 26%.

Cabral, in particular, has borne the brunt of Cariocas’ ire since being accused of using state funds to fly his family and his dog to his beach house during June’s demonstrations. Protesters have been camped outside his house in the upmarket district of Leblon since the end of July, prompting him to issue an appeal (see sidebar). One other effect of June’s unrest is a growing trend towards voicing demands through petitions, particularly after a “popular initiative” to assign more money to health was signed by nearly 2m people and handed to deputies.

  • Alves rules and divides

On 12 August PSDB and PT senators separately called for CPIs into Petrobras and the ‘Siemens case’. Yet neither CPI looked likely to get off the ground after the president of the lower chamber Henrique Alves (PMDB) decided to install two other new CPIs (into child labour and Brazil’s music license regulator, Ecad, also immersed in a corruption scandal), bringing the total number at present to four. Only five are allowed at any one time. According to the daily O Globo, there are another 15 on the waiting list.

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