Petrobras Scandal Explains Brazil

Post on May 10, 2016, 3:02 pm by the-victoria-law-group 1 Comments

On Wednesday, something surprising and strange happened in Brazil: The president, Dilma Rousseff, appointed former President Luiz Inácio Lula da Silva, her political mentor, to her own Cabinet.

That same day, a Brazilian judge ordered the government to release a wiretap recording of Rousseff — yes, the government is listening in on its own president — speaking to Lula, as he’s commonly known.

 The recording seemed to reveal that Rousseff had appointed Lula to save him from prosecution in a multibillion-dollar corruption scandal involving the state-run oil company Petrobras. (Under Brazilian law, ministers go to special courts that have historically never prosecuted them.)

Subsequently, a separate judge ordered a pause on Lula’s appointment, suggesting it may have been illegal.

This is just the latest House of Cards–style twist in the Petrobras scandal — the largest corruption scandal, in dollar terms, in any democracy ever.

The scandal is shaking the Brazilian political establishment to its very foundations — and it comes amid a recession, as well as a largely separate effort by Rousseff’s political rivals to impeach her over unrelated financial improprieties.

Millions of Brazilians have taken to the streets in protest. The Brazilian political system is paralyzed, and could well be thrown into further chaos if Rousseff is ousted.

But in the long term, some observers say that the Petrobras investigation is a good thing. Brazil has been plagued by severe corruption for much of its modern history. This scandal could signal that the era of impunity may be ending. Until just six years ago, no sitting politician had ever been successfully prosecuted on corruption charges.

What we’re seeing today could potentially be epochal: one of the world’s largest countries finally coming to terms with one of its biggest problems. But that’s the long, optimistic view. For now, it’s a huge mess.

Here are the basics of what’s happening, why it matters, and how this became such a big deal.

Between about 2004 and 2014, the state-run energy firm Petrobras — which is Brazil’s largest company and one of the largest corporations in the world — engaged in one of the most astonishing corruption schemes ever to be uncovered. That Petrobras employees and their co-conspirators thought they could get away with it speaks to just how bad corruption in Brazil had become.

Nobody knows who exactly came up with the scheme. But it was developed during the commodities boom of the 2000s, when oil prices were high, and involved three main groups of players: leaders at Petrobras, top executives at Brazil’s major construction companies, and Brazilian politicians.

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