BRAZIL-What good does it do to have power...

...if you can’t abuse it?

Corruption is not new to the Brazilian scene. Some years ago there was a joke circulating in Brazil that a Brazilian diplomat in a meeting with the President, informed that a panel of judges had just elected Brazil as the second most corrupt country in the entire world. The President shook his head, clucked his tongue, and then asked, “What country was elected the most corrupt?” The diplomat responded, “Well, actually we were, but we managed to buy off a couple of the judges on the panel in order to ensure second place.”

The Chief Prosecutor of the Republic, Rodrigo Janot, has just issued a request for the arrest of former Cabinet Minister, Romero Jucá (Minister of Planning), President of the Senate Renan Calheiros, and former President  and current Senator for the State of Amapá, José Sarney. All are accused of obstruction of justice for planning to subvert the Lava-Jato investigations and limit the actions of the Federal Police and the Federal Public Prosecutor’s office. He also issued a request for the arrest of Eduardo Cunha whose mandate is supposed to be decided today by the “Ethics” Committee of the Lower Chamber of the legislature.

Local wags have suggested that Sarney has been in politics for so long that if he negotiates a plea bargain, he might be able to shed some light on whether Prometheus acted alone when he stole fire from the gods.

As the roster now stands, one President is awaiting trial (Dilma), and two ex-presidents are under investigation (Lula and Sarney), the arrests of the Presidents of the Senate and of the Lower Chamber have also been requested, so the situation begs the question of who is minding the store?

You might remember that when Dilma was suspended from office to await a decision that she would or would not stand trial for impeachment, she was given the use of an Air Force jet to zip around the country. That “perk” has now been rescinded and she can only requisition a jet to fly to and from her home in Rio Grande do Sul. Dilma was livid. She plans to fly to the City of Campinas today and may have to go on a commercial flight with “the people” (horrors!). Given her level of popularity with the general public, she might find the flight a “bit uncomfortable”!

As I wrote yesterday, plea bargains have also now indicated 13 governors and 36 senators in some form or other of corruption.

A significant number of those under investigation might be indicted and have to stand trial. Their trials will be conducted by the Supreme Court. That’s an impressive case load to add to those already flowing through the Court. How long all this could take is anyone’s guess.

Whew!!

BRAZIL-"Singing" in perfect harmony.

Will anyone be left standing?

Things are off to a good start this week. Four Lava-Jato suspects are negotiating plea-bargains that are cited by some as the equivalent of a political atomic bomb.

The four “singers” are: Marcelo Odebrecht (President of Odebrecht Construction Company – Brazil’s largest); Leo Pinheiro (former president of the OAS construction company);  Sergio Machado (former president of Transpetro – a Petrobrás subsidiary) and Nestor Cervero (former director at Petrobrás).

Odebrecht’s depositions have so far implicated 13 governors (50% of the total in Brazil) and 36 Senators (44% of the Senate).

Leo Pinheiro’s testimony indicated that the country retreat in Atibaia, São Paulo the ownership of which has been attributed to Lula and that Lula vigorously denies, was the object of numerous improvements that were requested by Lula. Pinheiro also referred to the beachfront triplex apartment in Guarujá, São Paulo as belonging to Lula.

Sergio Machado has indicated that Renan Calheiros, President of the Senate, Romero Jucá, recently dismissed as Minister of Planning in the Temer administration, and former President José Sarney divided R$60 million of bribe money.

Nestor Cerveró, currently serving a 17-year sentence for corruption and money laundering, offered his testimony that Dilma Rousseff was fully aware of the problems associated with the purchase by Petrobrás of a refinery in Texas. Dilma had denied she was aware of the enormous overprice and a couple of draconian clauses in the purchase contract that caused Petrobrás to lose upward of US$800k.

Both Odebrecht and Cerveró appear to “have the knife out” for Dilma Rousseff. Each claims that she sold them “down the river” (as they say in New Jersey). Both have provided damaging testimony. And Lula doesn’t come off any better!

The testimony of all four “singers” does not help Michel Temer very much either.  Two of his recent Cabinet appointments are endangered by revelations of malfeasance and two of his current Cabinet Ministers also face possible charges in the Lava-Jato investigation(s). With half of Brazil’s governors and 44% of the Senate accused of crimes involving corruption, bribes, and money laundering it must be difficult to find the proper combination of technical expertise and integrity. And it would appear that the current situation is just the beginning.

At least it now appears that the economy has “stopped worsening”. A bottoming out seems likely. Inflation will continue to rise for a while but the downward drift of the rate of GDP growth appears to have slowed slightly. 

BRAZIL-Is it that they just can't resist?

Or are they scared witless?

Not long ago on this blog I made reference to a very wise comment of one of my clients, the president of the local subsidiary of a large European MNC. He said he would give practically anything for just one executive who, when faced with a major decision, would say “Let’s think this through before we react.”

Life is full of clichés about the wisdom of “cautious delay”: “Let sleeping dogs lie”; “Don’t rush to judgment”; and the less famous one from New Jersey – “What’s your f****** hurry?”

They all suggest that moving too fast can sometimes cause more problems than it solves.

Such would seem to be the case with Dilma’s impeachment.

The administration seems to want to move her eventual trial faster and get a final verdict by August. The PT is, of course, livid with anger.

After all the debate that resulted in a Supreme Court decision to define, once and for all, the procedures to be followed for impeaching a president, the administration wants to change the rules. I guess Brazil’s politicians simply cannot resist fixing what ain’t broke.

Dilma is out of office for up to 180 days. She screams epithets from the back of the bar and for some crazy reason that I have yet to fathom she was given access to an Air Force jet to take her wherever she wants to go and preach her message of “coup d’état”. 

Since that damage is already done, it seems to me the best thing to do is just live with it. Anyway, the recent news coming out of Lava-Jato’s plea bargains continue to offer rather strong arguments against her claims of a “coup”.

The debate over Dilma Rousseff’s impeachment is being conducted, with significant and rather puerile verbal pushing and shoving, in a Special Senate Committee that will decide if the case goes to a plenary session in the Senate for judgment. 

If the committee votes against sending the case forward, it is closed and Dilma returns to office.

If the case is sent forward, the Senate must render a verdict within the 180-day period that Dilma is out of office to stand trial or she returns to office. She vacated office on 12 May so the Senate jury has up to around 12 November to come up with a verdict.

Dilma’s supporters on the committee engage in all manner of shenanigans to delay moving the process forward while the opposition tries to accelerate it.

Watching the debates on Tuesday, the 2^nd, was a bit like watching a circus in which none of the acts was very professional. The jugglers dropped the articles they were juggling, the trapeze artists kept falling into the net, the lion tamer was attacked by one of the cats, the human pyramid of the gymnasts collapsed and the only act that seemed to be professional were the clowns whose chaos was at least amusing.

I simply fail to see what is to be gained from accelerating the trial now that Dilma is out of office. The economy already shows signs of “bottoming out” and stabilizing. Interim President Michel Temer has the power he needs to carry out his programs. He is auditing the social programs that were the showcase of the Rousseff and Lula administrations and finding a wide array of patronage and cronyism. He can probably cause more damage to the PT and its 13 years in government by simply exposing its screw-ups and malfeasance in the light of thorough audits than trying to speed things up.

Of course, the flip side of this desire to speed things up might increase the risk that Lava-Jato will come up with information that will compromise those in power as well as the PT. (That’s more like a certainty!) After all, the war being conducted is between two groups of kleptocrats, neither of which has an unblemished reputation for integrity and moral probity.

However, that risk is unavoidable whether Dilma is impeached immediately or in November. Lava-Jato simply cannot be stopped or stymied in its efforts to weed out corruption. 

Speeding up the impeachment process won’t change things one iota with regard to avoiding exposure going forward. As I wrote previously, when the tide goes out it’s easy to see who is swimming naked! And as we saw in my post on King Canute, no one, not even a great king, controls the tide!

So, it would appear that the adage that we should leave sleeping dogs lie is quite wise. I have yet to see many Brazilians who want to see Dilma back in office and would be inclined to change their minds about that. It has often been written in the press that while things might be bad with the traditional kleptocrats in charge, they would be worse if Dilma were to return to office.

So, what’s the f****** hurry? 

BRAZIL-2+2=?

Why now?

A very long time ago I published on this bog a quote from John Steinbeck’s book, The Log from the Sea of Cortez. I cited the quote as possibly the single most cogent explanation of what causes the development of a society. I won’t quote it again because it is relatively long.

In summary, Steinbeck suggests (in 1939, mind you) that when the isolation of a community is broken by highways and high-tension wires the result is irreversible. The world is brought into the community and things will never be the same. Trucks will be able to deliver products from outside, canned foods, and all of the “stuff” (both good and bad) of civilization. 

High-tension wires will deliver information, lighting and end the power of darkness over activities. 

In just a few paragraphs, Steinbeck summarized all the literature of development that economists still debate. In a broader sense, Steinbeck simply states that once a community can “communicate” with the outside world, the Zeitgeist of development takes over.

In another post I wrote on the difference between neurosis and psychosis. Psychotics have an internal logic all their own and might tell you that the sum of two plus two is 27, 3,000, or whatever number matches their internal logic. 

The neurotic, however, will tell you that the sum of two plus two is four but that he/she considers that result unacceptable. The neurotic knows reality but simply does not accept it.

I have attributed Brazil’s recent problems to the rejection by its politicians of the results of the Real Plan. I believe now that the attribution was only partially correct. The Real Plan’s salutary economic effects had the effect of facilitating the entrance of the outside world to Brazil. Digital technology became the vehicleby which it entered.

As Simon and Garfunkel sang in The Sounds of Silence, “the words of the prophets are written on the subway walls…”. The smart phones, tablets, laptops, etc. are the new “subway walls”. The Real Plan facilitated the purchase of those devices and made it possible for Brazilians of every social and economic level to independently discover and accept that 2+2=4.

For literally centuries, Brazil’s kleptocrats had kept Brazil relatively isolated in a highly closed, protectionist economy. They sold the view that two plus two could be whatever they could make it and that no one was obliged to accept the answer as 4.

The Internet was as liberating as were Steinbeck’s highways and high-tension wires.

Neither the traditional kleptocrats nor the “neo-kleptocrats” are satisfied with the acceptance by Brazilians of the equation. Each wanted to control the process of isolation in their own way but they do not agree on what two plus two should be if 4 is unacceptable to both. (Hence the mutually exclusive nature of their respective “models”).

To his credit, Michel Temer appears to have read the writing on the “subway walls”. He knows that the isolation has been broken, that Brazilians can now accept that 4 is the correct result. His challenge is not to “lead the people”. It is to convince his colleagues that the “game” has ended. The “people” have rejected the models of both the traditional kleptocrats and the neo-kleptocrats in favor of the acceptance of 4 as the correct answer of the sum of two plus two.

It remains for the “elites” to accept not only that number but also that the public is now “wise to their game”, and no longer isolated.  Brazilians are anxious to join the rest of the world. 

The combined effects of increased purchasing power (via the Real Plan) and the information that reaches the public over the high-tension wires of Steinbeck have rendered the kleptocratic “model” useless as a form of government. 

That’s why both the PT and the “traditionals” have been rejected. As Abraham Lincoln is reported to have said, “…you can’t fool all of the people all of the time.” Or, to quote once again economist Herb Stein, “Things that cannot go on forever, don’t”. It’s over! We still don’t know the eventual outcome, but the “game” as it had been played for centuries has ended.

Oh, there will still be those who confiscate the rents of society but their ability to do so with impunity has ended. Henceforth, they will be held accountable when they are caught.