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.