March 31, 2016 | Clarice Palmer
São Paulo, Brazil — As online publications have hailed the major protests overtaking the streets of Brazil at the outset of an apparent political revolution, few discuss the problems that have been brewing for decades in South America’s largest nation.
While Brazilians are angry and tired of their economic hardships, they are also incensed at the country’s history of corruption, which now includes a massive presidential scandal carried out by politicians and lobbyists during the current and previous administrations. This misconduct has given residents of all walks of life enough incentive to take their demands to the streets.
But are the politicians listening?
The History of Brazil is a History of Corruption
Local sociologists often tout Brazil’s corruption problem as a “genetic disposition” to crookedness. But late economist Ludwig von Mises disagreed. In Human Action, the famed economist claimed that corruption is simply a consequence of government’s heavy intervention in all public matters. “Corruption is a regular effect of interventionism,” he wrote — not the root of a country’s woes.
As Brazilian newspapers and talking heads tend to focus on corruption scandals as the root of the political and economic issues the country faces, they are, in fact, some of the consequences of heavy government intervention — not the foundation of the nation’s ongoing problems.
Between 1930 and 1945, the country was under the rule of the populist tyrant Getúlio Vargas, whose rise as a dictator was also tied to a series of corruption scandals, political persecution, and oppression. Nicknamed “the Father of the Poor,” Vargas and his administration used images of hope and harmony to sell the leader as the country’s grassroots hero.
But the individual behind the facade and popular image was the first of many political leaders to promise — though never deliver — peace and prosperity. Vargas also maintained an amicable relationship with Germany prior to World War II, prompting the United States to wonder whether Brazil would enter the Axis orbit. The Vargas administration even aided Nazi Germany by sending Jewish refugees back to their home country, such as the revolutionary militant, Olga Benário Prestes, a German Jew who ultimately died in a concentration camp.
Getúlio Vargas is particularly relevant because Brazil’s last president, Luiz Inácio “Lula” Da Silva, who held office between 2003 and 2011, is often remembered by many as the second coming of the 20th century dictator. Lula is currently implicated in the high-level scandals currently plaguing Brazil.
Long before Lula took office, however, the anti-communist “Red Scare” mindset — the culture of fear tied to communism that existed between 1919 the late 1950s in America — finally settled in Brazil. The country began to fear the possibility that communist agitators would take over the country. With the help of democratically-elected president, João Goulart (Brazilian Labour Party), the country’s military leaders took over, replaced Congress with the National Constituent Assembly, deposed opposition members, and drafted a new Constitutional Charter. The 1964 military coup lasted until 1985.
Once Brazilians had the chance to elect a new president, they put young Fernando Collor de Mello in power, a right-wing politician who froze thousands of Brazilian savings accounts and converted them into government bonds, inciting a wave of anger across the nation.
It was only when Collor was accused of having played a role in an influence-peddling scheme that many started paying attention.
Afraid of what Congress could do to his presidency, Collor allegedly paid $2 million for falsified documents, an act that, once discovered, prompted Congress to vote for his impeachment. Only three senators voted in Collor’s favor. Seventy-three voted for his removal.
Whether or not this was a sign of things to come, Brazil’s first democratically-elected president after the military rule became the first to be impeached.
As privatization policies were put in place by President Fernando Henrique Cardoso in the 1990s, the country’s economy picked up steam. People suddenly believed they had a good, competent administration in place, despite issues with the ongoing drug war. The many years of privatization and inflation-taming measures, however, prompted younger Brazilians to become attached to the ideology behind progressive politics. Enter Lula.
In 2003, young Brazilians cheered the election of the Workers Party’s Lula. After all, they believed a “man of the people” had been picked as the country’s president. He was the same man who would go on to become the country’s “lobbyist in chief.”
After Lula’s two terms, the Workers Party managed to get Dilma Rousseff elected. Her rise to the presidency was mostly due to her proximity to Lula. She has often referred to him as “[her] president and leader.”
Unemployment, Poverty, Inflation, and High Taxes: Brazilians are Fed Up
Brazilians experienced an economic miracle in the 1990s. But as the Rousseff administration upped sales and consumption taxes while relying on inflation, the increase in the money supply. As the country hosted the World Cup in 2014, businesses and consumers began to suffer. The first ones to feel the consequences were the poor.
Currently, Brazilians pay about 36 percent in sales taxes on most goods and services — a regressive tax that ends up hurting the poor the most. Brazilians give up about 28 percent of their income yearly. With the increase in taxes on large net gains and the country’s protectionist policies, many believe investors will begin to flee the country.
Tension built up due to the economic difficulties consumers face only worsened when the country’s judiciary launched an investigation into Rousseff’s embezzlement and crony capitalist scheme, which has made global headlines.
“Car Wash” Corruption Scheme and Its Investigation: the Beginning of the End for Dilma Rousseff
The “car wash” investigation is the largest probe of its kind in Brazilian history.
Its name comes from the network of laundromats, gas stations, and currency exchange businesses participants in the scheme used to launder money.
From Brazilian writer Alice Salles at FreedomWorks.org:
“Trouble began to brew when authorities launched an investigation into a network of currency exchanging businesses connected to Alberto Youssef. He was accused of forging contracts and moving billions of Brazilian Reais domestically and abroad using front companies and foreign bank accounts.”
Once the investigations were deepened, authorities “learned that Youssef had business relationships with Paulo Roberto Costa, the former director of the state-controlled oil giant Petrobras, major contractors and their lobbyists, and other Petrobras servicers. On March 2014, both Costa and Youssef were arrested.” Once Costa agreed to take part in the investigations in August of 2014, “Brazilians learned that he and several other directors of Petrobras received bribes and passed them along to politicians for their campaigns.” In a few weeks time, the authorities convinced Youssef to join Costa, “and revelations about one of the largest embezzlement schemes in the history of the country started flooding the news.”
Soon enough, the authorities learned the names of contractors involved in the scheme, which happened to be the country’s two top construction companies: Odebrecht and Andrade Gutierrez. André Estevez, owner of Latin America’s largest investment bank, BTG, was also involved.
By March of 2015, authorities learned 53 politicians had participated in the scheme. Even José Dirceu, the former prime minister under President Lula, was “accused of receiving payments from Odebrecht and Andrade Gutierrez.” Lula’s close friend, the farmer José Carlos Bumlai, and Senator Delcídio Amaral of the Workers Party, known as PT, were arrested. The President of the Chamber of Deputies, Eduardo Cunha, a member of the Brazilian Democratic Movement Party (PMDB) was also targeted, along with several other PMDB party leaders.
According to what the investigations have unearthed thus far, the embezzlement scheme benefitted political parties in charge of Petrobras’s leadership appointments.
Salles reported that “as federal judge Sérgio Moro showed signs he believed former president Lula had profited from the scheme, prosecutors from the state of São Paulo added insult to injury by accusing Lula of ‘hiding his ownership of a beach-front condominium.’” But the rumors about his future finally hit the news, and Rousseff decided to appoint her predecessor as her chief of staff. The Economist claimed Lula is a “canny political operator,”which may have helped Rousseff make the decision to bring him on board to boost her reputation. However, as Salles noted, “what the cabinet position means to Lula may have served as the sole incentive.”
As the country’s call for impeachment intensifies, a strong opposition movement in Congress is taking shape. The country’s top association of lawyers, Ordem dos Advogados do Brasil, has also announced it will present an impeachment proposal to Congress, making matters worse for Rousseff.
The proposal claims the current president has “authorized … the country to delay its payments,” and it also accuses the president of unilaterally lifting tax obligations tied to the Fédération Internationale de Football Association (FIFA) during the 2014 World Cup. OAB attorneys also claim Rousseff may have “interfered with the ‘car wash’ probe, which includes her appointment of former president Luiz Inácio Lula da Silva as chief of staff.”
Unclear Future: Impeachment Alone is Not the Solution
As the “car wash” probe unveils that billions of taxpayer dollars have been tied to investments abroad that didn’t benefit Brazilians — and that members of most Brazilian political parties were involved — many of the county’s residents are showing signs of fatigue.
Impeaching President Rousseff may offer momentary relief to Brazilians under pressure, but unless a cultural change takes shape, the expulsion of Rousseff from Brasília, the nation’s capital, won’t make a difference.
According to activist Kim Kataguiri, a key figure in the anti-Rousseff protests, “the smokescreens used by the Brazilian government to disperse the population are finally gone.” He believes impeachment will come — no matter what. Even so, Rousseff says she has enough friends in Congress to avoid her downfall. Only time will tell whether Brazilians will find a way to restrict government’s interference in the country, helping to keep corrupt politicians from finding reasons to steal from the taxpayer.