Society

Is the struggle against corruption to blame?

LABS columnist analyzes whether the struggle against corruption led by the Operation Car Wash was the cause for the fall of some of the biggest Brazilian companies

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On November 14th, 2014, Federal Police agents roused from sleep some of the most powerful men in Brazil. It was the seventh phase of the notorious Operation Car Wash, christened as “the Final Judgment.” Among the 25 targets, presidents and executives from construction firms in the country ended up jailed.

Tracking the trails left by apprehensions, due diligence, breaches in confidence, and the testimonies of other suspects probed, the Federal Police were on the right path when thinking that the companies of those powerful men had played a part in that large-scale corruption network built to unlawfully divert resources away from Petrobras, the biggest state-owned company in Brazil. The contracts under suspicion totaled more than BRL 60 billion.

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With the typical arrogance of someone who, blinded by power and a degree of impunity, believes he is “master of the world;” some of those businessmen experienced a crisis when they arrived at the Federal Police’s penitentiaries on the day of their arrests. Some cried in panic, others said that they would not accept the “humiliation” of being jailed, according to police reports that have appeared in chapters from books and scenes from films on Operation Car Wash.

Even with all the criticisms that can be raised against any police operation, it was an unprecedented moment in Brazil. Never before had such rich and powerful men been thrown into a police van–all of them together. It signified a shift in the paradigm, one that broke the perverse Brazilian logic in which white-collar crimes went unpunished.

Some of those construction businessmen on that fateful November of 2014 were eventually convicted, and others were imprisoned, and others remain under police investigation. A good part of these men preferred to collaborate with the Public Federal Ministry to obtain benefits. One thing became very clear: corrupt businessmen, owners of the biggest contracting firms in Brazil, unlawfully collaborated with public agents and politicians to ransack the public coffers.

Obviously, those companies should be hard hit by the actions taken by the managers. If, before, money–a lot of money–circulated on the basis of overpriced contracts with business continuing, not surprisingly, as usual; then after the outbreak of the corruption scheme known as petrolão or “big petroleum,” large business groups suffered the consequences of the path chosen by their owners: dismissals, cancelled contracts, closing of branches.

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Employees from the suspected companies even went as far as publicly defending their bosses. Given a comprehensible survival instinct, it was an attempt to defend what was essentially indefensible. Companies ended up signing agreements of leniency, a type of prized betrayal for companies. Only one of them committed to returning the BRL 800 million of money illegally diverted from the oil company Petrobras, also affected by the corruption scheme.

Now, it seems to me evident that corruption took those companies to a new situation in the market, not the struggle against corruption itself. But Eugênio Aragão, the ex-Minister of Justice, in an event on June of this year, said the following, according to several websites: “Sometimes, even, for the certain type of corruption, you need to be lenient.” And more: “In some states that are extremely bureaucratic, with a high cost to the economy, there is a thesis that a certain level of corruption functions to grease the cogs and makes the economy work.” 

Aragão isn’t the only one to think this way. When criticizing Lava Jato, the house representative Elmar Nascimento, leader of the DEM political party, developed the following reasoning in a recent interview with the Revista Crusoé: “Companies go bankrupt. The model of punishment by the Public Ministry wasn’t good for the country.” No, this isn’t an interpretation by the columnist; it is a fact: Brazilian public agents and opinion makers decided to question the punishment of those corrupt, saying that they were worried about the economy.

It is important to list what really “hinders the economy”: the unscrupulous relationship between businessmen and politicians, overpricing of construction projects, fraudulent public bids, payoffs in cash and through offshore accounts, fictitious contracts, brass plate companies, offices created exclusively to administer the company’s corruption, and, first and foremost, impunity.

Or Brazil–and here even the press, market, society, politicians–decides to confront the historic and systemic corruption with responsibility and firmness, becoming accountable for the undesired consequences or insisting on more of the same: a country that leaves the powerful and corrupt act freely. It is also an economic decision.

Translated by Axel Diniz