Why this is important to Wisconsin businesses: Cracking down on corruption is seen as a positive step for foreign investment.
“Imagine if the Watergate investigation had led not only to the downfall of President Nixon, but also to allegations against his successor, plus the Speaker of the House, the leader of the Senate, a third of the cabinet, and more than 90 members of Congress. That gives you some idea of what's happening in Brazil right now.”
That's how one episode of “60 Minutes” began more than a year ago, but it's still the best reference to explain what's been happening in Brazil in the last few years and to where it has been leading the country.
Initially a money laundering investigation, the Operação Lava Jato (Operation Car Wash) has expanded to cover claims of corruption at the state oil company Petrobras, where executives accepted bribes in return for awarding contracts to construction companies at inflated prices.
The scandal arose in part because it challenged the impunity of politicians and business leaders that had previously prevailed. Prosecutors had already charged nearly 300 people for hundreds of crimes, including former President Lula and Marcelo Odebrecht, then president of the biggest engineering and contracting company in Latin America, which carries the name of his family and was deeply implicated in the scheme. Odebrecht was charged with fines totaling $2.6 billion by authorities in Brazil, Switzerland and the U.S. after he admitted bribing officials in 12 countries for around $788 million.
According to the prosecutors, the bribes involved in the scheme totaled approximately $2 billion. The good news is that the money is coming back. In August 2018, Petrobras received a return of more than 1 billion Brazilian reais as a result of the cooperation and leniency agreements signed under the ongoing investigation. According to Petrobras, this is the highest refund received in a single period, which when added to the resources already transferred to the company exceeds R$2.5 billion. The company is using a big chunk of this refund for social and environmental projects.
Recognized by the authorities as a victim of the acts unraveled by the investigation, Petrobras stated that it will continue to take action against companies and individuals that have caused damage to the company. In addition, Petrobras has implemented a new management and governance model and has endeavored to ensure process compliance and improve safeguards that prevent ethics violations.
Brazil has turned a corner. It is true that public indignation over corruption has led to a loss of credibility for democratic institutions, but on the other hand it has ignited the civil and political awareness of Brazil’s citizens, who no longer tolerate being deceived, and who are part of a broader movement that is pushing for greater transparency and dignity from politicians.
For Wisconsin companies, one thing to keep in mind is that Brazil is one of the easiest countries within the BRIC nations (Brazil, Russia, India and China) to conduct business with. It’s in the same continent and time zone, friendly to outside businesses, rich in natural resources, has done reasonably well despite the economic recession, is stable politically, and has a young and growing population that appreciates U.S. culture and products—not to mention that Brazil represents half of Latin America’s economy and is projected to be the world’s fifth-largest consumer market by 2020, surpassing France and the UK. Despite constraints including high taxes, bureaucracy and poor infrastructure, and even after a three-year recession, this industrial and agricultural giant still ranks among the top 10 largest economies in the world. The U.S. is Brazil’s top trading partner, and Wisconsin businesses should explore the trade opportunities Brazil presents.