Brazil: A massive corruption scandal, a political crisis and a recession

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It is an extraordinary time in Brazil. Not only is the economy in a deep recession, but the country has been shaken by a corruption scandal in which figures at the highest level of business and politics have been implicated.

Meanwhile, President Dilma Rousseff faces the very real threat of impeachment over a separate scandal - one she sees as a coup attempt by her adversaries. 


The Petrobras scandal

The corruption ring being investigated as part of the Lava Jato probe centres around the Brazilian energy giant Petrobras and implicates executives, suppliers, construction contractors and politicians. Lava Jato is being led by Sergio Moro, a federal judge, and began in March 2014. 

Among those under investigation are the speaker of the lower house,  Eduardo Cunha, who is accused of taking $5 million in bribes as part of a ship building contract between Petrobras and Samsung. 

Luiz Inacio Lula da Silva, Brazil's president from 2003 to 2011, is being investigated for allegedly benefiting from the kickback scheme at Petrobras through certain property deals. His brief arrest in March 2016 was followed almost immediately by his nomination to President Rousseff's cabinet as chief of staff.

The nomination was blocked by a Supreme Court judge and is pending appeal by the government. Brazilian politicians in ministerial positions can only be prosecuted by the Supreme Court - opponents accused President Rousseff of offering 'Lula', her mentor and an influential political figure, a position in cabinet as a way of providing him with substantial immunity. 

Both Mr. Cunha and Mr. da Silva deny any wrongdoing. 

President Rousseff herself has been linked to the scandal in a plea bargain made by Delcídio do Amaral, a senator from the Workers Party. Mr. do Amaral claimed in his deal with prosecutors that Ms. Rousseff was aware of what was going on at Petrobras (Reuters). He also said Aloizio Mercadante, Rousseff's education minister, offered him financial incentives not to cooperate with prosecutors (BBC News)

President Rousseff denies any wrongdoing or knowledge of the corruption at Petrobras. Mr. Mercadante denies Mr. do Amaral's accusations. 


Efforts to impeach Rousseff

 
brazil votes needed for impeachment

President Rousseff's adversaries are seeking to have her impeached for alleged breaches of budget rules in 2014, during her successful re-election campaign. Ms. Rousseff denies any wrongdoing and says the efforts to oust her from office are without grounds and purely political. 

On April 17th, the lower house voted to advance proceedings against Rousseff with 367 deputies voting in favour of impeachment and 137 against. The senate will now consider whether to put the president on trial. Should they do, Rousseff would be suspended from office for the duration of the trial before a final vote by the senate on whether to remove her as president. 

Michel Temer, Brazil's vice president and leader of the PMDB, would replace Rousseff. PMDB is Brazil's largest party and chose in March 2016 to leave President Rousseff's coalition government. The impeachment process is being largely driven by lower house speaker Eduardo Cunha, who is a member of PMDB and who split with Rousseff long before his party did. 

 

The economic crisis

As if the political crisis and massive corruption probe wasn't enough for Brazilians to worry about, the country is also in a deep recession marked by high unemployment and high inflation. Brazil's economy contracted 3.8% in 2015. 

Data: World Bank, Brazil statistics office

Data: Brazil statistics office
 

The key players

The key terms


Central bank leaves Brazilian interest rates unchanged

  • Banco Central do Brasil left interest rates unchanged at 14.25% following the conclusion of its monetary policy meeting on Wednesday. *

  • The decision to hold rates passed by six votes to two - the two opposing members proposed raising rates to 14.75%. 

  • On Tuesday, Brazil's central bank chief described the IMF's downgrading of its forecasts for the Brazilian economy as 'significant'. +

  • Banco Central do Brasil faces the challenging task of bringing down high inflation without further entrenching Brazil's deep recession. 

  • Brazil's inflation rate in December was 10.7% - the target range is between 2.5% and 6.5%. GDP in the third quarter of 2015 fell 4.5% year on year.


Rousseff impeachment process: Supreme Court hands boost to Brazil's embattled president

  • In a boost to President Dilma Rousseff, Brazil's Supreme Court ruled on Thursday that the country's Senate would be allowed overrule the lower house should it vote to impeach Ms. Rousseff.
  • The Supreme Court also ruled that the voting to select the impeachment commission cannot be held in secret, annulling a vote made last week. 

  • Thousands of people marched in support of the president on December 16th, while thousands also marched calling for her impeachment on December 13th - neither rally attracted the crowds seen at anti-corruption protests in March. 

 
 

Corruption in Brazil: Home of parliament speaker raided by police