Brazil: What's Needed to Fight Corruption?

José Dirceu, former chief of staff of President Lula, is accused of paying bribes to lawmakers. (Photo of Dirceu: Jose Cruaz/Agencia Brasil)

Brazil needs to pass several reforms to reduce corruption, experts say.


Inter-American Dialogue 


Last week, the corruption trial, part of the so-called mensalão scandal, of former President Luiz Inácio Lula da Silva's chief of staff, José Dirceu and 37 other defendants started in Brazil's Supreme Court. Meantime, a vote in the lower house of Brazil's Congress on a new anti-corruption bill was delayed last month for the fifth time and is not expected to win approval until next year. How effective would the proposed law be in fighting graft? What would a more stringent anti-corruption law mean for foreign investment in Brazil? What else does Brazil need, beyond new laws, in order to fight corruption?

João Augusto de Castro Neves, Latin America analyst at the Eurasia Group:
Despite ongoing corruption scandals, there have been some institutional improvements in Brazil over the last two decades or so. Lessons from past scandals have led to more independent oversight agencies and increased transparency in public finances. However, these advancements are far from permanent and may have fallen short of solving the problem. At least they have increased to some extent the 'political cost' of corruption. To be corrupt in Brazil today you need to be more creative now than before. Not a very reassuring assessment, of course. Unfortunately, there is no silver bullet against public corruption. A number of proposals in Congress indicate that there are many different angles from which to tackle the problem. Regulation of lobbying activities, legislation on campaign financing and harsher penalties on companies involved in public corruption schemes are but a few examples. Elevated costs of campaigns -- a problem that does not pertain only to Brazil -- however, will most likely maintain the incentives for corruption and mitigate the positive impact of any new legislation. But if the lack of legislation and an electoral system that promotes competition largely as a function of economic power are a serious part of the problem, they pale in comparison to the sluggishness of Brazil's judicial system. The mensalão trial, set to begin seven years after the scandal broke out, is just one example that justice moves more slowly where there is political and economic power. A vicious cycle, to say the least.

Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars in Washington: A domestic version of the U.S. Foreign Corrupt Practices Act, the bill in question was introduced in 2010 by Workers Party Congressman Carlos Zarattini. It would make Brazilian corporations criminally liable if their employees try to bribe politicians. Under current law, only individuals can be charged of such crimes. Not expected to be approved before 2013, the bill responds to the growing societal demand for ethics and accountability in public life in Brazil. Popular pressure has led recently to laws and Supreme Court decisions that have removed candidates convicted in criminal cases from electoral slates, ensured public access to government information, including salaries of public officials, and affirmed the authority of the National Council of Justice to investigate judges accused of wrongdoing. The demand for and expectation of guilty verdicts in the trial of the Lula era 'mensalão' scandal is a clear manifestation of this sentiment. The Zarattini bill, if adopted and fairly applied, would help undermine the culture of impunity that has historically benefited those in positions of power and influence in Brazil, as would the enforcement of other anti-corruption statutes already in the books, such as the 1992 Probity Law. The Zarattini bill would likely force corporations to adopt more stringent internal controls when participating, for instance, in bids for public works contracts. As far as foreign investment, the adoption of new anti-corruption laws would probably do less good than the judicial security provided by stronger and more stable regulatory frameworks in infrastructure, energy and other key sector of the economy.

David Fleischer, emeritus professor at the University of Brasília and editor of Brazil Focus: There are three anti-corruption proposals before Congress: regulation of the activities of lobbyists, exclusive public finance of elections and penalizing businesses for participation in acts of corruption. Deliberation of the bill that would penalize firms that participate in corrupt schemes has been postponed several times and because of the municipal elections 'recess' of Congress is not likely to be brought to a vote before 2013. However, on July 9, President Dilma Rousseff sanctioned a new anti-money laundering law. This new law includes all 'suspicious' or undocumented funds from any source, beyond drug and arms trafficking and terrorism, and authorizes the confiscation of funds and assets related to these cases. Also, the penalties were stiffened to as many as 10 years in prison and 20 million reais in fines. This new law will penalize recipients of proceeds obtained through corruption. Immediately, this law was applied to José Ferreira das Neves who was accused of using his post as president of VALEC, the railroad construction unit at the Transportation Ministry, to siphon off some 60 million reais in kickbacks. The expensive farms he had acquired and the funds 'hidden' via third parties were all confiscated under this new law. He probably will be convicted and fined. If the anti-corruption law is approved in 2013, foreign investors would become more wary of participating in kickback and other corrupt schemes organized by those in public office. What is also needed is to thoroughly reform Brazil's 'dysfunctional' judicial system where the legal procedures make conviction of those accused of corruption nearly impossible -- if those accused are able to hire expensive competent lawyers.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter


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