Corruption, economic crisis and impeachment

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December 4, 2015 7:10 pm

Corruption, economic crisis and impeachment

Yet Brazil’s agony holds a positive lesson for the rest of the world

 

Brazil is no stranger to volatility and upset. Even so, the events of the past two weeks — from the imprisonment of a billionaire banker, to the president’s possible impeachment — are breathtaking. Nor is Brazil’s agony likely to end soon. The country is suffering a recession so deep it could well tip into depression. Yet the latest stage of Brazil’s crisis may hold positive lessons for the world. That is because at its heart lies an exemplary probe into one of the great scourges of our time: corruption.

First, though, the bad news. Brazilian politicians and businesses are frozen in the headlights of an unprecedented corruption scandal at Petrobras, the state energy company. This has crippled investment and halted in Congress the passage of measures needed to face the economic crisis; the economy is now shrinking at an 8 per cent rate. Adding to the chaos, Dilma Rousseff, the president, may be impeached. She faces charges of fiddling the public accounts. Yet the reason why the proceedings have been launched now flow back to rival politicians seeking to save their skins amid the corruption scandal. They have turned Brasília into a tropical version of The Hunger Games.

The key figure here is Eduardo Cunha, head of the lower house. Like the president, he is fighting for political survival. Mr Cunha has been accused of hiding millions of dollars of kickbacks in Swiss bank accounts. A skilful operator, he had hoped the governing Workers party would protect him. When it did not, he pulled the trigger on the impeachment process, justifying it as a “technical” matter. The opposition, scenting blood, joined in. Although Ms Rousseff may well summon enough political support to stop the process, everything is now in flux. Such has been the disruptive power of the corruption probe.

The short-term costs of this are huge. But Brazil’s anti-corruption drive could deliver considerable benefits, too. If crooked operators think twice about dipping their hands into the honeypot, governance will improve — a good thing. The fearlessness with which previously untouchable figures — from senior senators to André Esteves, the former head of investment bank BTG Pactual — are being held to account is remarkable. Certainly, it is a contrast with how meekly corruption is dealt with in other major emerging economies, such as Russia or China, let alone lawless Venezuela, where it has reached spectacular levels.

If crooked operators think twice about dipping their hands into the honeypot, governance will improve — a good thing

Still, one cannot be naive. Brazil has been here before. The 1982 impeachment of Fernando Collor, the former president, also on corruption charges, failed to turn a new page for the country, as then hoped. Nor did Italy’s “clean hands” movement, somewhat comparable to Brazil’s, noticeably improve affairs there. It fostered a false belief that judges can renovate politics; they cannot. It led to the tainted premiership of Silvio Berlusconi. And it laid the ground for populist opposition politicians who declared “being clean” was enough to govern; it is not. Competence is also required.

Yet Brazil’s case today is slightly different. The probe is independent, and touches all major political parties. More than 100 business leaders are being questioned; a first. The Workers party is so discredited it is unlikely that a populist will emerge as a “shining white knight”. Although a risk, the opposite is more likely true.

The painful dislocation that such an important nation is suffering is very worrying. The impeachment process will only further distract Brasília from the country’s most pressing problem: the economy. But amid the deepening gloom and catharsis there are encouraging, even exemplary, changes too.

Copyright The Financial Times Limited 2015.