Lula Convicted: End of an Era?

By Anthony W. Pereira*

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Former Brazilian President Luiz Inácio “Lula” da Silva / Jeso Carneiro / Flickr / Creative Commons

Former Brazilian President Luiz Inácio “Lula” da Silva’s conviction last week on corruption charges was more than a legal decision and could mark a political watershed – the beginning of the end of “Lula-ism,” a political and redistributive pact that lasted from 2003 until 2010 which Lula has been offering to revive as a candidate in the 2018 presidential elections.  On July 12, Federal Judge Sergio Moro found Lula guilty of taking a bribe and laundering money, sentenced him to nine years and six months in prison, and banned him from taking public office for seven years.  This judgment, the first to convict an ex-president in Brazil, was the result of the Carwash anti-corruption investigations begun in March 2014.

  • The decision will be appealed to the Federal court for the Fourth Region in Porto Alegre. This court will probably rule on the case before the 2018 filing deadline for presidential candidates (yet to be decided, but usually in mid-August), and is expected to uphold the conviction.  Lula would be legally barred from being a candidate at that point, although he might mount some sort of challenge to such a ruling.  Lula’s strategy for now is to press on with his campaign, to criticize his conviction as political persecution that was not based on evidence, and to portray himself as a man of the people capable of taking on the “elite.”

Lula still has great strengths.  The basis of Lula-ism has been his personal appeal – he captured twice as many voters as did his political party, the Partido dos Trabalhadores (PT), in 2002 and 2006 – boosted by economic forces and public policies that raised the living standards of the poor.  With his finely-tuned ability to communicate to ordinary people, he showed that it was possible to both grow the economy and redistribute its fruits.  His government reduced poverty significantly, offered the poor inclusion in the consumer society and the chance of social mobility, and even achieved a modest reduction in income inequality – while promoting the interests of big companies.

  • But he may not have achieved the long-term realignment his supporters claim. Lula-ism proper only lasted for eight years, the length of his two presidential terms.  His hand-picked successor, Dilma Rousseff, ruled for almost six more years, but by the last year of her first term, poverty had stopped declining.  The current government of President Michel Temer has passed a constitutional amendment freezing federal spending in real terms for 20 years; the measure does not automatically reduce spending on social programs, but in the absence of tax increases that is what it has produced.  Temer’s own bribery scandal may take him down, perhaps within the next couple of weeks, but his policies raise a more fundamental question:  whether Brazil can return to economic redistribution, diminishing the severe inequality that still marks its society, without Lula-ism.

The organs of anti-corruption investigation and control that have challenged Lula, Dilma, and Temer – the media, the Federal Police, the Public Prosecutor’s Office, and the judiciary – are neither consistently politically neutral nor free of corruption themselves.  They are not a Deus ex machina that can free the Brazilian polity of corruption all by themselves.  For that, Brazil needs political reform, further changes in at least some of the rules that regulate elections and governance, a realignment of incentives faced by elected officials, state bureaucrats, business people, trade unions, and the electorate.

  • The PT and the other two most important parties, however, seem incapable of renovation despite leaders’ awareness of the low level of legitimacy with which they are viewed by voters. The PT has few viable new leaders and is clinging to Lula’s candidacy as its only hope of a return to power.  The Brazilian Social Democratic Party (PSDB) still nominally supports Temer.  And Temer’s own party, the Brazilian Democratic Movement Party (PMDB), is torn between defending the president in an act of self-preservation, and fearing the wrath of the voters in 2018.

Brazilians face a “trilemma”: they yearn for the three long hoped-for goals of sustained and successful anti-corruption investigations, political reform, and a return to economic redistribution.  Achieving two of those goals at the same time, let alone three, seems impossible.  The 2018 elections therefore will reveal a country in which anti-corruption investigations continue to knock major figures out of the political game, while political reform and economic redistribution are postponed.  The old cliché that Brazil is the country of the future takes on a new meaning in light of this somber possibility.

July 17, 2017

*Anthony W. Pereira is a Professor and Director of the Brazil Institute at King’s College London.

Can the 2018 Election Overcome Brazil’s Crisis of Legitimacy?

By Fabio Kerche*

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The Brazilian flag. / Club Med UK / Flickr / Creative Commons

The political and economic crisis punctuated by the impeachment of Brazilian President Dilma Rousseff in 2016 persists unabated under the troubled administration of Michel Temer.  Stagnation is fueling unemployment, and the government’s efforts to rein in pensions and limit public spending are reinforcing the perception that the principal objective of those who ousted Dilma is to cut back on social rights promised in the 1988 Constitution and deepened by Dilma and her predecessor, Luiz Inácio Lula da Silva.  Even more ominously, the continuing cascade of corruption allegations is also undermining support for the new government.

  • Surveys show that only 10 percent of Brazilians rate the Temer government as “good” or “great,” and that its legitimacy is further undermined by whistleblowers alleging that the president and nine of his ministers are corrupt.

The notorious “Car Wash” anti-corruption campaign is hurting more than Temer and his men.  Zealous prosecutors and judges are essentially criminalizing not only politicians’ behavior but, through aggressive interpretations of the law, the practice of politics itself.  The targeting of Dilma’s leftist PT is most obvious, but the deluge of charges is now buffeting all the major political parties.  Leaders of the center-right PSDB, including former President Fernando Henrique Cardoso, have been accused of corruption as well.  Except for some miniscule political parties, virtually the entire political system now faces corruption charges.

The 2018 presidential election offers the most plausible avenue for emerging from the crisis, but even that remains highly problematic.  There is a relative consensus among the political class and political analysts that a new, legitimate, and directly elected president could reverse, or at least limit, the deterioration of the political system.  With just over a year remaining for candidates to register, the likely roster is very uncertain, in part because a basic feature of constitutional democracy – that citizens are allowed to compete for office – is increasingly in jeopardy amid the current anti-corruption fever.  Early polls place Lula as the strongest among the likely candidates, and he remains in first place even when surveys include Sérgio Moro, the most important judge in the Car Wash saga, who has not declared himself to be in the running.  But it is unclear whether the courts will let Lula stand for office.  Right-wing media are hammering Lula’s alleged corrupt practices while downplaying those of Temer and his cabinet.  Potential candidates of PSDB have been denounced for receiving bribes and having overseas bank accounts, and their numbers are shrinking in the polls.  An alternative now being floated as a potential PSDB candidate is João Dória, the newly elected mayor of São Paulo who, like U.S. President Donald Trump, is a non-mainstream politician and businessman who formerly hosted the Brazilian version of the TV show The Apprentice.)

  •  This uncertainty – even if the parties resist the continuing wave of Car Wash denunciations and take back some political space from the unelected judicial branch of government – raises the question whether, over the next 18 months, Brazil’s 32 year-old democracy proves itself to be irreversible or to have been an all too brief interlude in the country’s political history. The apparent appeal of outsiders in an environment that is criminalizing politics is a worrisome sign.

April 24, 2017

* Fabio Kerche is Research Fellow at CLALS and Researcher at Casa de Rui Barbosa Foundation, Rio de Janeiro.

The Panama Papers: Damning Evidence Against Latin American Elites?

By Emma Fawcett* and Fulton Armstrong

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Photo Credit: Pixabay / CC0 Public Domain

The “Panama Papers” have revealed the reputed secret accounts and tax-evasion strategies of a number of Latin American leaders, but preexisting widespread perceptions that political and economic elites are corrupt may reduce the immediate shock value of the revelations.  More than 11 million documents leaked from the Panama-based law firm Mossack Fonseca – given an initial review by the Süddeutsche Zeitung and International Consortium of Investigative Journalists (ICIJ) – provide evidence of 215,000 arrangements by which 14,153 powerful and wealthy clients from around the world hid their money from the prying eyes of the media, tax collectors, and public-accountability experts.  Early reports already indicate Latin Americans – small-time players compared to the Russians and some Europeans – are among those mentioned.

  • The Petrobras scandal that has paralyzed Brazil will find further fuel in these files. Investigators in Operation Car Wash apparently had no knowledge of many accounts held by Petrobras officials.  A secret company linked to House Speaker Eduardo Cunha, who’s leading the charge to impeach President Rousseff, reportedly figures prominently.
  • Argentine President Macri, his father, and brother reportedly had an offshore company for 10 years. They closed it in 2009, two years into Macri’s term as Buenos Aires mayor, but he did not report it.  The government says he was only “circumstantially” the CEO.
  • The president of the Chilean branch of Transparency International, Gonzalo Delaveau, resigned because he was linked to at least five offshore companies.
  • Mexican President Peña Nieto’s association with tycoon-contractor Juan Armando Hinojosa, who reportedly had a massive array of shelters worth US$100 million, is once again a liability. The President was dragged through the mud – and eventually exonerated of personal involvement – over a mansion that Hinojosa allegedly gave to his wife.  The Mexican government is investigating several dozen others named in the documents.
  • Many other cases are in the wings. Pedro Delgado (former governor of Ecuadorian Central Bank and cousin of President Correa); financial backers of Peruvian Presidential candidate Keiko Fujimori; and an array of former central bank and intelligence officials – Peruvians, Venezuelans, Panamanians, and others – are all being looked at.  In El Salvador, the Attorney General, already criticized for his investigative zeal, has raided Mossack Fonseca’s offices, suggesting more revelations to come.

Allegations of tax evasion, hidden income, and other forms of corruption are a mainstay of Latin American political lifeand the Panama revelations will only aggravate the oft-held opinion that rich, powerful people play by their own rules to maintain wealth and power.  Ramón Fonseca, one of the founders of the law firm, claims that the publicity is part of “an international campaign against privacy,” which he called “a sacred human right [and] there are people in the world who do not understand that.”  The backlash against someone like Argentine President Macri may not be too great, especially because his family ended the tax haven years ago.  But what makes the allegations potentially disruptive is the number of people implicated – across public and private sectors – in so many countries, in an investigation that has only just begun.  Further revelations are sure to come and, although themselves a sign of transparency, challenge people’s faith that leaders will come clean.  The revelations will fuel popular cynicism and discontent in the short term, but renewed demands for transparency may eventually help rekindle popular confidence in government.

April 11, 2016

*Emma Fawcett is a PhD candidate in International Relations at American University.   Her doctoral thesis focuses on the political economy of tourism and development in four Caribbean case studies: Haiti, Dominican Republic, Cuba, and the Mexican Caribbean.

Brazil: Daring to Look at Succession Scenarios

By Silvio Levcovitz*

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Photo Credits: Instituto Liberal (Brasil) and Brasil 247 / Google Images / Labeled for noncommercial reuse

Brazil’s snowballing scandals are generating a high level of uncertainty regarding the country’s political future.  “Operation Car Wash”—a two-year investigation by a task force of the Federal Police and the Federal Prosecutors—has already led to the conviction and 20-year imprisonment of several senior officials from Petrobras and prominent construction companies, and others are likely to follow.  In Brazil, congressmen, cabinet ministers, and the President can be criminally charged only by the Supreme Court, through a long, difficult process called “privileged forum.”  On March 17, former President Lula, under investigation for allegedly receiving two properties as a bribe from construction companies, was designated a Minister of State in President Dilma Rousseff’s administration, an appointment that would have afforded him that protection.  The judge pursuing him released a recording of a call from Dilma offering him immunity as well as Lula’s calls on family and other private matters.  Many in the Brazilian legal community have disapproved of the judge’s disclosure of the calls as disrespecting the rule of law and the right to privacy, but the damage to Dilma and Lula was done.

Calls for the President’s impeachment are surging—and she repeatedly rejects the pressure to resign.  On Sunday, March 13, a half-million people protested in São Paulo, and the press estimates that another 1-2 million demonstrated elsewhere around the country.  (Demonstrations supporting Dilma have attracted 100,000 citizens in São Paulo.)  The PMDB, party of Vice-President Michel Temer and President of the House Eduardo Cunha, is officially quitting the government this week, and other minor parties appear likely to do the same, definitely cracking the presidential support.  The impeachment process in Brazil has two steps.  In the House, two-thirds of its 513 members (342 votes) are required for “admission” or approval, in which case the Senate can decide by majority vote to take up the charges, resulting in the President being suspended for up to 180 days.  Conviction requires the votes of two thirds of the 81 senators.  Although press reports indicate the mood is for the impeachment, the government is offering positions and funds individually to Congressmen and in hopes of achieving a low turnout to stop the process in the House.

Predicting the outcome of such a volatile situation is inherently risky, but discussion of post-Dilma scenarios is growing increasingly common.  Should she step down or be removed from office, Vice-President Michel Temer would be her constitutional successor.  Like Dilma, however, Temer is being charged by the Superior Electoral Court on suspicion of illegal campaign financing and, if convicted, would not be allowed to take office.  The next two in line to succeed her—President of the House Eduardo Cunha and President of the Senate Renan Calheiros—have been snagged by Operation Car Wash and face charges by the Supreme Court, suggesting that they too could be disqualified.  (The Federal Attorney General has already asked the Supreme Court to issue a preventive order to remove Cunha because of evidence that he has received US$5 million in secret Swiss bank accounts, without any justification.)  That leaves Supreme Court President Ricardo Lewandowski as a possible successor for a maximum period of 90 days, at which point elections would be called.  As Brazil faces crisis after crisis, the press have taken to commenting that the country’s fast-paced, dramatic events make the American series House of Cards look slow and boring. 

March 30, 2016

* Silvio Levcovitz is a CLALS Fellow and political science PhD candidate at the Universidade Estadual de Campinas, São Paulo.  He has been a public lawyer in Brazil and is researching criminal cases of corruption and civil claims of administrative misconduct from 1991 to 2014.