By The Foundation for Economic Education. Originally published at ValueWalk.
You can tell a fighter is on his way to complete defeat when he gives up on any technique or finesse and just goes for knockout punches. If you are a fan of MMA like I am, you’ve probably seen this a few times before: the fighter starts confident, then gets shut out by his opponent. His jabs are countered, his takedowns aren’t there, his cardio doesn’t hold up that well, and he realizes he has only one tool: the puncher’s chance. Throw haymakers, crazy kicks, the kitchen sink, and pray something lands and ends the fight.
But we the spectators know what’s going on. We see that tactic for what it is and, though there is some thrilling hope it might just work, it will likely lead to a blowout defeat. And even if the punch does meet its target, the winner still comes out as the weak guy that got lucky. He’s a winner, but an exposed winner, and his next opponent knows this and will take advantage of it.
Lula has resorted to very desperate means. We the spectators know it’s a tactic for a failing fight.
Our fighter today is Luiz Inácio Lula da Silva, the former president of Brazil. After so much development in Operation Car Wash, he and his allies have resorted to very desperate means: calls protests and strikes to grind the country to a halt (which failed miserably, mind you), calls for early elections, promises to arrest journalists that “lied” about him, and support for a Supreme Court that decided to grant habeas corpus to convicted corrupt politicians. If that’s not swinging for the fences in desperation, it’s hard to know what is.
At this point, the beatdown Lula has received is impressive but far from over. It’s even more impressive when you see where he came from.
How did we get here? Let’s go over the general points of this combat.
The Backstory
In 2005, Lula survived a gigantic corruption scandal to win elections in 2006 by a wide margin. In 2010 he elected his successor, Dilma Rousseff, with basically a “trust me” argument, and she was re-elected amidst a disastrous economy in 2014. His reign was untouchable, and most parties were either his allies or unwilling to challenge a semi-saint figure in the eyes of the people. For the few that dared call themselves opposition, prospects were bleak. Dilma was already installing socialist laws, calling for constitutional reform and popular councils. Brazilian state banks were financing public works all over Latin America for socialist allies, including a gigantic port in Cuba, even while Brazilian ports were collapsing.
A major migration wave from Brazil started. Everyone who saw the country was going the way of Venezuela was either boarding a plane to Canada or Miami, or planning the trip. Everyone knew people who left and even more people who wanted to. All was lost.
Then Operation Car Wash struck. A small thread of money-laundering led to arrests of Petrobras higher-ups, arrests of major construction companies CEOs and higher-ups. Plea bargains flowed at an ever higher rate. Dilma was impeached. A senator was arrested for obstructing justice, allegedly under Lula’s orders. The speaker of the house was divested and arrested. Terror struck the political class in our capital.
Falling House of Cards
All the while, Lula seemed untouchable. His network was smart: lots of plausible deniability and very few men who could really make the connection from A to B. All the men were diehard soldiers who would keep quiet till their last breath. They were arrested and convicted one by one.
All cards around Lula were falling down.
João Vaccari Neto, treasurer for the Worker’s Party, was convicted to 15 years for passive corruption and money-laundering and intermediating kickbacks from Petrobrás and Renato Duque for the Worker’s Party. He was then convicted to nine more years for corruption after receiving 46 million Reais.
José Dirceu, former right-hand man and former Secretary of the Civil House to Lula (equivalent to Secretary of State), was also convicted to 23 years in jail for money-laundering and corruption. In fact, he became involved in this scheme as he was on trial for another enormous corruption scheme in 2005-06, dubbed Mensalão (roughly translated as “large monthly payment”). The schemes were the same thing: dirty money to buy support in the Legislature. All cards around Lula were falling down.
Then came Antonio Palocci, former Treasury Secretary to Lula and Secretary of the Civil House to Dilma, who was arrested in Operation Omerta for intermediating dirty money from Odebrecht to buy a plot and finance the building of the Lula Institute. Companies accused of paying the bribes started confessing and cutting deals, even though they were selective about what they confessed.
The Odebrecht Collapse
On and on they went until the key figure in this scheme, Marcelo Odebrecht, CEO of the largest construction company in Brazil and with direct contact to Lula and Dilma, finally folded.
Lula and his party were profoundly rocked. As I explained in a previous article, Odebrecht’s plea bargain had everything to be apocalyptical, and so it was. Odebrecht had 77 different collaborators in the plea bargain, and they mentioned every president since the military regime. All in all, eight federal government secretaries, three governors, 24 senators, and 39 house representatives were publicly named. Some of the accused are still under secrecy for fear of disrupting ongoing investigations.
Kickbacks were made to dozens of political campaigns, from mayors to governors.
Emilio Odebrecht clearly stated that he had a long relationship with Lula when he was a big union leader brought in and paid to put down strikes in Odebrecht’s home state, and that he gave around 115 million reais for Lula’s 2002 successful presidential campaign provided that Lula would not meddle in Odebrecht’s oil and gas sectors. Odebrecht also revealed that kickbacks were made to dozens of political campaigns, from mayors to senators, house members, governors, and all in between, if approved by Antonio Palocci, who was acting as informal accountant for Lula and as middleman in negotiations.
Bribes and kickbacks were paid to secure laws to cut taxes, safeguard Odebrecht’s dominance, and grant them contracts. Just a few weeks ago, more charges were brought against Lula for selling an executive order that granted tax cuts to specific car makers in a technically unrelated, but very related case.
Braskem’s Confession
On top of this there is Braskem. Braskem is a company formed between Odebrecht and Petrobrás that was involved in major corruption scandals as well. Because its money used the US’s financial structure, it got caught up and saw no exit but to confess. Fifty million reais were paid in kickbacks for Dilma’s presidential campaign and another 100 million for her re-election, all requested by her Treasury Secretary, Guido Mantega.
The post Brazil’s Politics Are Collapsing In A Whirl Of Illegal Money appeared first on ValueWalk.
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