The Petrobas Downfall and its Effects on Brazil’s Economy and Political System


At one time, owning stock in the Brazilian state-owned Petrobas oil company could be described as promising. However, that promise has waned as allegations of corruption and scandal have plunged the company into a formal “wide-ranging investigation” into the company’s business practices. This scandal, popularly known as “Operation Carwash” revolves around a high-scale money-laundering scheme and Petrobas executives are at the “epicenter.”

These executives have been accused of accepting bribes from companies and diverting those funds to prominent political figures within the ruling Workers Party. As Operation Carwash has infected the Brazilian political realm, several politicians have found themselves “in the hot seat.” And from the looks of it, no one is safe from investigation.

Current Brazilian President Dilma Rousseff served as chairwoman of the Petrobas board between 2003 and 2010, a time period encompassing much of the alleged fraudulent activity. And while Rousseff has denied knowledge of the money-laundering scheme, her critics allege that she “resort[ed] to accounting trickery in order to disguise the true size of the budget deficit.” The Petrobas scandal has largely contributed to Brazil’s current economic state as the country is experiencing its worst financial recession in over two decades.

Additionally, a published CNT/MDA poll indicated that 69.2% of people surveyed claimed Rousseff was “at fault for the Petrobas scandal” while 80.6% of those surveyed claimed Rousseff was “incapable of pulling Brazil out of its recession.” Rousseff proposed subsequent tax hikes to offset Brazil’s expanding deficit, but the Brazilian populace has overwhelmingly opposed these tax hikes. Instead, “[m]illions of people across Brazil have taken to the streets…calling for Rousseff’s impeachment….”

Rousseff has also been linked to Marcelo Odebrecht, the former chief executive of Brazil’s largest construction company. Last month, Brazilian judge Sergio Moro sentenced Odebrecht to at least 19 years in prison for his payment of $35 million in bribes to Petrobas officials. Moro stated that Odebrecht had used overseas accounts to launder money in connection with these bribes.

Analysts state that the 19-year sentence is a “highly unusual” sentence for a business leader. But for Moro, who is leading the Petrobas scandal investigation, this sentence is about sending a message to other business officials regarding corrupt business practices. According to Moro, “corruption with the payment of bribes over hundreds of millions of reals, which has the consequence of draining the public coffers, merits special condemnation.” Moreover, this “harsh sentence” may incentivize other business officials to negotiate plea deals with prosecutors and encourage executives to “cooperate with justice.”

Impeachment hearings against Rousseff have commenced and a committee within Brazil’s lower house will decide if removal is appropriate. However, as Rousseff’s impeachment fate hangs in the ballots, Operation Carwash has already permeated other levels of the Brazilian government. More specifically, attention is now focused on Rousseff’s potential successor if she is impeached—Brazil’s Vice President Michel Temer. Last week, Brazil’s high court justice Marco Aurélio Mello ruled that Brazil’s Congress must also consider impeachment proceedings against Temer.

As the scandal continues to cut through Brazilian politics, there seems to be no end in sight: “[i]n a sign of how much Brazil’s political class has been tainted by scandal, the heads of the lower house and Senate, second and third in the line of succession, are embroiled in the scandal.” In the end, how many political dominoes will ultimately fall?

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