Giving “dirty money” a new meaning

On Wednesday, Senator Chico Rodrigues, the government’s deputy whip in the Senate, was targeted by a Federal Police investigation into the embezzlement of BRL 15 million earmarked for the fight against Covid-19 by members of Congress. However, while this story seems bad enough, as Brazilians say: the hole gets even deeper. The Feds found around BRL 30,000 in cash in the senator’s home, with part of the money soiled by being stashed “between his buttocks,” leaving little to the imagination.

Interestingly, the case surfaces just days after President Bolsonaro stated that there was no more corruption in the government. Furthermore, last week, Mr. Bolsonaro said that if someone steps out of line with regard to corruption, they will be met with “a flying kick to the neck.”

The case continues to shed light on how corrupt officials are using the emergency situation created by Covid-19 to fill their pockets — and underwear, apparently — with public money. 

In a video that resurfaced after yesterday’s events, Bolsonaro is seen praising Senator Chico Rodrigues, saying their relationship is “almost a stable union.” However, today, Mr. Bolsonaro affirmed that Rodrigues is not part of his administration, despite being his deputy whip in the Senate.

Could this be a new meaning for the term “dirty money”?

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Brazil Daily

Moody’s threatens to downgrade Brazil

Today, we talk about how Jair Bolsonaro struggles to fit social policies within the federal budget — and Brazil could have its debt rating downgraded. Meat kings JBS add to their list of scandals. Bolsonaro ally caught short during Federal Police corruption operation.

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Bolsonaro torn between fiscal cap and need for social policies

Samar Maziad, a vice president and senior analyst for Brazil at ratings agency Moody’s, [restricted]said on Wednesday that Brazil’s sovereign debt could be downgraded further into junk territory unless the government managed to advance its agenda of reforms this year or, at the latest, early in 2021. “If the support for reforms dwindle, it will have a negative impact on our outlook [for the country],” said Ms. Maziad during an event.

  • Moody’s currently gives Brazil a Ba2 rating, two tiers below investment grade, with a “stable” outlook.

Why it matters. The path of austerity is by no means an obvious choice. With record-high unemployment rates and an uncertain recovery from the pandemic crisis — which no one knows how long will last — the government has been faced with the challenge of creating a new cash-transfer program that is bigger than Bolsa Família.

  • There is also the political element: the coronavirus emergency salary has pushed President Jair Bolsonaro’s approval ratings to their highest levels since his inauguration. Data published just hours ago by pollster PoderData shows the government’s approval ratings at 52 percent. 
  • “If Mr. Bolsonaro is able to combine his socially conservative agenda with a broad social protection network, his re-election bid shall become unbeatable in 2022,” said Pablo Ortellado, a public policy professor at the University of São Paulo, speaking to The Brazilian Report.

What is the plan? It is hard to know what the government has in store for taming the debt and preventing millions of people from dropping below the poverty line once the coronavirus aid ends in December. The latest plan being discussed within the Economy Minister would reduce the number of families benefited by the federal cash-transfer program to around 20 million. But with a divided cabinet, the administration has struggled to settle on a single plan.

  • Interestingly, it’s not only the federal government that is discussing cash transfers. In São Paulo, the two leading mayoral candidates — incumbent Bruno Covas and the Bolsonaro-backed Congressman Celso Russomano — have proposed emergency aid or basic income programs for São Paulo residents. 

State of the debt. According to the latest forecasts by the International Monetary Fund, Brazil’s debt-to-GDP ratio could top the 100-percent mark this year. Among emerging economies, only Angola would have a bigger deficit. The IMF also believes that Brazil is unlikely to record a primary surplus before 2025.

Bright-ish spot. The services sector — the backbone of the Brazilian economy — grew 2.9 percent in August when compared to July, recording a third consecutive month of growth. Even bars and restaurants are performing better than expected, with revenue at around 60 percent of pre-pandemic levels.

Meat kingpins under fire

On Wednesday, federal prosecutors indicted Mato Grosso do Sul Governor Reinaldo Azambuja and businessmen Joesley and Wesley Batista for corruption, money laundering, and criminal association. The Batista brothers — who control the world’s largest meatpacking company, JBS — are accused of paying BRL 67 million (USD 12 million) in kickbacks to the governor and his allies, in exchange for not paying state-level taxes. JBS allegedly gained BRL 209 million with the scheme.

  • On the same day, the Pilgrim’s Pride Corporation — a U.S.-based subsidiary of JBS — agreed to pay USD 110.5 million to settle federal charges that it fixed chicken prices for years, passing on higher costs to consumers, restaurants, and supermarkets.
  • Also on Wednesday, JBS’ parent company, holding firm J&F, pleaded guilty to U.S. foreign bribery charges, agreeing to pay USD 128 million in fines. The settlement refers to the company’s role in corruption scandals that nearly brought down the Michel Temer administration in 2017.

Rap sheet. Top executives of the J&F group admitted having bribed more than 1,900 politicians to advance their business interests — particularly regarding the expansion of JBS from a regional player to an international behemoth.

Stocks, stakes … Shares of JBS closed the day up 9.2 percent, following the news of the settlements — which investors hope will help turn a new leaf on JBS’ laundry list of scandals. The indictment, however, became known after market hours. 

A new meaning for the term “dirty money”

Just days after President Jair Bolsonaro stated that he had ended Operation Car Wash due to there being “no more corruption within the government,” his administration was rattled by an awkward — and frankly disgusting — scandal. Senator Chico Rodrigues of Roraima, the government’s deputy whip in the Senate, was targeted by a Federal Police investigation into the embezzlement of BRL 15 million earmarked for the fight against Covid-19 by members of Congress.

  • The Feds found around BRL 30,000 in cash in the senator’s home, with part of the money being stashed — we kid you not — “between his buttocks,” as reported by online magazine Crusoé, and confirmed by newspaper Folha de S.Paulo. As many of our subscribers read this newsletter during breakfast, we will spare you the gory details.
corruption federal police
Illustration by Jika

Why it matters. Few times have Brazilians been faced with such a ridiculous and graphic scandal — which can certainly do no good for the government’s image, especially as Jair Bolsonaro clashes with his core supporters, who oppose his pandering to establishment politicians.

  • The case also continues to shed light on how corrupt officials are using the emergency situation created by Covid-19 to fill their pockets — and underwear, apparently — with public money.

What they are saying. “I am relaxed about what happened in my home. I trust the justice system and know I will be able to prove my innocence,” said Mr. Rodrigues, in a statement.

  • “Ah, Car Wash is over, folks? The Feds are in Roraima today,” said Mr. Bolsonaro, on Twitter.
  • “Money laundering will be key in this case,” joked Federal Prosecutor Vladimir Aras, brother of Prosecutor General Augusto Aras.

Off you go. Government officials agree that either Mr. Rodrigues resigns as deputy whip, or he will be demoted.

What else you need to know today

  • Deceleration. The Central Bank publishes the latest update to its Economic Activity Index (IBC-Br) today, considered to be a predictor of the official GDP rate. Analysts expect the index to show a 1.6-percent expansion of the Brazilian economy in August — which would mean a deceleration of the economic rebound after months of stricter social distancing. In June, the index was at +5.32 percent, and reached +2.15 percent in July.
  • Crisis. Ricardo Eletro, one of Brazil’s biggest retail groups, has filed for bankruptcy protection. In what will be the biggest court-supervised recovery plan in Brazilian history, the group is set to split its assets into multiple companies in order to divest and be able to pay its BRL 4-billion debt to 20,000 creditors. 
  • Environment. A federal court denied a request to suspend Environment Minister Ricardo Salles from office. In their lawsuit, federal prosecutors say Mr. Salles is deliberately depleting Brazil’s environmental controls — which could allow Amazon deforestation to reach a point of no return (after which the rainforest could, according to scientists, become a savannah-like biome) and bring “tragic effects on environmental protection frameworks.” A panel of judges will trial the case on October 27.
  • Supreme Court. Allegations of plagiarism might have tarnished Federal Judge Kássio Nunes Marques’ academic résumé, but they have not dented his chances to be confirmed as Brazil’s next Supreme Court justice. Senator Eduardo Braga, the rapporteur of his confirmation proceedings, has recommended that the Senate’s Constitution and Justice Committee approves the nomination, saying the inconsistencies on Mr. Nunes Marques’ CV do not qualify as “relevant facts” against the judge.
  • This time’s the charm? The government intends on presenting its plan to privatize Correios — the state-owned postal company — “at the beginning of next year,” according to the Communications Ministry. Privatizing Correios has been listed as a priority since President Jair Bolsonaro took office in January 2019 — but no progress has been made since.
  • Drug boss. The Supreme Court is set to end a trial today on whether or not to jail a leader of the São Paulo-based First Command of the Capital (PCC), arguably Brazil’s most powerful criminal organization. He was set loose by Justice Marco Aurélio Mello last weekend due to a technicality — and a majority of justices (6 out of 6) have voted to overturn his decision. But the outcome of the trial should matter little: the drug boss, called André do Rap, is already at large.
  • Science. The Health Ministry has launched a BRL 600-million (USD 107-million) program to create a national database with mapped genomes of 100,000 Brazilians. The initiative could help anticipate disease diagnostics. [/restricted]

The fall from grace of Sergio Moro

With the hubris that can only come from a president who sees his future secure at the head of the Brazilian government, Jair Bolsonaro emphatically declared the end of the country’s sweeping Operation Car Wash anti-corruption investigation on Wednesday, claiming his administration is now above suspicion. “I do not want to end [Operation] Car Wash. I’ve already ended Car Wash, because there is no longer any corruption in the government,” he exclaimed, during a press address.

Beyond overlooking the numerous corruption investigations targeting his inner circle — including his sons and wife Michelle — this pontifical claim symbolized Mr. Bolsonaro’s turn toward the politics of cronyism, which he promised to end during his election campaign. In broader terms, it also symbolizes the end of Brazil’s zealous anti-corruption drive, embodied by Operation Car Wash.[restricted]

Perhaps the best example of this fall from grace of the country’s anti-corruption crusader class is the ruination of Operation Car Wash’s poster boy, former judge Sergio Moro.

For large sections of Brazil’s media class and the population at large, Sergio Moro became a national hero through his role leading Operation Car Wash. While his methods and alleged bias were often criticized, he became the face of the one aspect of the Car Wash years that the vast majority of society conceded as being overwhelmingly positive: the sense of absolute impunity among the upper echelons of Brazilian politics and business was no more. At the height of Operation Car Wash, influential politicians and business owners were facing prison sentences, something that was almost unimaginable before.

However, over six years on from his first involvement in Operation Car Wash and after having his name dragged through the muck by all sides of the political spectrum, Sergio Moro is packing his bags, ready to leave Brazil.

As reported by newspaper Folha de S. Paulo on Tuesday — and confirmed by The Brazilian Report — Sergio Moro plans to trade in his political career for academia, intending to lecture at an unspecified U.S. university. While the former Car Wash judge has yet to speak in public on the story, people close to him have affirmed that the move was a request of Mr. Moro’s wife, lawyer Rosângela Moro, who has told those close to the family that her husband “has given all he can to the country” and that he is not cut out for party politics “and its savage confrontations.”

There is a suggestion that Sergio Moro will now completely abandon his plans to run for president in the 2022 election, though other sources close to the ex-Justice Minister say it will be a temporary move, before returning to Brazil in two years’ time, banking on President Bolsonaro’s stock being weakened by that time.

Security is another factor weighing on Mr. Moro’s mind. It will soon have been six months since his acrimonious split with Jair Bolsonaro and abandoned his spot in the cabinet, meaning he will now lose his BRL 31,000 (USD 5,540) salary and the right to a Federal Police escort. 

The bigger they come, the harder they fall

After 12 years as a judge in Curitiba — four and a half of them spent in charge of Operation Car Wash — Sergio Moro abandoned his career as a magistrate and joined the government of Jair Bolsonaro, who invited him to serve as Justice Minister. With promises of being given autonomy to implant an anti-corruption agenda in the administration, Mr. Moro’s long-term future seemed sewn up: a few years in the cabinet, and then a seat on Brazil’s Supreme Court

However, Sergio Moro only remained in office for little over a year, resigning in April of this year while accusing President Bolsonaro of meddling with the Federal Police to safeguard his son, Senator Flávio Bolsonaro, from corruption investigations.

The decision to leave the government was no doubt based on his belief that he was more popular than President Bolsonaro — a notion often repeated by the Brazilian press, who suspected the government would crumble once its anti-corruption totem jumped ship. This turned out to be a gross miscalculation, and the government’s supporters sided with the president, labeling their one-time hero as a traitor.

Indeed, despite gaining worldwide recognition for his role in Operation Car Wash, Sergio Moro was frequently criticized and undermined in the field of Brazilian politics and law. After The Intercept Brasil published a series of leaked messages from the Car Wash prosecution task force, showing Mr. Moro’s collaboration with — and often command over — prosecutors, he was accused of violating due legal process and currently faces cases in the Supreme Court that question his impartiality throughout Car Wash.

Furthermore, Sergio Moro has been repeatedly vilified by the Brazilian left, who accuse him of acting in a biased and potentially illegal manner to spur on the impeachment of former President Dilma Rousseff, jail another former President Luiz Inácio Lula da Silva, and help elect Jair Bolsonaro.

So, having left the government, Mr. Moro had lost the widespread support from the right-wing, was unable to make peace with the left, and was ostracised in political life, with no obvious source of support. 

Discord and backtracking

The appointment of judge Kassio Nunes Marques to a soon-to-be-vacant seat on the Supreme Court represents the latest defeat for the Operation Car Wash anti-corruption movement, isolating Mr. Moro further. While the Supreme Court has made several decisions to void Car Wash cases, Congress is debating on laws that are wholly against what Mr. Moro had planned to do as Justice Minister.

On Twitter, Sergio Moro criticized Mr. Nunes’ nomination. “If Jair Bolsonaro does not appoint someone to the Supreme Court who is committed to the fight against corruption […] we will all know his true nature (and many already know),” he wrote. 

One follower asked the former Justice Minister if he knew about Mr. Bolsonaro’s “nature” when he accepted his cabinet invitation, to which the former judge replied “no.” He later deleted his post.

Moro out: Left and right celebrate

The news of Sergio Moro’s potential exodus was celebrated on social media by both the right and left. The former laud what they see as a fitting end to a “traitor,” while the latter revel in the irony of Mr. Moro leaving the country due to the very government he took part in and helped elect.

“Defenestrated by the far-right, neglected by the country’s renowned judges, unmasked as biased and without the old partnership with the media that promoted him, [Mr.] Moro is the image of decadence common among false heroes,” wrote one left-wing Twitter user.

However, one of the few demonstrations of support for Mr. Moro came from São Paulo state lawmaker Janaina Paschoal, famous for co-authoring the request that led to the impeachment of President Dilma Rousseff. She expressed her solidarity with the former Justice Minister, but warned against his plan of leaving the country. 

“I perfectly understand his discouragement, Sergio Moro’s family has every right to want a bit of peace! But as a Brazilian who doesn’t say any other alternative, I ask that [Mr.] Moro and his wife think about facing another great challenge. They will have my support! Brazil needs a fourth way!” she wrote.

In Ms. Paschoal’s view, Sergio Moro would offer a voting alternative for the 2022 elections, beyond Jair Bolsonaro, a candidate from the left, or someone linked to the center.

Indeed, that the only political figure in his corner appears to be a fringe state lawmaker does not bode well for the future of a man who was once regarded as Brazil’s savior.[/restricted]

Brazil Daily

EU Parliament slams Mercosur trade deal “as it stands”

Today, we talk about the EU Parliament’s decision to counter Jair Bolsonaro. A new airline is about to open in Brazil, despite a dramatic outlook for the aviation sector. The president says the Car Wash Operation is over. And Brazil reaches 5 million coronavirus cases.

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EU-Mercosur deal not dead yet, but on life support

In a 345-295 vote, the European Parliament has passed[restricted] an amendment to the common EU commercial policy which has been described as a rejection of the EU-Mercosur free trade agreement signed just last year. The amendment highlights the need for ensuring fair competition and compliance with European production standards — adding that, due to environmental concerns, “the EU-Mercosur agreement cannot be ratified as it stands.”

  • The vote doesn’t mean the trade deal has been rejected, but it paves the way for that. Especially as the deal lost its biggest backer on the other side of the Atlantic, after Ireland’s Phil Hogan resigned as European Union trade commissioner.

Why it matters. The original amendment proposal mentioned President Jair Bolsonaro by name, singling him out as the reason why the EU has cold feet about the deal. 

  • “[The EU] is extremely concerned about Jair Bolsonaro’s environmental policy, which goes against the commitments made in the Paris Agreement, particularly with regard to combating global warming and protecting biodiversity,” wrote a group of EU lawmakers headed by Marie-Pierre Vedrenne, from France.

Beneath the surface. The deal between the EU and Mercosur has always been met with fierce opposition from European agricultural lobbies — who now rejoice at the hard stance against Mercosur. These lobbies fear that highly competitive South American agricultural products may disrupt their revenue — and Brazil’s nonchalance towards recent environmental calamities hands them, on a silver platter, the perfect argument to oppose the deal.

  • In the wake of a particularly destructive 2019 fire season, year-to-date fire alerts for 2020 have already surpassed those of last year by 14 percent in the Amazon and over 200 percent in the Pantanal as of September 30, according to think tank Chain Reaction Research.

What they are saying. Representatives of European agro celebrated the amendment, while the Brazilian government remains in denial.

  • “It would be deeply hypocritical of the EU Commission to pursue a trade deal that so clearly conflicts with its own policy,” said Brendan Golden, livestock chair of the Irish Farmers’ Association.
  • “Jair Bolsonaro is the dream Brazilian president for EU agro lobbyists who oppose the deal. He is playing into their hands,” said Rubens Ricupero, a former Brazilian ambassador to the U.S.
  • “There is a lot of noise in all this, it’s all part of a diplomatic effort that must be done, let’s take it easy,” said Brazilian Vice President Hamilton Mourão — who believes the decision can be “reverted” in the future.

Opening an airline during a pandemic

Giant coach group Itapemirim will launch a selection process tomorrow to hire 600 people for their soon-to-be-launched airline, Ita. The company will recruit pilots, technicians, and flight attendants in a push to begin operations as soon as March 2021. According to CEO Rodrigo Vilaça, Itapemirim wagers that the coronavirus crisis will be over by then, if vaccine promises for the end of this year are fulfilled.

Why it matters. Ita is coming to life in one of the direst moments the airline industry has ever faced.

  • Multiple Latin American carriers — such as Latam, Avianca, and AeroMexico — have filed for Chapter 11 bankruptcy protection in the U.S., and a stimulus package from the Brazilian National Development Bank (BNDES) has never materialized.
  • On October 6, the International Air Transport Association (IATA) warned reporters that carriers were on course to burn through another USD 77 billion in cash in H2 2020 — calling on governments to renew expiring support programs.
  • Moreover, airport administrators in Brazil fear a total collapse of their businesses. The aviation sector’s supply chain could eliminate as many as 299,700 jobs before this crisis is over.

I believe I can fly. Ita has leased ten Airbus 320 planes, three of which will be delivered in 2020 — each of them will require 67 professionals. “As more jets arrive, we will hire more people, in a gradual process,” said Mr. Vilaça.

  • The Espírito Santo-based company plans to operate in 16 airports, with the bulk of its flights in São Paulo, Rio, Brasília, and an undetermined city in the Northeast. But Ita hasn’t yet received clearance to fly from the National Civil Aviation Agency (Anac).

An old dream. Since Itapemirim’s bus firm was placed under court-supervised financial recovery in 2016, the group has tried to migrate from asphalt to the sky. In 2017, they attempted to buy medium-range airline Passaredo, but the deal fell through after Itapemirim didn’t meet the conditions established in the contract.

— with Renato Alves

Bolsonaro ditches anti-corruption operation

President Jair Bolsonaro seems determined to break with the coalition he championed during the 2018 election — and embrace what he once disparaged as “old politics.” On Wednesday, he dismissed Operation Car Wash, the biggest anti-corruption effort in Brazilian history. “I’m proud to say that I don’t want to end the Car Wash Operation. I have already ended Car Wash, because there is no more corruption in the government.”

Why it matters. As Renato Alves wrote on The Brazilian Report, breaking with his core supporters is a savvy move by Mr. Bolsonaro to consolidate himself in power.

  • “His defense of far-right causes still makes him the best — and perhaps the only — option for the extreme right in 2022. Meanwhile, his recent implementation of welfare policies and alliance with moderately conservative forces may help him attract a voter base that seemed unreachable just months ago.”

Bolsonaro and Car Wash. No other politician benefited more from the Car Wash Operation than Mr. Bolsonaro. A backbencher for his entire political career, he could never get close to the upper-echelon politicians who were caught with their hands in the cookie jar by prosecutors. And, as droves of elected officials were tainted by the investigations, an anti-establishment sentiment paved the way for his election.

  • In office, Jair Bolsonaro never fully supported the operation — nor proposed correcting its (many) excesses and prosecutorial mistakes. Instead, the president and his clan only tried to attach themselves to the operation when it suited them.

5 million coronavirus cases

Brazil became only the third country in the world to top the mark of 5 million confirmed coronavirus infections — while simultaneously approaching the unwelcome milestone of 150,000 deaths. Data suggests that the outbreak might be slowing down in Brazil — but caution is advised, for a few reasons:

  • Testing in Brazil remains very limited, and epidemiologists say that the total tallies are much bigger than what has been confirmed.
  • According to the Imperial College London, the country has been able to sustain coronavirus transmission rates of below 1 for two full weeks. But the rate jumped from 0.95 to 0.99 over the past seven days — suggesting that going back to normal too soon could spark a second peak in case and death curves.
  • The pandemic has not progressed evenly across Brazil. While most of the country has seen new daily deaths decrease over the past two weeks, some Amazonian regions (the first to collapse back in March) are witnessing an uptick in casualties.  

What else you need to know today

  • Supreme Court. The Brazilian Supreme Court will decide whether President Jair Bolsonaro will be allowed to provide written testimony to investigators who are looking into his alleged illegal interference with the Federal Police. Justice Celso de Mello (who retires next week) says the president should give an in-person statement — like any other Brazilian citizen “under investigation.” But other justices argue that the benefit of written testimony was given to other sitting presidents in the past, and should be extended to Mr. Bolsonaro in fairness. 
  • Welfare. For the past few weeks, political observers have waited for the government to present its proposal for a new welfare program to boost cash-transfer initiative Bolsa Família, once the coronavirus emergency salary ends in December. But, off the record, officials within the Economy Ministry say nothing concrete will come before the end of the 2020 municipal elections (November 15 and 29).
  • Accountability. The Federal Accounts Court — a sort of audit tribunal that monitors public spending — will have a vacancy opening up on January 1 with the retirement of judge José Múcio Monteiro. President Jair Bolsonaro has already indicated that he plans on nominating his Secretary-General Jorge Oliveira for the seat. The Bolsonaro family has a personal bond with Mr. Oliveira, who has worked with them for two decades. 
  • You learned it here first. A new study by the Federal Council of Medicine shows that healthcare spending by Brazil’s states and municipalities reaches a combined daily amount of BRL 3.83 (USD 0.68) per citizen. The Brazilian Report had already shown on July 1 that health spending in some states is as small as USD 0.20 a day.
  • IDB. After endorsing the U.S. decision to break with tradition and appoint an American to the Inter-American Development Bank, Brazil was granted the right to name a head to IDB Invest, the bank’s private-sector branch. Carlos da Costa, a senior official at the Economy Minister, will be chosen for the position.
  • To debate or not to debate. CNN Brasil is the latest major network to choose not to hold mayoral debates in the country’s biggest cities, citing fears of coronavirus infections. São Paulo has 14 candidates for mayor, and parties have been unable to agree on a debate format that only includes frontrunners — making the logistics of a debate more challenging. Besides CNN, the three biggest free-to-air TV channels Globo, Record, and SBT have declared they won’t hold debates before the runoff stage.[/restricted]

Brazilian First Lady accused of misusing Covid-19 funds

The Jair Bolsonaro administration has misappropriated BRL 7.5 million (USD 1.3 million) earmarked for the purchase of Covid-19 rapid tests. According to newspaper Folha de S.Paulo, the money — which had been donated on March 23 by meat producer Marfrig — was used instead to fund the “Pátria Voluntária” program (Voluntary Motherland), led by First Lady Michelle Bolsonaro.

Created in July 2019, the initiative aims at fostering volunteer initiatives and raising money from private corporations for third-sector organizations. So far, it has raised nearly BRL 11 million (70 percent of which coming from the Marfrig donation) but has cost the government around BRL 9 million in advertising costs.

Only after the money had already been reallocated, the government asked Marfrig about the possibility of using it for other purposes rather than buying rapid Covid-19 tests. The amount was ultimately funnelled to evangelical organizations linked to Human Rights Minister Damares Alves — in what many observers call a flagrant conflict of interests.

The government has decided not to comment on the report.

This is not First Lady Michelle Bolsonaro’s first controversy. According to money laundering enforcement agents, she received a total of 21 checks from Fabrício Queiroz, a former advisor to Senator Flávio Bolsonaro who has been accused of money laundering involving the president’s son. The checks are dated from between 2011 and 2018, amounting to BRL 76,000. The revelation is part of a corruption case against Jair Bolsonaro’s son and Mr. Queiroz.

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Coronavirus Power

Coronavirus corruption a new headache for Brazilian governors

Allegations of corruption linked to the misuse of the state’s coronavirus budget have led to the downfall of Rio de Janeiro Governor Wilson Witzel, who has been suspended from office and awaits an impeachment trial that is almost certainly going to go against him. Now, the Federal Police is zeroing in on at least six other state governors suspected of mishandling funds earmarked for the anti-Covid-19 effort. Meanwhile, investigations into the misappropriation of funds have been opened in all 27 Brazilian states.

With the arrival of the coronavirus, Congress quickly declared a nationwide state of emergency until December 2020. In practical terms, this move lifted a series of controls on public procurements, to allow for local administrations to respond to the crisis as quickly as possible, purchasing medicine and equipment, and hiring staff. However, this period of “anything goes” also offers a golden opportunity for dishonest politicians to siphon public money into their personal bank accounts.[restricted]

So far, four governors have been directly targeted by police operations. Besides Mr. Witzel, the Feds have also gone after Wilson Lima in Amazonas, Helder Barbalho in Pará, and Carlos Moisés in Santa Catarina. Investigators believe these governors helped — or failed to prevent — the embezzlement of over BRL 4 billion (USD 708 million) from state coronavirus funds.

The latest Covid corruption scandal

Pará Governor Helder Barbalho
Pará Governor Helder Barbalho. Photo: Ag.Pará

On Tuesday, the Federal Police targeted Pará Governor Helder Barbalho — carrying out search and seizure operations at his home and offices, as well as arresting two members of his cabinet and one senior aide. The group is suspected of defrauding public procurements for ventilators to be used by Covid-19 patients. 

The equipment — which didn’t even work properly — was allegedly overpriced by nearly 90 percent, and the bidding process was considered to be rigged. Dozens of arrest orders were issued, and the courts froze Mr. Barbalho’s assets. According to Francisco Falcão, a judge on Brazil’s Superior Court of Justice, the governor was “instrumental” in the prosperity of the scheme, saying there is “robust evidence that the governor was aware and participated in the criminal enterprise.”

Prosecutors say Mr. Barbalho is the ringleader of the ploy, and claim to have proof that he met with corrupt business owners before launching procurement processes in order to negotiate kickbacks.

In a statement, the government of Pará claims to support “any investigation that seeks to protect public money.”

Corruption worsened Latin America’s coronavirus crisis

The coronavirus has killed over 1 million people worldwide — 14 percent of these deaths occurred in Brazil. According to a report by Reuters, if the city of Rio de Janeiro were its own country, it would be the global leader in deaths per 1 million inhabitants. 

And while inequality, misinformation, and high levels of informal labor might have been the biggest factors for Latin America to become the global epicenter of the pandemic, it is undeniable that corruption by elected officials hampered the ability of the region’s countries to respond to the outbreak more efficiently.

Investigators in Brazil, Bolivia, Ecuador, Colombia, and Peru claim that local leaders filled their pockets with public money through rigged procurement processes for materials to fight the coronavirus. Unsurprisingly, four of these five countries figure among the nations with most deaths per capita.

Data from investigators show that nearly every single piece of material was overpriced in a number regions — including hand sanitizer and gauze pads. In their defense, most of the governors under scrutiny place the blame on private companies — whom they accuse of jacking up prices as demand grew, and insisting on receiving payments up front.[/restricted]


The endless list of scandals involving Brazil’s multinational church

That Evangelical churches have carved out a significant niche of influence in Brazilian public life is no secret. Neither is it news that many of these organizations are tied up in corruption schemes involving massive amounts of money. In Rio de Janeiro, prosecutors are investigating an alleged money laundering racket connected to the Universal Church of the Kingdom of God, which is among the largest Evangelical charismatic institutions in the Americas.

Suspicions stemmed from a report from Brazil’s money laundering enforcement agency Coaf, which identified the “atypical” transfer of BRL 5.9 billion (USD 1.05 billion) between May 2018 and April 2019 in the church’s accounts. State prosecutors say there is sufficient evidence to affirm the organization is being used to launder large quantities of funds obtained from corruption in the Rio de Janeiro municipal government.[restricted]

Rio Mayor Marcelo Crivella — who last week was made ineligible for public office after committing electoral crimes — is a licensed pastor of the Universal Church.

According to investigators, there is a “bribery headquarters” within the municipal administration, allegedly led by Mauro Macedo, who is Mr. Crivella’s political campaign coordinator and was implicated in plea-bargain testimony as part of Operation Car Wash. He is accused of tapping up business owners to take part in corruption schemed within Rio city hall, and is the cousin of Edir Macedo, who founded the Universal Church back in 1977. 

With 8 million followers in Brazil alone, the Universal Church of the Kingdom of God has 4,700 temples spread across 172 countries — making it even more of a multinational company than McDonald’s, which has restaurants in 118 countries. Edir Macedo is also well known for being a media magnate, despite Brazilian law forbidding churches from owning TV or radio networks. RecordTV, the second-largest free-to-air television channel in Brazil, is owned by Mr. Macedo. 

The self-proclaimed bishop also has his own political party — the Republicanos party, of which President Jair Bolsonaro’s sons Flávio and Carlos are members — as well as influence in Congress, the Executive, and the mayor’s office of Rio de Janeiro. And Edir Macedo is never far from power. All of Brazil’s presidents in recent decades have enjoyed his support and shaken hands with him at some point.

His political views appear to change according to convenience. He once associated ex-President Luiz Inácio Lula da Silva with the devil, before campaigning alongside him once he was in power. His alliance with Lula’s center-left Workers’ Party was quickly scrapped as soon as ex-President Dilma Rousseff was impeached in 2016. 

Despite having members of his church within Ms. Rousseff’s cabinet, he came out in support of the Michel Temer government the day after her impeachment, with another ally appointed to the cabinet. With the election of Jair Bolsonaro in 2018, Edir Macedo and his church became even more powerful, allowing the organization to shield its most scandalous corruption schemes, which are numerous and certainly not restricted to Rio de Janeiro.

Convicted con man and charlatan

The rise of the Universal Church came at the end of the 1980s, culminating in the election of Fernando Collor de Mello as president in 1989, who Edir Macedo supported against “the devil” Lula. Three years later, the first scandal surfaced. The bishop spent 12 days in jail in May 1992 as part of an investigation into swindling and charlatanism. The principal accusation was that Mr. Macedo had amassed a large fortune thanks to his work at the head of the Universal Church.

Prosecutors evaluated Mr. Macedo’s net worth as BRL 100 million back in 1992. He was eventually let off the hook, with one court saying the fact he did not declare his assets on his income tax return was “not relevant.”

In other cases, Edir Macedo is accused of instigating violence against Afro-Brazilian religions, followers of which the bishop has called “devil lovers.” Members of the Universal Church were tied up in cases of executions, torture, and sexual assault, with the victims being followers of Afro-Brazilian faiths.

One such case involved the rape, torture, and murder of a 14-year-old boy in 2001, committed by pastors from the Universal Church. At the time, the organization washed its hands of any potential involvement in the crime, stating it was an individual act of the perpetrators.

Satanism in Zambia and bible-burning in Madagascar 

Controversy linked to the Universal Church has not been limited to Brazil. The organization began expanding to Africa in the 2000s, before it was targeted by a series of protests in Zambia for “practicing satanism.” The Zambian government even banned the church in 2005 and requested the extradition of two Brazilian pastors, but courts overturned this decision and the institution has operated normally ever since.  

That same year, courts in Madagascar also prohibited the Universal Church from working in that country, ordering the deportation of the institution’s pastors. This move was in connection to allegations that the church was involved in the burning of bibles and other religious objects. 

Deaths and forced sterilization in Angola 

Elsewhere in the southern portion of Africa, the Universal Church has had a presence in the Portuguese-speaking country of Angola since 1992. In 2003, its operations were suspended for 60 days due to an accident at an event hosted by the church inside the Estádio da Cidadela football stadium in the capital city Luanda, which resulted in the death of 16 people. An inquiry concluded that the event was oversold, which was blamed on the organization’s false advertising. Advertisement for the event urged spectators to “bring their whole families” in order to end “all of [their] problems in life.”

In November 2019, Angolan pastors from the Universal Church staged a rebellion. Occupying the organization’s 300 temples across the country, they protested against Edir Macedo’s Brazilian representatives in Angola, making numerous criminal allegations, including money smuggling, forced vasectomies, and racial discrimination.

Prosecutors in Luanda investigated claims that pastors and their wives were forbidden from pursuing academic, scientific and technical qualifications, and that minutes of Universal Church meetings had been doctored. Brazilian bishops fled from the country, while Edir Macedo lobbied President Bolsonaro and Congress to intervene in favor of the church in Angola.

In the same month, a popular uprising resulted in Universal Church temples being vandalized in the African island nation of São Tomé and Príncipe. A São Toméan pastor was arrested in Côte d’Ivoire after leaking messages exposing the church’s abuse of its African employees. The organization called the claims “absurd lies.”[/restricted]


Railway project delays and corruption keep Brazil off the tracks

Along with a large part of the world, Brazil adopted railway transport at the end of the 19th century, importing British technology, designs, and materials. The first Brazilian railway began operations in 1854, located in the interior of São Paulo state, before the mode of transport spread countrywide. The peak of Brazil’s rail network came during the presidency of Juscelino Kubitschek (1956-1961), reaching 32,287 kilometers before the military dictatorship began eradicating railways deemed to be “deficient.”

As a result, at the end of the 1980s, Brazil had practically no passenger railways, despite its huge size and population. The only long-distance train line of the sort connects the southeastern cities of Belo Horizonte and Vitória and is operated by mining company Vale.[restricted]

Of the approximately 30,000 km of railway lines in Brazil, 29,000 km are privately owned. To give an idea of the relative insignificance of railways in the company, only 5.4 percent of Brazil’s industrial production is transported by train; 75 percent is moved on roads, according to Fundação Dom Gaspar.

The impacts caused by a truck driver’s strike in 2018 laid bare Brazil’s dependence on roadway transport and sparked a public debate on the need to expand the country’s railway system. However, little has changed since. Flawed planning, an absence of political will, lack of funds, and corruption have all kept Brazil from getting back on the tracks.

The northeastern pipe dream

The federal government’s most recent gamble in the field of rail transport is the so-called Transnordestina line, which is not a particularly novel idea. The endeavor seeks to develop cargo logistics in the Northeast region, taking a line through 81 municipalities in three states, starting from Eliseu Martins in Piauí and heading toward the ports of Pecém, in Ceará, and Suape, in Pernambuco.

The project began with an official ceremony in June 2006, when then-President Luiz Inácio Lula da Silva laid the cornerstone in Missão Velha, in Ceará. The plan was for trains to be in operation by 2010, with an investment of BRL 4.5 billion — BRL 10.8 billion (USD 1.9 billion) in today’s money.

However, since it began, the project has been a mix of hope and dashed ambitions. Hope, for what the new railway could represent for the Northeast, Brazil’s poorest region. Disappointment, on the other hand, for the constant interruptions and complaints of misused funds.

The Transnordestina (Transnortheast) project is a private endeavor — led by steel-maker Companhia Siderúrgica Nacional (CSN) — but it is funded with public money. So far, work stoppages have occurred due to legal issues, squabbles among CSN partners, and a lack of money from the government. Construction has already swallowed up BRL 6.9 billion — over half of the total forecast — but only 30 percent of the project has been completed. There is no guarantee that the remaining BRL 4 billion will be released to finish construction.

In 2017, the Federal Accounts Court (TCU) blocked all federal government entities from sending funds to the endeavor until they received detailed projects and budgets from CSN. Two years later, part of construction resumed on the stretch of rail between the states of Piauí and Ceará, but work remains stopped in Pernambuco, where the majority of the future railway is located. In that state, two segments of the track have been completed, between the cities of Trindade, Salgueiro, and Custódia. For much of the unfinished project, definitive routes have not even been finalized and there is no guarantee of funds for this to take place.

In Ceará, works were divided into 11 blocks. So far, work has only been done on two of them. Since resuming construction in 2019, the project is already grinding to a halt once again.

As a result of these constant delays, the Brazilian Land Transport Agency (ANTT) issued a proposal to the Infrastructure Ministry in March that would determine the termination of the railway’s concession contract. In other words, the regulatory agency wants new deals to be signed before work may continue. The ministry has yet to reply and has shown no indication of doing so soon.

A railway 35 years in the making

While the Transnordestina project has been plagued with delays and controversy, it pales in comparison to the problems encountered with the Ferrovia Norte-Sul (North-South Railway), which was drawn up 35 years ago as the new backbone of Brazil’s railway network. However, since its inception, the project has suffered from flawed execution and design, as well as a large helping of corruption.

Announced in 1985, the line was initially projected as a 1,550 km track between Açailândia in the Northeast to Anápolis in the Center-West state of Goiás. The awarding of the contract was shrouded in controversy, with allegations of being rigged to favor the winning construction firms — which, three decades later, would find themselves in the middle of Brazil’s largest corruption scandal in history, uncovered by Operation Car Wash.

Over time, the planned construction grew and grew, eventually turning into a hypothetical 4,500 km line linking Brazil’s North and South regions. However, 35 years since it was conceived, only one-quarter of the project has been completed, and the finished tracks are seldom used. According to state-owned company Valec Engenharia, Construções e Ferrovias — in charge of the Norte-Sul railway — BRL 12.5 billion has been invested in the project so far. 

According to investigations, much of the corruption that hindered the progress of the Ferrovia Norte-Sul is down to the fact that the entire grand operation is controlled and overseen by Valec. Beyond simply coordinating the works, Valec is also in charge of operating the railway, setting prices and essentially auditing itself. Unsatisfied with the freight charges demanded by the state-owned firm, agricultural companies and other producers have opted to continue hiring private trucking firms to transport their output to ports. Beyond this, it didn’t take long for investigators to find proof of public money being embezzled by Valec executives.

The biggest such corruption scheme was led by engineer and politician José Francisco das Neves — commonly known as Juquinha das Neves — who led Valec between 2003 and 2011. Last May, Juquinha and six other people became defendants in a case accusing the group of overpricing contracts in the stretch of railway that passes through Goiás, Juquinha’s home state. Investigations showed that construction companies formed a cartel to rig prices and offer anti-competitive proposals to give the impression that auctions were being conducted fairly. Public prosecutors estimate that this scheme caused losses of over BRL 76 million to the public coffers.

Government gambling on private concessions

Today, the Norte-Sul railway project is split into three parts. In March 2019, at the beginning of the Jair Bolsonaro administration, two of these segments were awarded to Rumo Logística in a 30-year non-renewable contract costing BRL 2.7 billion — 100.29 percent more than the minimum bid of BRL 1.3 billion.

The remaining segment was surrendered by Valec back in October 2007, which awarded it to mining giant Vale. The firm was the only interested party in the auction, paying the minimum price of BRL 1.5 billion.

Researchers in mobility have long complained about Brazil’s lack of railway projects that involve passenger transport. Experts consulted by The Brazilian Report say that the Transnordestina and Norte-Sul initiatives could go far beyond simply transporting cargo, without the need for significant further investment.

One such specialist, Marcelo Dourado, laments the poor decisions made by Brazilian authorities concerning public rail transport. “Brazil is the only continent-sized country without a national passenger rail network. It’s also the only continent-sized country that reduced the size of its railway network over the last century. This is deplorable from all points of view.”[/restricted]


Brazil’s prosecutor general: unbiased professional, or Bolsonaro’s lackey?

Handpicked by President Jair Bolsonaro last September, Brazil’s Prosecutor General Augusto Aras is about to complete a full year in office. Initially depicted as the president’s strawman, Mr. Aras used his inauguration speech to reinforce his “unwavering commitment to [fighting] corruption,” while stressing that the Federal Prosecution Service he now oversees must be “pledged to the true spirit of the Constitution.”

His stint as prosecutor general has so far been littered with controversy, with questionable decisions that have led to internal and external criticism. Mr. Aras’s vow against corruption has been called into doubt, thanks to his series of attacks against Operation Car Wash — the largest anti-corruption investigation in Brazil’s history.[restricted]

Indeed, several of his decisions have raised a question mark over his actual dedication to the fight against corruption, and whether he is simply in the role of prosecutor general to act as President Bolsonaro’s lackey.

Just last week, Augusto Aras made at least three statements in favor of the Bolsonaro family. On Thursday, he told the Supreme Court that Senator Flávio Bolsonaro should be given the right to jurisdictional prerogative in the corruption case currently brewing in Rio de Janeiro.

When the events that make up the inquiry took place, Flávio Bolsonaro was a member of Rio state congress, meaning that — by the letter of the law — the president’s oldest son should not be granted any parliamentary jurisdictional benefits.

Mr. Aras also shelved a request to place President Bolsonaro under investigation for threatening a reporter from newspaper O Globo — Mr. Bolsonaro threatened to “punch [his] face in” — claiming the president enjoyed immunity.

He also ruled in favor of Mr. Bolsonaro in stating the president’s verified social media accounts should not be considered “official,” giving the head of state the right to block users as he sees fit. This statement came in a case pending before the Supreme Court, filed by a lawyer who was blocked by the president on Twitter.

Suing President Bolsonaro

The major litmus test of Mr. Aras’s time in office concerns a complaint issued by former Justice Minister Sergio Moro, who directly accused President Bolsonaro of undue interference in the Federal Police. The Brazilian Report spoke with several sources within the Prosecutor General’s Office, Planalto Palace, Supreme Court, and the General Counsel for the Federal Government — the general feeling is that Augusto Aras will nix Mr. Moro’s plea and save the president from investigation.

Before this, one of the most controversial decisions of the prosecutor general’s time in office also concerns Sergio Moro. Prior to examining whether Mr. Moro’s accusations are based in fact, Mr. Aras named the former Justice Minister as a suspect for alleged malfeasance. 

One source from within the Prosecutor General’s Office called Augusto Aras’s attitude towards Mr. Moro in the investigation as “subtle, but uncommon,” saying that it works in Jair Bolsonaro’s favor.

Indeed, the president’s allies are prepared to submit appeals in the case and are wary of celebrating prematurely. “In legal matters, you never know what’s around the corner,” said one of Mr. Bolsonaro’s interlocutors. However, all are in agreement about the “signals [Mr.] Aras is making.”

Constitutional Catch 22

Michael Mohallem, a law professor at Fundação Getúlio Vargas in Rio de Janeiro, says that the appointment of the Federal Prosecutor General is one of the weak links left by the Brazilian Constitution when it comes to the autonomy of the prosecution service. “The institutional framework does not favor independent stances from the [Prosecutor General] as the president is not forced to choose a candidate from the three-person list of suggestions [prepared by prosecutors],” he explains.

“It’s not unconstitutional, but it weakens the situation, as it allows any person who is close and aligned with the president to be given the job. It’s one thing to evaluate technical requirements, it’s another to evaluate preferences. One of the central responsibilities of the Prosecutor General is to carry out oversight on the Executive branch. If he/she is aligned [with the government], that’s a flaw.”

When appointing Augusto Aras as Prosecutor General, Jair Bolsonaro turned his back on a tradition in place since 2003, by which the president would choose the new head of the prosecution service in accordance with a three-person list of nominees selected by professionals in the field. Over the last 17 years, only President Michel Temer selected the second-name on this list — Mr. Aras’s predecessor, Raquel Dodge. On all other occasions, Brazil’s presidents have chosen the prosecutor with the most votes among their peers. 

Augusto Aras wasn’t even on the list presented to Mr. Bolsonaro.

Beyond simply having been handpicked by the president, suspicions around the prosecutor general’s credibility are increased by subtle hints from Jair Bolsonaro that Mr. Aras could be in the running for a seat on the Supreme Court. Two justices will retire before the end of Mr. Bolsonaro’s term and the chance of a spot on the country’s highest court could be making Augusto Aras toe the government line.

This issue is repeated to exhaustion among legal scholars and Mr. Aras’s peers. “Even if the prosecutor general has a neutral legal view, without bias, the doubt and mistrust around his actions weigh heavily against the image of his office. It’s not enough to have integrity, in this case, it is important that society perceives him as someone who works without political bias,” stresses Mr. Mohallem.

The law professor points out another problem with the constitutional rules regarding the role of prosecutor general: the possibility of being granted a further term after two years. “If someone does the job independently, if they file complaints against the president, cabinet ministers — in other words, if they do their job properly — there is a chance that the president will not want to give the prosecutor another term, inhibiting their work.”[/restricted]

Brazil Daily

Volkswagen to pay reparations for dictatorship involvement

Today: Volkswagen reckons with its past. The impeachment of Rio de Janeiro’s governor. A massive merger that will challenge antitrust authorities. And the progression of the coronavirus in the country.

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Volkswagen apologizes for role during dictatorship

German automaker Volkswagen will pay BRL 36 million (USD 6.44 million) in [restricted]reparations and donations to the families of victims of the Brazilian dictatorship — as well as to human rights initiatives. The payments are part of a settlement that will end three criminal investigations into the company’s role in assisting the Department of Social and Political Order (DOPS) — Brazil’s former political police — which kidnapped, tortured, and killed hundreds of people.

  • In a 2017 report led by Volkswagen, historian Christopher Kopper determined that the company’s security crew spied on its staff and told DOPS of any “suspect” activity. Over 100 people were directly impacted by Volkswagen’s relationship with the military. 
  • In 2015, Volkswagen became the first company to negotiate paying compensation for its role during that period. And, according to Mr. Kopper, “the first time that a German company accepts responsibility for human rights violations against its own workers for events that happened after the end of National Socialism.”

Why it matters. According to Brazil’s Truth Commission, created to set the record straight on human rights abuses during the dictatorship (1964-1985), over 80 companies helped turn in their own employees associated with union movements and considered to be “potential subversive agents” — including Ford, Toyota, and Mercedes-Benz.

Memory. The documents dug up by the commission, however, do not provide a complete record of state repression during the dictatorship — nor the full extent of private firms’ involvement. Many documents of the time were burned by the military or have otherwise vanished.

Rio governor’s impeachment moves forward

Rio de Janeiro’s State Congress voted in favor of submitting Governor Wilson Witzel to an impeachment trial. As with previous votes in the process, lawmakers unanimously voted against the politician, who is accused of embezzling funds intended for use in the coronavirus effort.

  • Now, a committee of five lawmakers and five state judges will trial the case. Mr. Witzel’s recent political defeats suggest that the chances of him escaping the ousting are slim to none.

Why it matters. Mr. Witzel’s downfall epitomizes Rio’s political collapse. The state is living in a position of financial calamity and five former governors have been arrested since 2016.

Trivializing impeachment. By definition, impeachments should be exceptional measures but have become part of the political landscape since 2016, when Dilma Rousseff became the second president to be impeached since Brazil’s return to democracy in 1985.

  • Before 2016, only two state governors had faced impeachment proceedings over the last 60 years. After Ms. Rousseff’s ousting, five governors saw themselves in that situation — three in the past few months.
  • According to João Villaverde, a consultant and researcher at Fundação Getulio Vargas, “the political costs of impeachment for lawmakers has disappeared.”

What comes next. Barring a shocking twist, Rio shall continue to be governed by Cláudio Castro, a fervently religious politician who has become close to the Bolsonaro family — and is himself under investigation for corruption.

Merger in car rental sector a regulatory pickle

Localiza and Unidas, the two biggest car rental companies operating in Brazil, announced on Wednesday their intention to merge. If the deal goes through, it would create a massive BRL 48-billion firm with a fleet of over 468,000 vehicles and a footprint in 404 cities, as well as six South American countries. 

  • However, the merger will be a tough sell to antitrust watchdog Cade — as the two companies combine for a 47-percent market share of car rentals and fleet management, which could skew the market in their favor. Analysts say there is little chance of the deal being approved without restrictions.
  • Still, markets received the news positively, with shares of Localiza rising 14 percent, and Unidas stock going up by 17 percent.

Why it matters. The car rental market boomed in Brazil as millions of people sought job opportunities working for logistics apps. But the sector was severely hit by the pandemic. Localiza’s Q2 profits dropped 53 percent, while Unidas’ net recurring profits were nearly wiped out. Together, the companies would be better positioned for a recovery.

8 percent of Brazilians have taken coronavirus tests

According to the Brazilian Institute of Geography and Statistics, 17.9 million Brazilians (or 8.5 percent of the total population) had taken a coronavirus test by the end of August. Considering that the country had 3.9 million confirmed infections during the same period, Brazil had a positive rate of approximately 21 percent — one of the highest in the world.

Why it matters. The rate of positive results is a good measure of how adequately countries are testing, as it indicates the level of screening relative to the size of the outbreak. 

Lack of data. As we at The Brazilian Report have pointed out on numerous occasions, Brazil doesn’t test nearly enough people to have an accurate understanding of how the pandemic has progressed in the country.

Deceleration. In seven Brazilian states, the 7-day rolling average of new daily deaths rose by more than 10 percent between September 8 and 22. In 14 states, it decreased by more than 10 percent.

What else you need to know today

  • Diplomacy. Foreign Minister Ernesto Araújo will attend the Senate’s Foreign Affairs Committee to explain the visit of U.S. Secretary of State Mike Pompeo to the Venezuelan border last week — during which Mr. Pompeo called Venezuelan President Nicolás Maduro a “drug trafficker.” The move, just 46 days before the U.S. election, was considered by lawmakers an “affront to Brazil’s diplomatic tradition” of neutrality and good relations with neighboring nations.
  • Trade. The government announced trade deals with Mexico and Paraguay to boost sales of vehicles and auto parts with the two Latin American countries. According to ordinances published on Brazil’s Federal Register, the idea is to progressively reduce tariffs before scrapping them altogether in 2022.
  • Environment. The Federal Prosecution Service has requested that a federal court in Brasília promptly analyze a request to remove Environment Minister Ricardo Salles from office. Signed by 12 federal prosecutors in July, the complaint accuses the minister of “purposely depleting Brazil’s environmental protection structures and policies.” During an April 22 cabinet meeting, Mr. Salles said the government should take advantage of the undivided attention of the press on the Covid-19 pandemic to “run the cattle herd” through the Amazon, “changing all of the rules and simplifying standards.”
  • Inflation. The IPCA-15 price index, a predictor of the official inflation rate, rose 0.45 percent in September — the biggest bump for the month since 2012. Food products were the main culprits, continuing a trend that has been observed for the past few months — and has already worried the government about possible effects on poor populations.[/restricted]
Coronavirus Latin America

Peru once again in political turmoil as pandemic rages on

Just 11 months ago, Peru witnessed a tug of war between President Martín Vizcarra and the country’s lawmakers. After anti-corruption legislation was blocked, Mr. Vizcarra dissolved Congress, and managed to block an attempt to remove him from office. But now lawmakers might get their way, as Mr. Vizcarra faces impeachment proceedings for “moral incapacity,” after he tried to obstruct a Congress-led corruption probe.

The case was called after the head of Congress, Manuel Merino, received leaked audio recordings in which the president appears to discuss ways to cover up the misuse of public funds.[restricted]

In the audio clips, he is heard telling advisers to lie while giving their testimony to a parliamentary hearings committee — downplaying details of his office’s hiring of a little-known singer, Richard Cisneros, to deliver pro-government motivational talks. Mr. Cisneros was reportedly paid PEN 175,400 (USD 49,500). To make matters worse, the contracts were made during the pandemic.

The case could result in the end of an administration marked by chaos from the start. Mr. Vizcarra took office in March 2018, after then-President Pedro Pablo Kuczynski resigned to avoid being impeached over corruption scandals. 

The worst possible timing for a political crisis

Almost one year after Congress tried to declare the presidency vacant and swear in Vice President Mercedes Aráoz as the head of state, Peru finds itself in turmoil yet again. 

This latest attempt to remove the president arrives just as Mr. Vizcarra is trying to pass a bill that would make those convicted of corruption by Peruvian courts unable to run for public office. Just as Brazil, the Peruvian political landscape has been devastated by massive construction scandals involving Brazilian construction group Odebrecht. The country has seen all of its living former presidents investigated for corruption. Two have been arrested — a third killed himself in 2019 to avoid a similar fate.

But this latest chapter comes precisely at a moment in which the coronavirus pandemic has worsened in the already badly hit country.

When the virus arrived in Latin America, Peru was one of the first countries to impose strict lockdown rules and set aside between 9 to 12 percent of its GDP for a major aid package to help vulnerable populations in coping with the economic effects of the sanitary crisis. Five months later, however, Peru leads the world in Covid-19 mortality rates, according to data from Johns Hopkins University.

So far, 730,000 Peruvians have contracted the coronavirus, and 31,000 have died . The Andean country now has 931 deaths per million people — far more than Brazil or the U.S., the worst-hit nations in absolute numbers in the Americas. 

Peru seems a textbook example of what we at The Brazilian Report have commented on in our Explaining Brazil Podcast — the success of social isolation measures is limited in countries defined by deep, structural inequality.

Why things got so out of hand in Peru

  • Deficiencies in the national healthcare system. According to Eduardo Gotuzzo, a professor emeritus at the Cayetano Heredia University, Peru invests very little in its healthcare system. The country lacks hospital beds (especially for intensive care), relies on overburdened and underpaid staff, and at the beginning of the year had only one lab capable of processing molecular tests.
  • Bungled attempts to trace the coronavirus. Experts say Peru’s response to the coronavirus had one key mistake: it was centered on treating infections rather than preventing them. The country also did a poor job with its testing — prioritizing rapid tests, better for epidemiological control, over serological ones (which are considered to be the gold standard by the World Health Organization).
  • Informal economy. About 70 percent of the Peruvian economically active population works in the informal sector — meaning that they can’t stay home for long, and that the government’s efforts to aid vulnerable populations wouldn’t be enough on their own. Moreover, even getting aid to these people forced them into risking their health — as less than 40 percent of Peruvians have a bank account. The result was massive gatherings at bank branches across the country.

The Peruvian government has lacked self-reflection, saying that the dreadful numbers are more linked to the administration’s “transparency” than to an unmatched epidemic. “I don’t know any country that is as transparent as Peru in dealing with the number of deaths caused by the pandemic,” said Walter Martos, president of the council of ministers. “We are adding suspected cases in the death tally, which increases our totals.”[/restricted]

Brazil Weekly

Latin America’s oil industry during Covid-19

This week, we give you an overview of the oil industry in Latin America. Bolsonaro’s Church v. State dilemma. And Brazilians’ increasing access to banks.

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The state of the Latin American oil industry during Covid-19  

Back in March, Petrobras CEO Roberto Castello Branco said the coronavirus pandemic could spark “the worst oil crisis in a century.” [restricted]Indeed, 2020 has proven to be a truly dreadful year for the industry, with Brent spot prices crashing from USD 67 back in January to just USD 39 today. Oil-rich Gulf nations have been forced to slash spending and borrow money, in a risky strategy as the outlook for oil continues to be uncertain. Latin America reporter Lucas Berti and I explain how the 2020 oil crisis has impacted the region:

Brazil. Shares of the country’s state-owned oil giant Petrobras are actually higher now then on March 11, when the World Health Organization declared a pandemic and Russia and Saudi Arabia were fighting an oil price war. But the company still has many questions to answer:

  • The company’s divestments program sees Petrobras focusing on oil extraction. Leadership wants to sell off assets in the North, Northeast, and South regions — concentrating their operations instead in the states of Rio de Janeiro and São Paulo (where the deepwater pre-salt reserves are). But before leaving their operations in these regions, Petrobras will have to negotiate billions in tax, labor, and environmental debts.
  • Moreover, the company is accused of falsely imprisoning 73 workers during a strike in February. Labor prosecutors say Petrobras prevented these workers from leaving their position until replacements arrived — with some working 11 straight days — and are asking judges to slap a BRL 100-million fine on the firm along with individual reparations of BRL 100,000.

Argentina. The oil sector has nearly stopped operations completely in Argentina, as only five oil-drilling rigs are currently operating, according to oil tech firm Baker Hughes. Current production is down to 1940 levels (fewer than 300,000 barrels a day). Experts predict that Argentina’s output will reach an average of 400,000 to 500,000 barrels a day by 2024.

Mexico. The oil industry represents roughly 6 percent of the Mexican GDP — a share that stood between 9.4 and 10.8 percent from 1996 to 2008. Pemex, the state-owned oil company, is the single largest tax contributor to the Mexican government, reduced losses in Q2 2020 when compared to one year ago (USD 1.9 billion), but overall revenue has been halved over the same period. Pemex’s debt reached USD 107 billion, hampering its long-term growth projections.

  • Moreover, as we at The Brazilian Report explained in September, a massive corruption scandal has rocked Pemex. Former chief executive officer Emilio Lozoya is accused of pocketing USD 10.5 million in bribes from Brazilian construction firm Odebrecht — the company behind a veritable avalanche of corruption in Latin America and Angola.

Colombia. According to consultancy Control Risks a quarter of Colombia’s oil production could be lost by 2021, “and will never be recovered” if prices remain at current levels. Production has dropped 10 percent since Q1, and the country’s sector leader, Ecopetrol, seems more focused on its USD 1.5-billion investment in the U.S. shale gas sector.

Chile. Production in Chile fell by 12.2 percent by July 2020, worsening a downward trend that predates the pandemic. Experts say that a drop in investments will certainly be detrimental to its recovery effort. 

Between the Church and the Deficit 

There is an expression in Brazil to describe when someone wants to have it both ways: we say they are lighting ‘one candle for God, and another for the devil.’ The expression seems to fit the latest tug of war between President Jair Bolsonaro and Paulo Guedes, his Economy Minister. Under pressure from Mr. Guedes, the president vetoed a piece of legislation pardoning BRL 1 billion (USD 188 million) in unpaid tax fines to churches. But then asked Congress to strike down his own veto.

What is behind the move. Brasília correspondent Débora Álvares explains that Jair Bolsonaro is trying to maintain the support of the evangelical caucus — which includes 187 congressmen (of 513) and eight senators (of 81). Last week, the president was determined not to veto the pardon, and ordered his aides to find legal arguments to back him.

  • Economic advisers, however, warned the president that granting BRL 1 billion in tax pardons — especially in a moment when the government is cash-strapped — could be considered an infringement of Brazil’s fiscal responsibility laws (which is an impeachable offense).

What he is saying. On Twitter, Mr. Bolsonaro called the fines “absurd,” and said that he only vetoed it as a way to avoid an “almost certain impeachment process.” But added: “I confess that, were I a representative or senator […] I’d vote to strike the veto down.”

Why it matters. This is not the first time Mr. Bolsonaro shows that he puts his personal alliances before fiscal stability.

  • Last year, he made churches exempt from the ICMS tax (a levy on goods and services) until 2033. And under the government’s auspices, the evangelical caucus has been working on muscling its way into using the tax reform being discussed in Congress as a way to enhance their already very generous tax exemptions.

Church and state. The rise of evangelicals in politics has created new forms of corruption in Brazil. Just this weekend, Rio prosecutors revealed that there is evidence that Mayor Marcelo Crivella used the Universal Church of the Kingdom of God (where he is a bishop) to launder billions siphoned from City Hall.


On Friday, Brazil’s second-largest pet retailer chain, Petz, raised over BRL 3 billion (USD 564 million) in the country’s biggest initial public offering of 2020. High demand boosted stock by 21 percent on the first day of trading. Suno Research estimates a target price of BRL 17.99 for Petz, considering strong future growth. Petz’s high reliance on animal feeding products and the fact it only has one warehouse for its entire supply chain are the company’s main weaknesses.

Natália Scalzaretto

More Brazilians enter the financial system

The number of Brazilians with a bank account has significantly increased over the past decade. All age brackets have seen advances — but 45 million adults still remain completely out of the banking system. Exclusion from the banking system is higher among women, blacks, low-income people, and the Northeast region (Brazil’s poorest). 

Looking ahead

  • Economy. The Central Bank publishes today its Economic Activity Index (IBC-Br) for July. The index is considered to be a preview of official GDP figures. Analysts predict a +4-percent result. On Wednesday, the bank will also decide on Brazil’s benchmark interest rate for the next 45 days. Markets expect the current 2-percent-a-year rate to stay unchanged.
  • Elections. Parties have until Wednesday to decide on their candidates for the 2020 municipal elections. In two months, 147.9 million voters will elect new mayors and city councilors across the country — the sole exception is Brasília. The federal capital has a state-like status and is run by a governor.
  • Vaccine. British-Swedish pharmaceutical giant AstraZeneca resumes today Phase-3 trials of a potential coronavirus vaccine in 5,000 Brazilian volunteers (many of whom are health workers). The study was suspended for a week after a suspected serious adverse reaction in a UK patient.
  • Government. Justice Minister André Mendonça was admitted into a hospital on Sunday after being diagnosed with acute myocarditis (an inflammation of the heart muscle). Mr. Mendonça will remain in hospital for at least 48 hours, but the latest medical report stated that he was feeling better.
  • Car Wash. On Thursday, a court of appeals will decide whether or not to punish Federal Judge Marcelo Bretas for taking part in political events alongside President Jair Bolsonaro and Rio Mayor Marcello Crivella. The trial will be explosive for the Brazilian Judiciary branch, as Mr. Bretas has become the face of Operation Car Wash— and just last week authorized an operation against relatives of members of high courts accused of influence peddling (more below).

In case you missed it

  • Inflation. Food prices have dramatically increased in Brazil, raising red flags in the government. President Jair Bolsonaro asked vendors to reduce their margins to “close to zero” as an act of patriotism, and the Justice Ministry ordered them to explain the reasons for price increases — but the administration says it won’t freeze prices. Food inflation weighs disproportionately on the poor and could spark mass anger among a significant proportion of the electorate.
  • Trade. Despite U.S. President Donald Trump’s decision to reduce import quotas on Brazilian semi-finished steel, President Jair Bolsonaro will extend a tariff-free ethanol import program with the U.S. for 90 days, starting today. The move breaks with Brazilian diplomacy’s reciprocity principle, but the Brazilian government hopes it could open the opportunity for a free-trade deal with the U.S. The strategy could fail if Mr. Trump fails to win re-election, as challenger Joe Biden has defended a tougher stance on Mr. Bolsonaro for his laissez-faire environmental approach.
  • IDB. The Inter-American Development Bank (IDB) elected as president Mauricio Claver-Carone, a Florida-born attorney best known for defending a hardline policy against Cuba and Venezuela. Besides breaking with tradition of always having a Latin American head for the bank, the U.S. move for control over the IDB scuppered the Jair Bolsonaro administration’s intention of naming the bank’s first Brazilian president. Still, Brazil’s Foreign Affairs Ministry celebrated Mr. Claver-Carone’s election.
  • Big law. Operation Car Wash launched an investigation into major law firms owned by relatives of members of high courts. According to Rio de Janeiro prosecutors, law firms have become fronts for money-laundering schemes or for paying kickbacks to judges. The operation, however, did not target the judges who might have received dirty money. That is because state prosecutors have no jurisdiction over high courts — only Prosecutor General Augusto Aras can charge high court justices. Considering that Mr. Aras has been extremely subservient to President Jair Bolsonaro, this is an interesting dynamic to observe.
  • Big meat. The U.S. Occupational Safety and Health Administration slapped a USD 15,000 fine on Brazilian meat giant JBS (which operates in the U.S. under the name Swift Beef) for failing to protect workers of a Colorado plant from Covid-19. Meat plants have also been linked to the rapid spread of the coronavirus in Brazil’s countryside, as working conditions increase the chances of transmitting respiratory viruses.[/restricted]

Brazilian Feds target big law firms accused of corruption

One of the most common legal strategies in Brazil is not taught in any law school and left out of the textbooks. It is known in Portuguese as “embargos auriculares,” something that could be translated as “close-to-ear appeal.” The expression is a derogatory way of describing a common practice in courts — when lawyers visit judges’ chambers and sweet-talk them into a favorable ruling. It implies that counselors use more than their words to get their way, offering some sort of under-the-table deal.

This week, Operation Car Wash launched a new set of charges against big law firms, suggesting that the hidden meaning of the expression “close-to-ear appeals” might be less of an urban legend and more of a common strategy. [restricted]

Investigators launched Operation S $cheme (yes, with a dollar sign), targeting 15 big law firms accused of embezzling funds from the so-called “Sistema S” — a group of non-profit organizations run by the private sector (yet financed with public money), which promote educational and cultural activities across the country. According to prosecutors, law firms have become fronts for money-laundering schemes or for paying kickbacks to judges.

The list of high-profile names targeted by the Feds includes the likes of Cristiano Zanin, Roberto Teixeira — both of whom represent former President Luiz Inácio Lula da Silva —, Frederick Wassef — a shady lawyer who runs errands for the Bolsonaro family —, and relatives of members of high courts and even the Federal Accounts Court (TCU) — a sort of audit tribunal that monitors public spending and is supposed to act as a deterrent to corruption.

Among the relatives of the judges being targeted is the son of Justice Humberto Martins, who presides over Brazil’s second-highest judicial body, the Superior Court of Justice (STJ).

Why the Feds are targeting big law firms

Part of the investigation was based on a plea bargain agreement made with Orlando Diniz, who for 20 years headed three branches of Sistema-S organizations in Rio de Janeiro. Mr. Diniz was arrested as part of the corruption ring run by former Rio Governor Sérgio Cabral — who has already racked up dozens of corruption convictions.

According to investigators, at least BRL 151 million (USD 28.5 million) of the BRL 355 million paid by Mr. Diniz’s organizations to law firms was siphoned off as part of the scheme. So far, prosecutors have presented charges against 25 people — 24 of whom are lawyers — for criminal association, embezzlement and influence peddling.

Prosecutors are claiming that Lula’s lawyers formed the “core” of the criminal ring, representing Mr. Diniz since 2012.

Cristiano Zanin denies any wrongdoing and says the accusations are a ruse to divert his attention from the former president’s case. Mr. Zanin represents the leftist leader at the Supreme Court, trying to overturn past convictions by claiming the case against Lula was biased against him.

The criminal group would also include Caio Rocha, son of former STJ Presiding Justice César Asfor Rocha, Tiago Cedraz, son of TCU member Aroldo Cedraz, and Eduardo Martins, son of incumbent STJ Presiding Justice Humberto Martins. The latter allegedly received BRL 77 million from Mr. Diniz’s organizations due to his political connections, in return for guarantees of favorable verdicts in cases of interest.

Prosecutors claim the amounts paid for council were unreasonably high — suggesting they were actually payments for influence peddling. However, investigators add that there is no evidence that any of the justices associated with those lawyers were ever bribed.

Questionable behind-the-scenes relations

Some of the most exclusive law firms in Brazil are headed by former members of higher courts — or by their relatives. More than expertise of the law, they offer access to the chambers of pretty much any judge in the country. While having private conversations with members of the bench isn’t, in itself, illegal, Operation S $cheme shows that this spirit of camaraderie among judges can easily cross the line into criminal territory.

Former Supreme Court Chief Justice Joaquim Barbosa was one of the few judges ever to criticize that practice. “There are many [judges] who should be tossed from the bench. The collusion between lawyers and judges is pernicious and damaging to the rule of law. We all know that many decisions are based on friendships and absolutely out of bounds,” he said during a 2013 trial that convicted a judge for ruling in favor of his friends.

Former Justice Eliana Calmon, who served as the ombudsman of the National Justice Council, went as far as talking about “criminals with gavels.” She said in an interview: “These are still boys — and all are millionaires! This is an old issue that has grown more problematic in recent years. This includes not only judges’ sons and daughters, but also their spouses.”

A couple of examples of this practice come from Rio. Disgraced former Governor Sérgio Cabral received kickbacks from government contractors and laundered money through his wife’s law firm — a scheme allegedly copied by current Governor Wilson Witzel (who has recently been suspended from office and faces impeachment proceedings).

This umbilical relationship between big firms and members of the bench are one of the most deleterious features of Brazil’s legal system — leading 60 percent of Brazilians to distrust judges

And we all know, the legitimacy of the courts depends on the people’s trust.[/restricted]


Explaining Brazil #124: Rio’s descent into political hell

This week’s episode, Rio de Janeiro’s descent into political hell, was supported by AMEC, the Brazilian Association of Investors in Capital Markets. AMEC brings together around 60 institutional investors from Brazil and abroad — with a combined portfolio of over USD 130 billion.

It was also supported by, a platform that offers a SEO Mastery course which will help make your company’s website the top-ranked in your field, in no time at all. 

Rio de Janeiro was the center of the world in 2014 and 2016, when Brazil hosted the football World Cup and the Olympics. It seemed like a turning point for the City, with Brazil’s soft power reaching a historic high. 

Four years later, everything seems to have gone downhill. Every single living former governor of Rio has been jailed at some point, and the incumbent governor could face the same destiny. Apart from its political troubles, Rio continues to battle the Covid-19 outbreak, violent crime, police brutality, and an economic collapse that has no end in sight.

This week, we discuss Rio’s endemic corruption problem.

Listen and subscribe to our podcast from your mobile device:

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On this episode:

  • Mauricio Santoro holds a Ph.D. in Political Science. He is currently an Assistant Professor and Head of the Department of International Relations at the State University of Rio de Janeiro. He also writes op-eds for The Brazilian Report.
  • Benjamin Fogel is a regular contributor to The Brazilian Report, he also writes for Jacobin magazine and Africa is a Country. He is working on a Ph.D. on the history of Brazilian corruption politics at New York University.

Background reading:

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Famous Brazilian priest dips his hand into a millionaire collection plate

In the world’s largest Catholic country, with around 125 million adherents, Brazil is home to the bizarre phenomenon of the “celebrity priest.” With millions of followers on social media, these famous fathers fill out churches for services that are broadcast live over a wide range of platforms, selling millions of CDs and books, and being featured on primetime television. They also enjoy significant political prestige in a nation where the Catholic Church has always had broad influence over all sectors of society, to the point that their words can be decisive in debates such as the legalization of abortion — still a taboo in the country. 

But, as has been the case in several parts of the world, members of the Catholic Church in Brazil have often been caught up in scandal — and these pop priests are no different. One such notable man of the cloth is suspected of leading a criminal organization accused of dipping its hand in the collection plate and embezzling donations put toward the construction of a mega-church in Central-Western Brazil.[restricted]

The hyper-temple in question is located in Trindade, in the interior of Goiás state — a region based largely on its agribusiness economy. The money that was meant to be used on building the church ended up enriching local business owners and politicians, as well as the priest himself, say investigators.

The alleged leader of this gang is the 46-year-old Father Robson Oliveira. Born and bred in Trindade, he spent some time in Ireland and completed a master’s degree in Moral Theology at the Pontifical Gregorian University in Rome. Upon returning to Brazil in 2003, he took over the parish of the Sanctuary of the Eternal Holy Father in his hometown. One of his first actions in charge was to file a request with the Pope to award the church basilica status. Indeed, the temple is one of the largest in the country, housing up to 2,500 people and attracting millions of pilgrims.

Recognition duly came in 2006, when Pope Benedict XVI granted the church the title of ‘minor basilica,’ making it the only one in the world dedicated to the Eternal Holy Father. With his mass broadcast live on the Rede Vida TV station, the work of Father Robson began being noticed nationwide and even abroad. 

Four years later, with his celebrity status established, Father Robson began an intense campaign to build a new, much larger basilica, with a capacity of 6,000 people. He created the Association of the Sons of the Eternal Holy Father (Afipe) to receive and manage donations for the ambitious construction project. The idea is to build a temple that is 94 meters tall, on an area of 120,000 square meters, with the largest suspended bell in the world, made especially in Krakow, Poland. At four meters high, 4.5 meters in diameter and weighing 55 tons, the bell is 78 percent copper and 22 percent tin, and is decorated with images depicting the history of the parish.

Budgeted at a total of BRL 100 million (USD 18 million), the construction job was slated to be finished in 2022, said Father Robson. However, it is still in its foundation stage and will be delayed until 2026, despite having raised the equivalent of 20 times its original cost. Public prosecutors have found that Afipe has transferred around BRL 2 billion, which the priest himself confirms. The problem is, according to the investigators, that the money has been used for purposes that have nothing to do with the construction job or religion as a whole. 

A farm, a beach house, and a plane

Prosecutors suspect that at least BRL 120 million donated by Father Robson’s congregation were embezzled for the purchase of luxury assets, such as a BRL 6 million farm in Goiás and a beach house in the north-eastern state of Bahia, which cost BRL 3 million and is where Father Robson likes to spend his weekends. These R&R trips are often made on a private plane worth BRL 2 million, also bought with the donations of his parishioners.

Besides this, a country house with glass walls overlooking a garden, a heated pool, and a hot tub were also allegedly purchased using offerings from the congregation. It was here that Father Robson was relaxing when the police and public prosecutors launched an operation last week to lift the lid on the embezzlement scandal.

According to the Public Prosecution Service, Afipe had become “a large company.” Police and prosecutors noted that Father Robson had created “various associations with similar corporate names, with the same purpose and address.” Some of these companies had the same shareholders and headquarters. 

Extortion case sparks investigation

The probe into embezzlement involving Afipe began two years ago, as a result of another investigation, of which Father Robson was the injured party. The priest had been blackmailed between March and April 2017, and “unduly used funds from the accounts of the association he presides,” according to the prosecution service. A man was arrested and convicted for demanding BRL 2 million from Father Robson in exchange for not leaking details of an alleged romantic affair involving the priest. However, the police found that the messages used to extort Father Robson were in fact false.

According to investigations, the money was moved through bank transfers and deliveries in cash, paid in quantities between BRL 50,000 and 700,000. In some cases, the money was left in a vehicle outside apartment complexes or shopping centers in the city of Goiânia. One of these ‘drop-offs’ was supervised by the Civil Police, in a bid to identify all of the criminals involved.

Aerial view of the Basilic
Aerial view of the basilica

At the time, Afipe said that it “suffered no financial losses and the entire amount was returned to the institution.” However, last week’s court order that authorized Father Robson’s arrest warrant highlighted that of the BRL 2.9 million withdrawn from Afipe’s accounts to make the payment, almost half — BRL 1.2 million — was not recovered. These payments allowed investigators to uncover a “much larger network of persons involved, with misappropriation and negotiations involving the association’s assets.”

This ensued almost two years of investigations to track and inspect over 1,200 real estate transactions, as well as transfers, deposits, and withdrawals, involving millionaire amounts. Prosecutors say that the amounts transferred — not just by Afipe but by everyone involved in the probe — could exceed BRL 2 billion.

Two emissaries from the Vatican visited Trindade in September 2019 to investigate Afipe, as there was some concern about the quantities of funds being raised by the basilica. “Two police chiefs spoke with them. At the meeting, they told us about the Vatican’s worries about the amount of money circulating around the church in Trindade, for the construction of the basilica, which has yet to see any progress. The suspicion was about the origin of these funds and their misapplication,” explains Rodney Miranda, the public security secretary of the state of Goiás.

Deputy mayor among the suspects

The prosecution service’s report on the operation mentions business owners and politicians who signed voluminous contracts with Afipe. Among them is the Deputy Mayor of Trindade, Gleysson Cabriny, who prosecutors say carried out “countless” transactions with the associations controlled by Father Robson. According to the prosecution service, he was a partner of companies that conducted several real estate deals between legal entities and the association, causing losses to Afipe.

The report states that “the evidence is reinforced due to the incompatibility of the nature of the transactions with the purposes of the religious association, the links between the many companies and the suspects.” Prosecutors noted that one PR company received a sum of BRL 18 million from Afipe between June and November 2018 — during that same period, the company transferred BRL 17.5 million to a chain of gas stations.

Priest on probation

This past Sunday, the archdiocese of Goiânia suspended Father Robson’s right to give mass, including “participating, holding, and starring in programs on television, radio or the internet.” According to the decision, he will be unable to carry out his role as a priest until January 2022.

In a press statement issued by Father Robson’s press office, he said he “humbly receives” his suspension, saying that it is standard procedure in canonical law and he is keen to clear up the scandal.[/restricted]

Latin America

As Mexico’s opposition mired in scandal, AMLO eyes an opportunity

A growing scandal within Mexico’s state-owned oil company Pemex (Petroleos Mexicanos) is swallowing up key opposition political figures and could be a blessing in disguise for President Andrés Manuel López Obrador.

Emilio Lozoya, former chief executive of the oil giant that represents 6.6 percent of Mexico’s GDP, issued a declaration to the attorney general’s office that implicates three former presidents in a sprawling bribery scheme, along with a slew of other important political figures.[restricted]

Arrested in Spain in January and extradited to Mexico as a protected witness, Mr. Lozoya is accused of receiving USD 10.5 million in bribes from Brazilian construction firm Odebrecht — the company behind a veritable avalanche of corruption in Latin America — between his 2012-2016 term, in exchange for contracts. 

Denying the accusations, the businessman agreed to cooperate with the courts, pointing the finger at former Presidents Enrique Peña Nieto, Felipe Calderón, and Carlos Salinas, as well as many other high-ranking politicians in prior administrations. Mr. Lozoya confessed that Odebrecht distributed the money to several representatives during Mr. Peña Nieto’s term, seeking a legal and administrative modification in the country to allow the participation of private companies in the exploration of Mexican oil. 

The attorney general’s office stated that the former Pemex chief met “constantly” with Luis Alberto de Meneses Weyll, then-head of Odebrecht in Mexico. In 2016, Odebrecht executives admitted in a plea-bargain agreement that Mexico was one of the 12 countries involved in its bribery schemes. 

While the brunt of Mr. Lozoya’s accusations are leveled at the Peña Nieto government, the 60-page statement expresses that Felipe Calderón also established a “solid scheme of corruption” with Odebrecht during his 2006-2012 presidential term. Carlos Salinas, in turn, had allegedly used his lobby influence as president from 1988 to 1994 to benefit his son Juan Cristóban Salinas, who is linked to a company that held business with Pemex. 

According to Adolfo Laborde Carranco, an International Relations Professor at Anahuac University in Mexico, though the Pemex case is not the first corruption scandal involving major political figures, the sheer amount of former head honchos means any decision made will cause “many controversies and discrepancies.”

“There is a constitutional vacuum and multiple interpretations [about whether these authorities could end up in prison]. The president says yes, the opposition says no. Therefore, it is possible that, when these cases go ahead in the court, they end up being discussed in Congress or even in public consultations to understand the view of Mexican society toward it,” Mr. Laborde tells The Brazilian Report

But the possibility of seeing justice done depends on Mexico’s porous court system. A 2020 report by the University of the Américas Puebla (UDLAP) indicated Mexico as having among the highest rates of impunity in the world, ranking the 10th out of 69. In the Americas, only Honduras, Paraguay, and Guyana are classified as worse in this regard. 

For some skeptics, there is more chance of Pemex striking more oil than influential politicians being sent to jail by the scandal. “At least this will guide public opinion,” the professor added. 

An opening for AMLO?

All of the politicians mentioned by Mr. Lozoya are members of either the Institutional Revolutionary Party (PRI) or the National Action Party (PAN), the two establishment cornerstones in the country which also form the opposition to President López Obrador. Until 2018, when AMLO was elected, the PRI-PAN hegemony ruled Mexico for more than 90 years, from 1920 onwards. 

So, the revelations could serve as an opportunity for the president in what has been a tricky period.

As The Brazilian Report showed in March, the Mexican president has been criticized for some of his lax attitudes towards Covid-19. Also, months before completing two years in office, AMLO’s administration has seen an increase in drug cartel violence: in 2019, the country had increased homicide rates, jumping 2.5 percent from 2018. 

And last but not least, the Covid-19 crisis will put Mexico into its most severe economic crisis since 1929. The International Monetary Fund slashed its predictions in July, forecasting that Mexican GDP will fall 10.5 percent in 2020. 

But seeing his rivals in the courts’ crosshairs is set to be a boon for AMLO, says Mr. Laborde.

“It is a fact that AMLO will capitalize on this event. The scandal will also benefit the government in a strategic moment: in July 2021, Mexico will have legislative and regional elections, which will choose governments in 15 states.”[/restricted]


Brasília Governor to face hearings committee on coronavirus corruption

Ibaneis Rocha, the governor of Brazil’s Federal District, is set to face a hearings committee launched by local lawmakers to investigate fraudulent spending during his administration’s coronavirus efforts. The request to set up the probe, spearheaded by environmentalist lawmaker Leandro Grass, already has the support of 13 of the chamber’s 24 members — the minimum threshold for being enforced.

Earlier this week, Health Secretary Francisco Araújo (alongside five other high-ranking officials) was arrested in a police operation investigating fraud in purchases of Covid-19 testing kits. Law enforcement says authorities bought low-quality materials for inflated prices. The poor-quality material purchased by Brasília authorities has a high rate of false-negative Covid-19 test results, increasing the risks of contaminated people wrongly believing that they have not been infected — and thus potentially becoming spreaders.

Governor Rocha recently escaped a lawsuit that could have led to his impeachment. He was accused of illegally using funds in his 2018 campaign — but electoral courts shelved the case.

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BREAKING: Court suspends Rio governor for suspected corruption

Rio de Janeiro Governor Wilson Witzel has been temporarily stripped of his job after a decision from the Superior Court of Justice. Mr. Witzel is accused of leading a corruption scheme involving the embezzlement of state funds allocated to combating the coronavirus pandemic.

“I want to voice my outrage. These search and seizure operations are ‘search and get disappointed’ stunts. They haven’t found [anything against me]. Federal prosecutors are specializing in destabilizing state administrations with shallow investigations — and show the political use of the Federal Prosecution Office,” said Mr. Witzel.

Read more in this morning’s Daily Briefing.

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Brazil Daily

Rio Governor suspended in coronavirus corruption probe

Today, another major political crisis in Rio de Janeiro. The risks for the Mercosur-EU trade deal. And the first Brazilian carbon-neutral meat product line.

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? Court suspends Rio governor for suspected corruption  

Early this morning, Brazil’s Superior Court of Justice — the country’s second-highest judicial body — has temporarily stripped Rio de Janeiro Governor Wilson Witzel of his office. [restricted]Prosecutors accuse Mr. Witzel of heading a corruption scheme to embezzle funds earmarked for the state’s coronavirus efforts, involving the receipt of kickbacks from contractors and laundering money through a law firm belonging to his wife, Helena Witzel. The corruption scheme is suspected of siphoning around BRL 1 billion (USD 180 million) from pandemic-related procurement processes.

  • Also today, the Federal Police launched an operation to carry out several search and seizure warrants — also targeting Lieutenant Governor Cláudio Castro and the speaker of Rio de Janeiro’s State Congress, André Ceciliano. Multiple politicians have been subject to arrest warrants, including Rio’s former Economic Development Secretary Lucas Tristão and Pastor Everaldo, chairman of Mr. Witzel’s Social Christian Party.
  • Mr. Witzel was initially targeted by investigators in May, when federal marshals held a search and seizure operation at the Laranjeiras Palace, the official residence of the governor.
  • Last month, former Rio Health Secretary Edmar Santos was arrested as part of the same probe, and signed a plea deal agreement with investigators.

Why it matters. Mr. Witzel already faces impeachment proceedings — and today’s decision could damage his political situation beyond repair.

Rio history. All living former Rio de Janeiro governors have been arrested at some point, highlighting just how ingrained corruption is in the state’s public life.

Rapid rise, rapid fall. Wilson Witzel came to politics as a completely unknown gubernatorial candidate in 2018. Just days before the election, he was polling at a mere 4 percent — but he leapfrogged all candidates to pull off an upset thanks to attaching his name to Jair Bolsonaro in the final televised debate. But soon after taking office, Mr. Witzel became a bitter rival of the Bolsonaros, as he hoped to run for the presidency himself in 2022.

  • Mr. Witzel and the presidential clan have traded accusations of tampering with investigations. The Bolsonaros say the governor used local police to target Senator Flávio Bolsonaro (accused of money laundering), while Mr. Witzel says the president is using the Federal Police to persecute his political foes.
  • Today’s decision is not without controversy. It was issued by a single justice, instead of a panel of judges. Moreover, it was penned by Justice Benedito Gonçalves, who was briefly under investigation due to alleged links to corrupt construction firm OAS.
  • Political scientist Ricardo Ismael, a professor at Rio’s Pontifical Catholic University, believes the governor is fighting on too many fronts. “He has neither the political support nor the popular support he had when he was elected,” he told reporter José Roberto Castro.

Who is Pastor Everaldo? More than just a party chairman, Pastor Everaldo (one of the operation’s targets) is a relevant political figure. He is a preacher at the Assembly of God church, one of the leading Evangelical segments in Brazil. Pastor Everaldo ran for president in 2014 but won less than 1 percent of votes. He was accused of getting kickbacks to use his candidacy to support center-right candidate Aécio Neves.

  • In 2016, the preacher performed a baptism ceremony at the Jordan River for Jair Bolsonaro. The event marked the identification of the then-congressman with Evangelical voters — a constituency that became key to his successful presidential bid.

UPDATE: “I want to voice my outrage. These search and seizure operations are ‘search and get disappointed’ stunts. They haven’t found [anything against me]. Federal prosecutors are specializing in destabilizing state administrations with shallow investigations — and show the political use of the Federal Prosecution Office,” said Mr. Witzel.

Resignation of EU trade chief a blow to Mercosur deal

Phil Hogan resigned as the European Union trade commissioner, after he was accused of breaching Covid-19 guidelines during a trip to his home country Ireland.

Why it matters. Mr. Hogan was the main advocate for the long-awaited free trade agreement between the EU and Mercosur — the trade alliance made up of Brazil, Argentina, Uruguay, and Paraguay — which has taken over 20 years of negotiations.

Trade. Announced in June 2019, the deal is set to create one of the biggest free-trade zones in the world — and could generate an extra USD 87.5 billion for Brazil’s GDP over the next 15 years. Among its main points, the deal would allow Mercosur countries to ship 99,000 tons of beef annually to the EU.

Yes, but … European countries with strong agricultural lobbies — such as France — have opposed the deal, saying South American agribusiness is reliant on deforestation. Mr. Hogan, however, has rejected this argument, saying critics exploit environmental concerns to favor their own trading interests.

Risks. With Mr. Hogan stepping down, many say that his replacement should reopen negotiations with Mercosur. Ends Europe reports that “Climate Action Network (CAN) Europe said the European Commission could now ‘put on ice’ the Mercosur deal, which would liberalise trade in commodities linked to deforestation, particularly after German Chancellor Angela Merkel recently expressed concern around ratifying it in its current form.”

  • “Instead of rewarding climate disruptors, the EU needs to make it much harder for non-EU actors to cut corners so they can outcompete EU industry and sell their carbon-heavy products in the EU,” said Nick Meynen, a policy officer at the European Environmental Bureau (EEB).

Brazil’s first carbon-neutral meat?

On Thursday, the Agriculture Ministry launched Brazil’s first carbon-neutral certification for meat products. This is a BRL 10-million (USD 1.8 million) project developed by sector giant Marfrig and the state-owned Brazilian Agricultural Research Corporation (Embrapa). In order to obtain the certification, producers must plant trees on their pastures.

  • Studies suggest that around 200 trees per hectare would be enough to offset methane emissions by 11 adult bovines over one year. In Brazil, cattle herd density is 1.2 heads per hectare. Certification would be issued and verified by independent auditors.

Why it matters. The initiative comes as Brazil’s agriculture faces a severe image crisis due to growing international concerns around the industry’s links to Amazon deforestation. 

  • Back in July, Europe’s Nordea Asset Management dropped JBS — the world’s biggest meat-processing firm — from its portfolio.
  • Embrapa researchers hope that the certification will be adopted by companies as a way to add value to Brazil’s meat products — especially to rebrand them in key markets such as the U.S. and Europe. 

What else you need to know today

  • Sanitation. After Congress passed new rules for the basic sanitation sector, the National Water Agency (ANA) has begun drafting a regulatory framework of its own. The agency plans to submit proposals to public debate in H1 2021, electing three priorities: governance of local regulators, calculating compensation for assets (in cases of contract terminations), and the adaptation of binding agreements to the sector’s new rules.
  • Oil and gas. With the government’s timetable of privatizations disrupted by the pandemic, Petrobras sees the sale of its remaining 37.5-percent share in fuel distribution company BR Distribuidora as the main money-making deal to fulfill its divestment plan. The company hopes to raise over BRL 9.2 billion (USD 1.7 billion).
  • Amazon fires. Without finding any culprits, the Federal Police ended its investigation into coordinated efforts to ignite fires in the Amazon rainforest. Last year, several fires erupted in forest areas, attracting global attention and criticism. Vice President Hamilton Mourão played down the destruction of Amazon vegetation yesterday, saying that the roughly 24,000 fires in the region today is “a needle in a haystack” compared to the size of the Amazon. There are fears the fire crisis may scupper the Mercosur-EU trade deal (see above).
  • Profits. Brazilian bank Bradesco was the Latin American company to post the highest profits in H1 2020 — with net profits reaching USD 1.257 billion. Another bank, Itaú, came second, with USD 1.246 billion.
  • Violence/racism. According to the Violence Atlas, an annual report by the Brazilian Public Security Forum, black and multiracial individuals are the victims of three out of four murders in the country. Murder rates among these ethnic groups rose 11.5 percent over the past decade. Meanwhile, the murder rate among the rest of the population went down 12.9 percent.[/restricted]