Brazilian democracy

Temer and Earmark Populism by Mark Langevin

Brazilian President Michel Temer dodged a bullet yesterday by galvanizing a majority in the lower house of deputies of the Brazilian Congress to vote against his removal and trial by the Supreme Court for corruption. Temer’s approval ratings hover around 7 percent, and most Brazilians want him investigated for corruption; but these documented facts did not dissuade 263 deputies (from a total of 513) from absolving the president.

Why did so many betray the popular will?

Earmark populism is a method for obtaining the votes of congressional representatives and pacifying their constituents at home. President Temer used the promise of earmarks to trigger votes in his favor; and supply his congressional supporters with justification that can be sold to voters back home. According to the Folha de São Paulo’s report, Temer has promised more than 4 billion reais in additional spending in 2017, spread across dozens of earmarks, to obtain the necessary parliamentary support to stave off a trial in the Supreme Court. Contas Abertas also reports that Wladimir Costa, federal deputy from the state of Pará and member of the Solidariedade party, made famous by his tattoo “Temer” received a promise of $7 million reais in earmarks. Costa stated that his tattoo cost 1,200 reais and served as a memorial to Temer, “The best president in the history of Brazil.” His claim does not deserve a response.

Costa’s earmarks will apparently be spent on such programs as sustainable rural development and strengthening the universal health care program SUS in the state of Pará.  These seem to be worthwhile public initiatives, but the use of government funds to secure a vote to avoid prosecution for corruption is ironic and disappointing for those committed to fighting corruption in Brazil. Moreover, most of Temer’s supporters in the lower house of congress voted in favor of the impeachment of former President Dilma Rousseff last year for her fiscal management, her use of the so-called “pedaladas.” Many of these same deputies were willing to accept or coordinate earmarks just as the government appears to be failing to meet its fiscal deficit targets (spending more than forecasted to deepen the deficit).

Remember, many notable economists supported Dilma’s impeachment due to what they argued was fiscal mismanagement. Today, these economists are either silent or stand betrayed by the consequence of their own political action.

The well-respected economist Monica de Bolle defended her support for Dilma’s impeachment in the pages of Terraço Econômico, in part by claiming that the former president was responsible for fiscal mismanagement related to the pedaladas.  It is important to remember that the so called pedaladas were budgetary operations that simply delayed transfers from the Federal Treasury to the Banco do Brasil e Caixa Economica for public programs, including small farmer financial support and the Bolsa Familia social welfare programs.  Bolle and others, including Mansueto Almeida, claimed these budgetary actions were irresponsible at best and possibly constituted the “crime of responsibility” that served as the justification for impeachment. Then came Temer.

Today, Mansueto Almeida remains in his position with Temer’s government, but silenced by the President’s earmark populism to avoid prosecution. Monica de Bolle is a strident critic of Temer, and recently noted that he needs to leave or risk “institutional corrosion” that might place Brazil on the path to become another Venezuela. Ameida, last May, argued that the government must carry out a fiscal adjustment and push forward a reform agenda that can initiate economic recovery, and that two years under Temer is sufficient to place Brazil back on the road to growth and fiscal stability.

Monica and Mansueto are entitled to their critique of former President Dilma and her fiscal affairs. They both spent 2015 and 2016 trying to explain the details of the pedaladas and how they may have jeopardized fiscal stability and economic development.  However, Temer’s earmark populism and Attorney General Rodrigo Janot’s charge of corruption against the president pose a more straightforward challenge to explain. No doubt Monica and many others will bear down on the damage done by failing to achieve the fiscal targets set for 2017, and others including myself, will point to the now obvious connection between earmark populism and congressional efforts to protect the guilty from prosecution. Mansueto continues to work for Temer’s Finance Ministry, but for how long?  How long will it take for Mansueto and his boss, Finance Minister Henrique Meirelles, to understand that the government they work for is now actively working against fiscal stability, economic recovery, and the Lava Jato prosecutions?

I hope it does not take too long because Brazilian democracy hangs in the balance.

President Lula, Judge Moro and Poor Judgment by Mark Langevin

Federal Judge Sergio Moro and former President Lula

Federal Judge Sergio Moro and former President Lula

This week Brazilian Federal Judge Sergio Moro convicted former Brazilian President Luiz Inácio Lula da Silva of corruption and money laundering and sentenced the political icon to nine years and six months of jail along with a fine of nearly $209,000 USD. Judge Moro found Lula guilty of receiving a beachfront apartment in Guarujá located in the state of São Paulo. According to Judge Moro, Lula received the apartment and its reforms (valued at over $1 million USD) from the Petrobras contractor Group OAS in exchange for his direct influence over Petrobras and its decision to award contracts to this company.

The court found that OAS documents indicated that after the company took control of the beachfront condominium community in 2009 it proceeded to reserve and reform the “triplex” apartment for then President Lula and his late wife Marisa. Judge Moro commented on the evidence and argued that Lula and Marisa did not effectively communicate their decision to exercise an option to purchase the apartment after 2009, a violation of the rules imposed upon all the condominium members.

Lula’s lawyers, Cristiano Zanin Martins and Valeska Teixeira Martins, argued that the apartment was never owned by Lula or his wife, and that evidence exists that the apartment was being sold to another buyer with financing from the Caixa Economica. Lula’s defense team also insisted that Judge Moro was biased throughout the proceedings, engaged in arbitrary rulings, and should have recused himself from the trial. Indeed, Judge Moro has been scrutinized by his apparent decision in 2016 to secretly wiretap, record, and leak a conversation between then President Dilma Rousseff and Lula regarding the latter’s nomination to become the Minister of the Casa Civil (chief of staff) and evade Moro’s jurisdiction. The questionable leak led the Supreme Court to annul Lula’s nomination, effectively keeping the former president in Moro’s courtroom.

The trial of Lula has confirmed that the former president did not take active measures to avoid the appearance of “pay to play” procurement based corruption; a scheme thoroughly documented through Judge Moro’s Lava Jato prosecutions.  Pay to play corruption preceded Lula’s election in 2002 (for an excellent analysis of the scope of corruption and lack of prosecution prior to 2002 see Antonio Lassance’s article in Carta Maior), but it took on greater scope and political importance during Brazil’s rapid economic expansion from 2004 to 2010. Increasing government revenues, the rapid expansion of Petrobras, and its procurement contracts opened up the possibilities for pay to play corruption to finance major political parties and their candidates, as well as enrich Petrobras directors and several intermediaries (often known as “doleiros”).  Clearly Lula and his government benefited in the short term as pay to play served to expand the Workers Party influence around Brasilia as corruption flowed into campaign slush funds (known as “Caixa 2”) to elect and reelect candidates across a broad spectrum of political parties (see http://meucongressonacional.com/). Few, including Judge Moro, had any idea of the pervasive scope of the Lava Jato scheme, but it has tainted almost every leading political figure, current President Michel Temer, prominent political parties, and Brazilian building and engineering contractors. Throughout the first decade of the 21st century Lula and his Workers Party did little to confront the Lava Jato scheme and replace it with a transparent campaign financing system. This neglect has cost the party, condemned Lula, and all but shipwrecked the country. Lula’s poor judgment and his inability or unwillingness to set the record straight on the Lava Jato is catastrophic even if Judge Moro’s conviction is light on evidence and heavy on judicial bias.

President Lula and Federal Judge Sergio Moro missed an historic opportunity during the trial. Judge Moro has zealously pursued the former president through Brazil’s odd system for Federal judges that allows them to act as prosecutor, jury and judge all together in a confusing whirlwind of conflicting institutional interests. Rather than tread lightly and guarantee constitutional due process, Judge Moro used every power under his authority to publicly condemn Lula before the trial began, and may have engaged in unethical or illegal acts related to the wiretapping of then President Dilma. He also selected to hear a case based on evidence that does not clearly indicate that Lula enjoyed or benefited from the beachfront apartment under the control of OAS, which would seem to be an essential condition of any Quid pro quo; that any suspected influence peddling on OAS’ behalf be contingent upon a benefit enjoyed by the president. The underlying evidence and logic of Lula’s trial suggests that Judge Moro was zealous about this particular case, a relatively weak case in light of the scope of the Lava Jato scheme.  Why did Moro choose this case, one that did not feature a smoking gun or evidence that Lula directly owned, enjoyed, or benefited from the OAS apartment? The answer: poor judgment by Judge Moro.

Poor judgment by Lula and Moro leaves Brazil in the lurch. Lula’s popularity increased in the weeks prior to his conviction. Moro is just as popular, but among those impressed by his work or deadest against Lula and the Workers Party. Their popularity provides each ample limelight, but together they are unbeatable. Lula and Moro missed a great opportunity to shed light on how politics really works in Brasilia and throughout the state capitals of the nation. Procurement based pay to play corruption is really just a systematic function of a broader institutional requirement based on money in politics, a dysfunctional condition that condemns candidates and their parties to seek out dark money and assemble slush funds to win, to become elected. Judge Moro should be applauded for his x-ray of the function, but his trial of Lula distracted Brazilians from the dysfunction of the system. Former President Lula also punted, choosing to defend himself rather than publicly attacking a system of campaign finance and pay to play procurement corruption that undermines the democratic principle of one citizen – one vote. Poor judgment.

What if Judge Moro had tossed the charges aside, but on the condition that he and former President Lula sit in front of the cameras and together explain what democracy looks like in Brazil?