June 10, 2015
On Tuesday, the Brazilian government unveiled a 198.4 billion reais ($64 billion) infrastructure plan aimed at restoring economic growth through private investments in the country’s depleted roads, rail and ports. “The increase of investments in the Brazilian economy must be done by the private sector,” said Brazilian Planning Minister Nelson Barbosa. “There is a huge demand for better infrastructure in Brazil.”
Battered by high inflation, rising unemployment and a corruption scandal at state oil company Petrobras, Brazil is on the brink of a recession that is expected to be the worst in 25 years. During a ceremony to announce the spending plan on Tuesday, President Dilma Rousseff said the government plans to use market-friendly procedures to calculate the return rate on projects such as roads, where concessions will go to bidders that offer the lowest toll rate.
The government also aims to reduce its role in infrastructure projects, as the planned concessions will feature reduced subsidized funding from the Banco Nacional de Desenvolvimento Econômico e Social (National Social and Economic Development Bank—BNDES).
“Our model of concessions will guarantee that consumers get quality services at fair prices and companies get an adequate return on their investments,” said Rousseff during the ceremony. The concessions include about 2, 715 miles of highways, expansion of existing freight railways and even a railway linking the Atlantic Ocean with the Pacific Ocean via Peru. Repairing the roads will allow Brazil to get its commodities like soy beans to the market.
June 4, 2015
At a secondhand bookstore in Brazil, I recently found an old copy of Graham Greene’s novella-turned-screenplay “The Third Man." Set in the shadowy streets and sewers of post-World War II Vienna, a police investigation reveals that the leader of a crime ring has faked his death to evade police. A coffin is exhumed, a body is found missing, and an iconic sewer chase scene ensues for Orson Welles in the 1949 noir film.
I could have opened up a local newspaper to read a similar tale unfolding.
A suspected ringleader in Brazil’s largest corruption investigation was recently alleged to have faked his death in 2010 to escape prosecution, and on May 20, a congressional committee ordered for his coffin in the city of Londrina, in southern Brazil, to be dug up and for a DNA test to be conducted on the corpse. Former congressman José Janene was thought to have died in a hospital of heart disease in 2010, but now rumors swirled that he was living in Central America with a $185 million Luxembourg bank account.
Digging up corpses could be a sign that Brazil’s corruption investigators will leave no stone (or gravestone) unturned, or that the unfolding scandal at Petróleo Brasileiro S.A. (Petrobras) has devolved into a witch-hunt. In either case, the development showed the extent to which officials need to distance themselves from a scandal that has cost Petrobras at least 6.2 billion reais ($2.1 billion) in graft-related losses, implicated dozens of major domestic and multinational firms, and pushed President Dilma Rousseff’s popularity to record lows.
May 29, 2015
The U.S. Justice Department accused more than a dozen people this week of being involved in a massive FIFA corruption scandal that spanned more than two decades. Several high-level officials were arrested in a luxury Zurich hotel Wednesday, including former Confederação Brasileira de Futebol (Brazilian Football Confederation—CBF) President José Maria Marin.
“Our investigation revealed that what should be an expression of international sportsmanship was used as a vehicle in a broader scheme to line executives’ pockets with bribes,” U.S. Attorney General Loretta Lynch said during a press conference Wednesday in New York. “These individuals and organizations engaged in bribery to decide who would televise games; where the games would be held; and who would run the organization overseeing organized soccer worldwide.”
Marin, who led the jogo bonito’s governing body from March 2012 to April 2015, is facing charges of corruption, racketeering and bribery. According to the indictment, Marin split an $110 million kickback with four others in order to help Uruguayan company Datisa secure global distribution rights for next month’s Copa América and the four future editions of the tournament, including the special centennial cup to be held in the U.S. next year. He also allegedly requested bribe payments from Brazilian sports marketing firm Traffic for distribution rights of the country’s Copa do Brasil.
Others arrested Wednesday were accused of taking bribes to influence the winning bids of the 2010 South Africa World Cup, 2018 Russia World Cup and 2022 Qatar World Cup, with the latter’s selection facing scrutiny for its poor human rights record. Most of these transactions were done using U.S. bank accounts, which triggered the alarm of American authorities in the FBI, IRS and DOJ.
May 18, 2015
Brazil is up for sale, and bargain-hunters from Sam Zell to Stephen Schwarzman are looking for deals.
If the country’s economy could be spread onto a monopoly board, distressed domestic utilities like Companhia Energética de Minas Gerais S.A. (Cemig) would be selling for a bargain, while infrastructure like airports and railroads would be begging for investment. Meanwhile, any of the dozens of companies implicated in a massive corruption scandal at state-run oil company Petróleo Brasileiro S.A. (Petrobras) might seem impossible to give away amid the ongoing risk of legal liability and financial fallout.
In that context, foreign investors are rolling the dice that Brazil will stage a turnaround. C’mon snake eyes!
It takes a certain type of investor to be drawn to the country right now. The economy is expected to contract more than 1 percent this year. The government is in a state of political paralysis amid calls for President Dilma Rousseff’s resignation and Congress’ refusal to sign off on belt-tightening measures meant to avert a sovereign credit downgrade. Rich Brazilians are fleeing for Miami.
May 8, 2015
A proposed government austerity package may keep Brazil from a credit rating downgrade, but could cost President Dilma Rousseff some of her biggest supporters: the country’s labor unions.
Lawmakers in Brazil’s lower house passed a proposed bill this week that would limit thousands of workers’ access to social security benefits. The MP 665 bill was approved by a narrow 252-227 vote during a heated debate late Wednesday.
Finance Minister Joaquim Levy called the legislative decision a “victory” and said it could potentially lower government spending by 18 billion reais ($5.9 billion) this year.
“It’s a victory for all of society,” Levy told journalists in Brasília on Thursday. “We will meet our objectives so that we can start an agenda that goes beyond the fiscal adjustment.”
Earlier this week, representatives from the Central Única dos Trabalhadores (Unified Workers’ Central—CUT) met with the ruling Partido dos Trabalhadores (Workers’ Party—PT) congressional leadership and said they were against the bill.
CUT is considered one of the largest unions in the country and one of the PT’s founding groups, and has been a strong supporter of Rousseff and former President Luiz Inácio Lula da Silva’s governments.
April 13, 2015
Anti-government protesters once again took to the streets across Brazil on Sunday, this time in smaller numbers, but with the same demands for President Dilma Rousseff to leave office.
This is the second march in less than a month in which Brazilians have spoken out against Rousseff and the ruling Partido dos Trabalhadores (Workers’ Party—PT). At least 500,000 people gathered in 24 cities throughout the country, chanting slogans like “Out with Dilma” and “Impeachment Now.”
On March 15, nearly two million people participated in one of the largest protests in Brazil’s recent history. Discontent over unpopular austerity measures and a kickback scandal involving state-run oil giant Petrobras and the PT were major catalysts.
“The Workers Party failed Brazil,” Cristiano Jacobs, a Rio de Janeiro businessman, said during the march. “They have left Brazil broke.”
Rousseff is facing historically low approval ratings. In a recent Datafolha poll, 60 percent of Brazilians said they believe she is doing a "bad" or “terrible” job. 2,834 people were interviewed April 9 and 10, with a margin of sampling error of 2 percentage points. The same poll showed that 63 percent of those interviewed support opening the impeachment process against Rousseff.
March 31, 2015
The companies being investigated by Brazil's Federal Public Ministry include large banks such as Santander, as well some of Brazil’s largest public and private enterprises, among them Embraer and the country’s embattled state-run oil giant, Petrobras. The companies are suspected of paying bribes to members of Brazil’s Conselho Administrativo de Recursos Fiscais (Administrative Council of Tax Appeals—CARF), a body within the Finance Ministry that deals with tax disputes, in order to reduce or avoid fines for tax evasion.
The federal investigation, called Operação Zelotes (Operation Zealots), began in 2013 but exploded into the public consciousness last Thursday, when federal police raided CARF headquarters and the offices of several of the companies and individuals believed to be involved in the scheme. While no arrests were made, authorities seized 1.3 million reais in cash (about $400,000), as well as reams of documents. Investigators have shown that the scheme has cost government coffers $1.8 billion, but believe that the real number could be as high as $5.9 billion.
Several companies, including Brasil Foods (BRF) and Marcopolo, have released statements denying any wrongdoing. In a press release, BRF stated that it will “take all measures necessary to protect its interests.” Others have taken a different tack. Federico Paiva, one of the prosecutors leading the investigation, indicated yesterday that several of the companies under investigation have signaled their willingness to enter into a plea bargain. The Federal Public Ministry has reportedly begun to analyze those proposals today.
March 20, 2015
March has been a tough month for the Brazilian government. In the past few weeks, millions of people have taken to the streets to protest against President Dilma Rousseff and demand her impeachment, the country’s local currency devalued to its lowest exchange rate in 12 years and state oil giant Petrobras continued to be engulfed in one of the biggest corruption scandals in the country’s history.
To top it off, national unemployment went up and Rousseff’s popularity hit an all-time low. Pollster Datafolha released figures this week showing the president’s approval rating reached 13 percent, the lowest presidential approval level since 1992.
In an effort to rebound from these negative numbers, Rousseff is schedule to announce some changes to her government roster. This comes after Minister of Education Cid Gomes resigned earlier this week.
She also presented an anti-corruption government package before Congress on Wednesday that introduced reforms such as requiring government officials to have no criminal records (known as “Ficha Limpa” or clean slate), making it illegal for unregulated slush funds to be used in the financing of electoral campaigns, and granting the judicial ministry the power to seize goods and properties of those convicted of corruption.
“Prevent and battle,” Rousseff said as she introduced her latest defensive strategy. “This is what we see as the essential strategy in order to deepen Brazil’s commitment with democracy.”
March 6, 2015
The Inter-American Commission on Human Rights (IACHR), the independent human rights body of the Organization of American States (OAS), experienced a period of intense political turmoil from 2011 to 2013. Criticism of the Commission by members of the OAS—most notably Ecuador, Nicaragua and Venezuela—was echoed by Colombia, Peru and others in their vocal disapproval of concrete IACHR decisions.
The increasingly antagonistic diplomatic environment came to a head in April 2011, when the IACHR requested that Brazil halt its construction of the $17 billion Belo Monte hydroelectric dam. Brazilian President Dilma Rousseff responded by withholding its dues payment, withdrawing Ruy Casaes, the Brazilian ambassador to the OAS, and temporarily withdrawing Paulo Vannuchi, Brazil’s candidate for a position on the Commission (although he was later elected to the Commission).
Two months after Rousseff’s sharp reaction to the Belo Monte matter, the OAS Permanent Council created a Working Group charged with preparing a set of recommendations on how to strengthen the Inter-American Human Rights System (IAHRS). On December 13, 2011, the Working Group approved a report containing 53 recommendations to the IACHR. The recommendations largely referred to operations, rules of procedure and institutional practices, but some attempted to limit the capacity of the Commission and weaken its mechanisms. In short, this process was a collective catharsis for critics of IACHR decisions, combined with a chance to air broader disdain for the OAS and any institution deemed to be spoiled by U.S. influence.
January 23, 2015
On the border of Brazil and Paraguay, David Rodrigues Krug is chasing a unicorn.
That’s how he describes his work at the massive Itaipu Dam on the Paraná River, which forms a natural border between the South American neighbors. In three decades of operation, the five-mile-wide, 65-story dam has come close to generating 100 billion kilowatt hours (KWh) in a single year—but has never quite reached that goal.
“This is like our unicorn,” says Krug, chief of staff for Itaipu Binacional, the quasi-private company that owns and operates the hydropower plant. “We want to do it, but it has to be the perfect year in terms of water, in terms of the system. It would be our exceptional year.”
But the unicorn is getting more elusive amid a major drought that is depleting hydropower reservoirs across Brazil and tipping the nation into an energy crisis—underscoring its over-dependence on hydropower and the urgency to shift to other alternative energy sources, such as wind and solar. Brazil relies on hydropower for about three-fourths of its electricity, but across the southeastern and midwestern regions, dam levels are at one-fifth capacity, leading to electricity rationing and rolling blackouts across Brazil, including in the most populous state of São Paulo. This month, Brazil had to import electricity for the first time in five years.
The blackouts are due in part to Itaipu, which opened in 1984 and is now the second-largest hydropower plant in the world. Itaipu’s electricity generation fell 11 percent last year to 87.8 billion KWh— down from 98.6 billion KWh in 2013—causing it to lose its title of world’s largest hydropower generator to the Three Gorges Dam in China, which generated 98.8 billion KWh in 2014. (The Hoover Dam, by comparison, generates 4 billion KWh per year).
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