A Brazilian tragedy

Brazil is a good friend of the Kingdom. It is, therefore, alarming to see the political tragedy that is unfolding with President Dilma Rousseff beleaguered by corruption accusations which extend to her highly-regarded predecessor Luiz Inacio Lula da Silva. As the president fights for her political life, popular opinion is turning against the government of the Workers’ Party (PT). Earlier this week, a million demonstrators took to the streets of Rio de Janeiro and other major towns and cities demanding that Rousseff resign. The president is already in danger of being impeached over allegations of massive payola when she was head of the state-run oil company Petrobras. But it is the position of the former president, popularly known as Lula, that is currently the focus of attention. Earlier this month police arrested him and quizzed him over allegations of money laundering in connection with construction contracts awarded by Petrobras when he was in office. His questioning is part of Operation Car Wash, an investigation which appears to be unravelling an astonishing network of kickbacks and bribes, most of them centered around the national oil company. It was widely expected that Lula was about to be charged as part of Operation Car Wash. But in a surprise move, Rousseff has appointed him her chief of staff. This effectively gives Lula political immunity from arrest on a warrant issued by the normal court. His protection can only be revoked by the country’s Supreme Court. Besides the president and Lula, among those accused of wrongdoing are Andre Esteves, the billionaire former boss of Brazil’s largest investment bank BTG Pactual, and senior PT senator, Delcidio do Amaral, who as head of the senate economic affairs committee has played a leading role in the current austerity program, as Brazil sinks deeper and deeper into recession. In his day, Lula was a hugely popular figure. Charismatic and amusing, he led Brazil during an economic boom, when foreign investors were falling over themselves to set up in the country. The major attraction was the existence of substantial offshore oil and gas reserves. But Lula’s socialist instincts meant he sought to protect local companies from the arrival of better-financed foreign firms with better technology. Thus a series of increasingly onerous restrictions was imposed which had two unfortunate effects. The first was to dampen free market forces and produce false costs to the economy. The second was that the regulated corporate environment opened the way for under-the-table deals driven by bribes and payola. To this was added the gradual downturn in the Brazilian economy, due in part to government mismanagement. The oil price slump has only added to the country’s woes. The targeting of Amaral as the architect of Rousseff’s desperate attempt to restore the economy is, therefore, popular, not simply because he is accused of being involved in corruption. The president’s appointment of Lula to her government and the legal immunity it bestows was clearly a miscalculation. It has further enraged her opponents. It has also given legs to the suspicion that a thorough investigation of Lula will unmask any role that she herself may have played in the corruption scandal.  At the moment, she and some of those around her are only accused of wrongdoing. It will be for the courts to decide if they are guilty. But at present the government of one of the world’s biggest economies is mired in serious suspicions while the country sinks ever more seriously into financial troubles.