The Clash of the Century
If this sounds like a superhero battle, Batman vs. Superman, don’t be surprised. Brazil has just weathered its most tumultuous week in politics since the return of democracy in the 1980s.
The battle rages on – in the streets, in congress, in the Supreme Court. While we all enjoy a good action movie, nothing on a movie screen compares with this real-life showdown. In a nutshell, it’s Curitiba’s Judge Sergio Moro versus ex-President Lula.
The story began a decade ago, when Lula was the most popular president in Brazil’s history. His approval ratings were so high, over 80 percent, that presidents from all over the world, including President Obama, were eager to shake his hand and learn his secret. How had Lula managed to direct a booming economy (7% GDP growth) in the midst of a worldwide recession? How had Lula implemented the world’s most successful state welfare system, Bolsa Família? (The program is so successful health officials are predicting it will change the health landscape of the nation’s next generation thanks to its comprehensive childhood vaccination agenda.)
While no one was quite sure how Lula did it, his success was unprecedented, and the president who never finished grammar school became a national hero in Brazil, particularly for the poor and working class. His administration, flush with money from a booming economy, thanks to a rich commodities market and little exposure to the US sub-prime mortgage crisis, poured money into social programs, such as increasing the size of the federal (free) university system by 50 percent, and raising the minimum wage more than once. The international community awarded Lula’s efforts with both the World Cup tournament and the Summer Olympics for Rio this year, the first Olympics held in South America.
In 2010, Lula passed the presidency baton of the political party he co-founded, PT (Workers Party), to his Chief of Staff, Dilma Rousseff, who became Brazil’s first female president, despite her never having held elected office. The rest, as they say, is history.
During Dilma’s six years as president, the walls have come tumbling down. The cascade into oblivion began with the Mensalão scandal, which was followed by Lava Jato, one of the largest political/business corruption schemes in modern world history. To this day, two years into the criminal investigation of Lava Jato, there are still more corrupt businessmen being uncovered and politicians attempting to hide their stolen millions in off-shore banking arrangements, hoping their colleagues in crime don’t mention them in the next plea bargain with Federal Judge Sergio Moro of Curitiba.
Brazil has a history of endemic corruption going back to the days of the emperor, thus only foreigners were surprised at the extent of the Lava Jato nightmare. Most Brazilians were not shocked when the corruption scandal ensnared ex-President Lula. Like the rest of the white-collar criminals, Lula was caught in a spider’s web of plea bargains woven by Sergio Moro’s team of federal prosecutors. Moro’s team, most of them educated in the US, are tireless, honest, and incorruptible, a rare combination among powerful men in Brazil. Together they have succeeded in unraveling the grandest corruption scheme in Brazil’s history, which is saying a lot.
The sad part of this story is the Judiciary has succeeded. What they have divulged is what every Brazilian knew but never wanted to admit – the political system is rotten to the core. Today, one third of the federal congressmen in Brasília are under indictment, although they continue to serve as congressmen. Additionally, titans of industry have fallen to Moro’s team, including the CEO of Odebrecht, the largest construction company in Latin America. CEO Marcelo Odebrecht, the grandson of the founder of the company, is now serving a 19-year prison term in Curitiba’s prison. Judge Moro’s team is accomplishing what no law enforcement entity in Brazil’s history has been able to do – the end (presumably, hopefully) of the Brazilian oligarchy.
To put it another way: How the mighty have fallen! In addition to ex-President Lula being questioned by police (although not yet arrested or indicted), his successor, President Dilma Rousseff, is facing impeachment proceedings. Meanwhile, the man leading the charge for impeachment, Eduardo Cunha, who was next in line after the Vice President, is himself caught up in the scandal. Cunha, the former Speaker of the House, has thus far avoided arrest by keeping media attention focused on Dilma and Lula; however, he was voted out of his position as Speaker of the House by his colleagues, and will soon face a vote on expulsion from Congress altogether.
Adding insult to injury, even Lula’s shining star – outmaneuvering President Obama’s efforts to host the 2016 Olympics in Chicago – has become tarnished. Along with Lula’s remarkable fall from grace are the lackluster ticket sales for the Olympics. Some Olympic tourists are staying away for fear of inadequate facilities, security, and infrastructure, plus the outbreak of the mosquito-borne disease Zika, which the WHO has labeled an “international public health emergency.”
As if that weren’t enough, Dilma (as she’s referred to here) and the ruling PT party have governed Brazil as it officially fell into a recession with negative GDP growth in 2015 and again this year. Along with high unemployment, there is also inflation during this recession, an economist’s nightmare known as “stagflation.”
Earlier this year before Dilma’s impeachment, seemingly in an attempt to avoid the Sergio Moro web that leads straight to prison, Lula convinced Dilma to hand over a Cabinet position to him, making him Chief of Staff, even though Dilma already had a Chief of Staff, thereby effectively shielding Lula from imminent arrest. While protecting her mentor, Dilma accused Moro of partisan and unconstitutional behavior for releasing audio tapes he authorized of wiretaps on Lula’s phone, including phone calls between Lula and Dilma. From those calls, Lula’s attempts to cover his shady dealings are clear, as well as his continued influence over Dilma.
Lula’s behind-the-scenes power within PT, as well as his fear of Sergio Moro, was evident when he accepted the position of Chief of Staff, essentially making him the de facto president. Additional transcripts released of Lula’s interrogation by the Federal Police make it clear that he hopes to be officially elected president again in 2018, when Dilma would finish her second term should she survive the impeachment proceedings.
Now here’s where the clash of the century gets particularly wild. With the news that Lula intended to re-enter the government as Dilma’s right-hand man, millions of Brazilians took to the streets in protest. And on the morning that Dilma performed the swearing-in ceremony, the Judiciary came fighting back to set-up a classic superhero confrontation: the Executive versus the Judicial. Just minutes after Lula was sworn in, a federal judge (not Sergio Moro) declared Dilma’s appointment of Lula illegal. Lula was ousted from the government the same day he re-entered!
BBC News soon dubbed Lula “the most hated and loved man in Brazil” and it wasn’t over. The following day, another judge overturned the first judge’s order, thereby reinstating Lula. On the same day, a third judge stepped in supporting the first judge, and Lula was out again!
At the same time, the Brazilian Socialist Party (PSB) filed a lawsuit with the Supreme Court requesting that Lula’s appointment as Chief of Staff be declared unconstitutional. By the end of the week, even smartphones carrying Internet news weren’t fast enough to keep up with this story. It was like watching Olympic ping-pong on TV.
Finally, Justice Gilmar Mendes of the Supreme Court officially blocked Lula’s appointment as Chief of Staff. No doubt Mendes was inspired by one of the released wiretapped conversations where Lula calls the entire Supreme Court “a bunch of cowards.”
Dilma has criticized the prosecutors and specifically Judge Moro, saying that his actions, namely releasing the wiretap conversations, constitute a “setback” in the country’s efforts to keep its judiciary apolitical. She believes that political forces opposed to PT are attempting a non-violent coup d’etat (golpe de estado) and Moro is working with those forces.
On Friday, March 18, the newspaper Folha de S. Paulo, which has been highly critical of President Dilma Rousseff, published a lead editorial that was unusually disapproving of Judge Moro, citing his decision to release the wiretapped conversations between Dilma and Lula. Whether you are pro-PT or anti-PT, Moro appears to have taken a legal battle against Lula into the political arena.
In the latest development, Lula’s lawyers asked on July 5 that Sergio Moro be removed from a corruption investigation involving the former president, arguing Moro had shown a lack of impartiality. The lawyers said a decision by Moro to publicly release Lula’s wiretapped conversations in March “caused public embarrassment,” leading to lawsuits in which the judge himself could eventually be held liable.
What has erupted in full view of the world is an ancient tale: Age vs. Youth. The younger generation, represented by Federal Judge Moro (44 years old) and supported by millions of protesters from the newly risen middle-class, is taking up the weapons of justice against the old guard. The powerful and wealthy oligarchs who have been running Brazil for hundreds of years, like the rich landowners of Latin America once referred to as Coronels, see themselves as above the law. Indeed, corruption and nepotism are present at all levels of Brazilian society, encompassing everyone from street vendors to doctors and engineers.
An ironic wrinkle to this bizarrely complex battle is the fact that the success of Sergio Moro’s team in bringing down Lula and the titans of industry is partially thanks to Dilma and PT. It was Dilma’s signature that set this avalanche of justice into motion. The Lava Jato scandal has uncovered monumental financial debauchery and been able to ensnare so many unsuspecting titans only because of the use of plea bargains by the federal judges. Plea bargaining has existed for centuries, but it only arrived in Brazil in 2014, signed into law by Dilma.
The other legal weapon that has fallen into prosecutors’ laps and is critical to bringing down the oligarchs is the Supreme Court adding additional weight to plea bargaining last month by ending the freedom of the wealthy who could afford to tie up their trials in an appeals process all the way to the Supreme Court, which often takes decades. (Unlike in the US, the Supreme Court in Brazil must consider all the cases put before it, and thus it suffers under a backlog of tens of thousands of cases.)
During the appeals process, convicted criminals are free to live their normal lives, including continuing the role of public servants. Because an appeal going to the Supreme Court takes so long, by the time it reaches the highest court, the statute of limitations on the crime has often expired. Thus, the oligarchs who are careless enough to find themselves convicted in court are not concerned, knowing they will never spend time in prison because they can afford to keep a legal team on retainer for years. However, with the latest change by the Supreme Court, once a criminal is convicted and loses his first appeal, he goes to prison while he’s awaiting the next appeal trial.
It is this new adjudication from the Supreme Court regarding prison incarceration for white-collar criminals that convinced men like Senator Delcídio to give up his cronies in crime to Veja magazine, and to submit a 400-page plea arrangement to federal prosecutors, declaring that Lula and Dilma are guilty of corruption. It is certain that Delcídio will get a reduced sentence and not be spending 19 years in prison like Marcelo Odebrecht, who until today has refused a plea bargain. Mr. Odebrecht declared to Sergio Moro that real men don’t sell out their friends. The Mafia code of honor, omerta, is alive and well in Mr. Odebrecht’s prison cell in Curitiba. However, one of Brazil’s largest daily newspapers, Folha de S. Paulo, has published several articles claiming Mr. Odebrecht is ready to sign a plea bargain. Meanwhile, Senator Delcídio has been rewarded for his plea bargain admissions by being expelled from the Senate by his colleagues for his lack of omerta. Should Marcelo Odebrecht and Eduardo Cunha also sign plea bargains in the future, along with Delcídio’s confessions, there may not be a politician or Brazilian CEO to survive.
To play devil’s advocate for a moment, near-President Lula and Mr. Odebrecht are apparently white-collar criminals, but they have been caught doing what is nothing more outrageous than business as usual in Brazil. This is the crux of the problem – the macho stance of powerful Brazilian men, like Eike Batista, allows them to fly at stratospheric heights on the clouds of personal and professional entitlement. They do not apologize; they never admit they are wrong; and they have no respect for authority. Their signature assertion to anyone who questions their actions is: “Do you know who you’re talking to?” (Você sabe com quem está falando?)
Thanks to this antiquated sense of entitlement, the vastness of the Lava Jato scandal has been successful in scaring away foreign investment in Brazil. Investors and hedge funds were unprepared for how endemic bribery and kickbacks were to business here.
Meanwhile, in the midst of the Petrobras/Odebrecht kickback scandal, and the devastating recession, the world’s largest iron ore producer, Vale, found itself in the thick of Brazil’s greatest natural disaster, a ruptured dam at an ore mine. Vale, another major driving force in Brazil’s economy, now faces billions in fines from the government. What foreign investors and everyday Brazilians are eager to know is how long it will take the Brazilian economy to recover. Years, no doubt.
In the likely scenario that Dilma is impeached and expelled from Brasília, Lula’s political future could be over. His arrest, should Moro find cause, will mark the end of his political career, certainly if we are to believe the articles published in Veja magazine, Brazil’s most popular weekly news magazine. This final knell for Lula would open the way for Dilma’s impeachment proceedings.
Should Dilma be ousted and Temer lead until the next election in 2018, there is little indication that Temer’s leadership will offer a positive alternative to Dilma. Temer is already under investigation for his role in the Petrobras scandal, and PMDB, despite being Brazil’s most powerful party, has no experience in the role of the presidency. Even more sticky, it’s conceivable that Temer could also be impeached and the Supreme Court could call for new elections before the end of the term.
While new elections may appease the millions of protestors, as well as foreign investors looking to renew their hope in Brazil’s economy, the fact remains that elections before 2018 would reveal a huge void of leadership in Brasília. In Datafolha’s latest poll, 68 percent of Brazilians currently support Dilma’s impeachment. However, no one is offering a response to the elephant in the room, the most essential question – following impeachment, what then? Can Brazil find a strong, honest leader?
Although the spirit of revolution is in the air, some revolutions, particularly those involving violence, end in military intervention. At this stage, a military takeover of the government is extremely unlikely, although there is a minority of protesters who support it.
Unfortunately, even a democratic and legal changing of the guard through early elections offers little hope for Brazil’s economic recovery in the near future. The bottom line is protesters do not take to the streets when the economy is healthy. However, who has the ability to lead the country out of the current economic dilemma known as stagflation, a recession combined with inflation?
All in all, many observers are energized by the engaged population. Watching everyday citizens become politically involved is exciting; it’s a testament to the necessary growing pains of a young democracy. However, the other side of the coin is that while the battle of the superheroes continues, everything else lies in suspended animation. We are riveted to the action, but with everyone sitting in the movie theater, no one is getting any work done. The country is paralyzed in argument between anti-PT voices and anti-Temer voices. With Lula fighting to return to Brasília and Dilma fighting to remain there, nothing can be accomplished in the battle against the Zika virus, in preparations for the Olympics, or to help the country escape its debilitating economic tailspin.
In the end, all of this brouhaha is a clear signal that the democratic system in Brazil of checks and balances, the Executive versus the Judicial, is working, perhaps for the first time. Additionally, no matter what happens next, millions of protesters will be on hand to remind the government where the real power is – in the hands of the people. It’s democracy in action. No more convicted white-collar criminals will be escaping jail because of an appeals process that extends for decades, surpassing the statute of limitations. The message is clear: the oligarchs time has passed. No more impunity. It’s the dawn of a new age here.
B. Michael Rubin is an American living in Curitiba.
[Research for this article comes from The New York Times, the Financial Times, the Associated Press, and Reuters.]