Just keep scrubbing.

In Brazil, the Car Wash carries on scrubbing.  Yesterday, final hearings took place to wrap up plea bargains made by no fewer than 77 former executives of infrastructure and construction conglomerate Odebrecht; proceedings even featured a special guest appearance from ex-CEO Marcelo Odebrecht, currently serving 19 years in a federal penitentiary in Paraná for his role in the Petrolão bribery scandal at state oil giant Petrobras.

One much-lamented absence was that of Teori Zavascki, the justice of the Supreme Federal Court (STF) overseeing the waves of trials coming out of the corruption probe. Mr Zavascki was one of five killed when his plane came down off the coast of Rio de Janeiro state last Thursday. Though preliminary investigations have indicated pilot error may have been to blame, given Mr Zavascki’s side-line in supervising investigations against high-profile political figures – in May, upholding the impeachment process against former President Dilma Rousseff and, more recently, overseeing charges against former Speaker of the Lower House Eduardo Cunha – the news naturally had the conspiracy theorists of the Brazilian blogosphere running wild.

So where does Teori Zavascki’s death leave the Lava Jato investigation? While he had been noted as a particularly independent voice, from a purely practical point of view, not much changes: as yesterday’s hearings demonstrate, the judicial proceedings will rumble on regardless. And on the business of investigating – a process that it is not so much “draining the swamp” as “dredging the Pantanal with an eggcup” – household name and probably-not-partisan federal judge Sérgio Moro remains on the case.

At the same time, the political consequences of a hold-up in the probe would be potentially devastating. This month, Ipsos Brasil polling found that 96% of respondents believed that Lava Jato should be pursued to the end “no matter the consequences”. There is clearly no appetite from the Brazilian public for any let-up in rooting out corruption and Brazilian politicians need not be reminded that “people power” has been a major feature of the domestic political landscape in recent years, with not-inconsiderable effect

More broadly, how is Lava Jato impacting Brazil?

As the country struggles to claw its way out of its worst recession in modern history, the drip feed of sleaze – Petrolão and more besides has demolished public faith in the political class and confidence in the country’s institutions is rock-bottom. Admittedly, the year-end saw positive noises coming from the Brazilian economy and much-needed reforms to cut prohibitive social spending were approved in December. However, in one important growth area, Lava Jato presents a particularly interesting challenge.

As most economists will tell you, well-targeted investment in infrastructure can have a stimulating effect on the economy: post-2008, Chinese infrastructure investment leapt to 16% of GDP, helping to maintain – officially at least – almost double-digit growth rates while much of the rest of the world languished in the economic doldrums (though the consequences of that particular splurge may become clear sooner than anticipated).

Few would suggest that Brazil now go on an East Asian-style poured-concrete bonanza. But Latin America’s biggest economy quite clearly has ground to make up – the World Economic Forum Global Competitiveness Report 2016/17 ranked Brazil 116th out of 138 countries for overall quality of infrastructure – and addressing this long-neglected issue would be a welcome source of jobs and investment for the economy and a raison d’être for President Michel Temer’s short-sell-by-date administration.

Thus far, Mr Temer has been – atypically – praised for his open and pragmatic approach to solving the infrastructure problem. Last September brought with it the launch of the Investment Partnership Programme, putting infrastructure high on the agenda and seeking a joined up approach between state and private interests.

But one question remains: How does this or any future Brazilian government manage the political consequences of harnessing the economic potential of a sector whose leading lights – Odebrecht, Camargo Corrêa, Engevix, UTC and others – have been savaged by corruption allegations and convictions and have dragged the reputation of former national jewel-in-the-crown Petrobras through the dirt? Answers on a postcard please.

 

This entry was posted in Brazil, Corruption, Infrastructure, Politics. Bookmark the permalink.

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