Corruption, impunity and stagnation
A foreign investor considering the possibility of setting up - or even maintaining - a subsidiary of his company in Brazil has plenty of reason to think twice. Between positive developments and setbacks, due to frequent changes in regulations, the third lost decade in half a century is becoming inexorable.
The background is endemic corruption. A presidential country with three dozen parties represented in Congress, in addition to a gigantic State and a closed economy closed for international standards, presents ideal conditions for corruption to thrive. With so many parties, the president finds it difficult to form a government coalition capable of approving his agenda in Congress. But he has numerous positions in the huge state apparatus, as well as in several state-run companies, which can be distributed to buy parliamentary support. Their occupants promote overpriced investments in order to finance multi-million electoral campaigns and expand their own assets. The absence of competition from foreign companies facilitates the action between friends.
Reducing the number of parties - in addition to reducing the size of the State and opening up the economy - is a precondition for containing corruption and improving the efficiency of public administration. This diagnosis led Congress, in 1995, to approve the electoral threshold, which created several difficulties for parties that did not reach 5% of the votes. In order to give the small parties time to adapt to the new rule, it would not come into force until ten years later. After the 2006 elections, however, small parties that did not reach that minimum level of votes convinced the Supreme Federal Court to overturn the rule. The result was an explosion in the number of parties. Would it be a coincidence that the biggest corruption scandal in the country's history, nicknamed Petrolão, loosely translated as Big Oil, occurred just after this fateful decision?
In 2014, a small group of prosecutors from Curitiba launched an anti-corruption crusade that revealed the systematic looting of the largest national company, Petrobras. Operation Car Wash, fearing reprisals that could turn it into nothing, widely publicized its findings in the press in order to keep public opinion mobilized. The result was the arrest, perhaps for the first time, of powerful businessmen, technocrats and politicians. Billions have been recovered by Petrobras and the tax authorities. Citizens and investors had hoped that...
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