Months before Rio Olympics, crisis and scandal: The spreading oil slick in Brazil, and the stain it has left on Dilma Rousseff

The crisis couldn’t have come at a worse time, given the state of the economy, the Zika outbreak, and the looming Olympics. But Rousseff has been firm on not resigning.

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The crisis couldn’t have come at a worse time, given the state of the economy, the Zika outbreak, and the looming Olympics. But Rousseff has been firm on not resigning. (Source: Reuters)

Months before the Olympics in August, Brazil is in deep political and economic crisis. President Dilma Rousseff faces massive protests on the streets and impeachment proceedings in Congress. The country is in its worst recession in decades, unemployment is high, tax revenues are down, and the governor of the Olympics’s host city Rio de Janeiro has suggested selling off property to raise funds. The largest party has pulled out of government, striking a blow to Rousseff’s attempts to stall impeachment proceedings. Fuelling Rousseff’s rising unpopularity is a huge corruption scandal at state-run oil giant Petrobras. What is this scam that prosecutors say is the biggest ever in Brazil, and has seen the President’s approval rating sink to just 10%, according to a poll released Wednesday?

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What are the Petrobras allegations?

They are centred around huge amounts of money — up to $ 5.3 billion by some estimates — that is supposedly missing. Rousseff chaired the Petrobras board during 2003-10, the period of allegedly the worst corruption. The alleged scam came to light after police arrested one Alberto Yousseff in mid-2013 for money laundering. It was alleged that Petrobras asked construction companies contracted by them to overcharge for services in return for kickbacks — money that would be funneled to politicians linked to the ruling Workers’ Party headed by Rousseff. Yousseff named several top politicians and Petrobras high-ups. In 2014, in what is known as Operation Carwash, Paulo Roberto Costa, Petrobras’s chief of refining from 2004 to 2012, was held for money-laundering. As Costa sang, more names came out.

What was the fallout of the revelations?

The Brazilian Democratic Movement Party (PMDB) tried make an issue of the scandal at the time of the 2014 presidential elections, but Rousseff won a second consecutive term. However, investigators led by Judge Sergio Moro went after some of the country’s most powerful individuals, and top Petrobras officials were arrested within a year after Rousseff’s re-election. Moro’s judicial powers and autonomy stem from the fact that the investigation is run by the Public Ministry, an institution unique to Brazil. It can investigate all government officials in the public interest, and enjoys special autonomy. 86 powerful people have been convicted; 30 members of the ruling party are under probe, as are the Head of the Senate and Head of the Lower House. The entire Petrobras board has resigned, including CEO Gracas Silva Foster, a close personal friend of Roussef’s.

How is former President Luiz Inácio Lula da Silva involved?

On March 3, 2016, the home of Lula, President from 2003-2010 and Rousseff’s political mentor, was searched. Rousseff subsequently appointed Lula her chief of staff, granting him prime minister-like powers. But many saw this as the President shielding her mentor, since ministers can only be tried by Brazil’s highest court.

How has the scandal affected Petrobras?

It is in crisis. The company’s auditors have refused to sign its financial statements, which means that Petrobras is cut off from capital markets. If the government is forced to bail out the company, it could cost the country its investment grade credit rating.

How have Rousseff and Lula responded?

Both have denied complicity, with Lula saying “if there was corruption, it was isolated”. Rousseff has alleged attempts at a “political coup”. The allegation does not seem entirely unfounded given that top PMDB leader and Congress Speaker Eduardo Cunha has sought the help of Vice-President Michael Temer, who is also facing charges, to accelerate impeachment proceedings. The ruling party has pointed out that five people on the panel formed to decide on Rousseff’s impeachment face criminal charges themselves.

Is there room for doubt in the charges?

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There is no evidence linking Rousseff directly to the scandal. Also, Brazil’s media is monopolised by the Globo Group, which has a long history of opposition to Rousseff’s (and Lula’s) Workers Party. The media has faced flak for being soft on Cunha, and exaggerating the opposition to the President. Statistics have emerged showing that of the estimated 1 million to 3 million protesters in Sao Paulo on March 13, 80% were white, 77% had higher education, and 75% were from the high income group. This is interesting given that only 50% of Brazil’s population is white, 11% has higher education, and 6% high income.

What now for Rousseff?

The crisis couldn’t have come at a worse time, given the state of the economy, the Zika outbreak, and the looming Olympics. But Rousseff has been firm on not resigning. If the impeachment goes through (see box), Temer will replace her. But if Temer too is found guilty, huge chaos will break out.