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Doing Business in Brazil: Political and economic landscape

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Sergio Moro's Anti-Crime Package

A central talking point of Jair Bolsonaro’s campaign was to market himself as the only one who could free Brazil from the ills of corruption.

During his campaign, he tweeted that “the evils and harms of corruption affect the population in every way. This is what we want to stop. A corrupt government stimulates crime in all areas.” Almost half of Brazilian voters saw corruption as an important concern, and his performance in the last presidential elections was higher amongst the share of the electorate considering corruption as a priority. In fact, his rise makes sense when one considers the backdrop of Brazil’s culture of political corruption. After watching politicians being caught in corruption scandals, Brazilian voters chose to bet on the far-right candidate.

Corruption in Brazil

As stated by Transparency International’s Executive-Director, Brazil needs to fight against corruption by attacking the root of the problem through legal and institutional reforms, since the world’s perception on corruption in Brazil will only change when legal alterations are implemented to fight this type of crime.

Brazil ranked 105 out of 180 nations in 2018 on Transparency International’s Corruption Perception Index, dropping in the ranking for the third year in a row. The same year, Brazilians identified corruption as one of the country’s major problems, and 95% of those interviewed believed that politicians were “not transparent”. Corruption is also one of the major hurdles that Brazil faces to maintain the country’s competitiveness on the world market as it ranks 72 on the Global Competitiveness Report. A study conducted by Ernst&Young showed that for 96% of Brazilian professionals interviewed, bribery and corruption were common in business. Brazil ranked in first position out of 53 countries participating in the study.

The political bribery investigation centered on former state-owned oil company Petrobras, known as Operation Car Wash, led to a wave of frustration with the “old politics” as it has targeted hundreds of politicians from all political spectrums. About 60% of Brazil’s 81 senators and a third of the 513 members of its House of Representatives have been accused of a crime. Former leftist Workers’ party (PT) President, Luiz Inácio Lula da Silva, is serving more than twelve years in jail for corruption. Other high-profile jailings include Eduardo Cunha, ex-speaker of Brazil’s House of Representatives, and one of the major responsible for former President Dilma’s impeachment.

Due to the impact of the anti-corruption agenda, a Special Commission was created in 2016 to carry out a bill of law based on the “Ten measures to fight corruption” presented by the Brazilian Federal Prosecution Service. Yet, many important points of the original text were removed after review in the House of Representatives, and the bill is still awaiting to be evaluated by the Senate. Though dropping in the last months of 2018, the public opinion’s support for Operation Car Wash has been significative.

Anti-Crime Package

Prepared by Justice Minister Sergio Moro, previously in charge of Operation Car Wash, the anti-crime package has generally gained popular support (over 60% of Brazilians approve the Minister’s anti-crime and corruption measures). Initially thought as a unique bill of law, the package was divided into three following politicians’ resistance against the criminalization of “slush fund”. The three main issues addressed by the bills presented in the package are the amendments to rules in the Electoral Justice sphere; the criminalization of “slush fund”; and other measures related to anti-corruption and organized crime.

The first bill states that the Brazilian Code of Criminal Procedure can be alternatively or additionally applied to the Electoral Code in judicial procedures and judgements of electoral crimes, as well as in appeal procedures and their related execution. Also, the bill stipulates that the same legal action can be subject to appeal both in the Common and Electoral Courts at the same time.

The second bill provides the criminalization of “slush fund”, practice widely spread amongst politicians, mainly during electoral campaigns. While cash flows are not declared to the authorities, a parallel fund is created and often intended to finance illegal activities or money laundering. Several congressmen are against including the criminalization of “slush fund” in a package mostly aimed at fighting organized crime. As such, abandoning this proposal can actually facilitate the review process of the package as a whole, while it could lead to a slower processing of the single bill.

The third bill is the most controversial, on which experts’ opinions have been divided. Some of the issues it covers directly result from events that took place during the 2018 elections, including a defendant’s imprisonment straight after a Court of Second Instance’s condemnation. Brazil’s judiciary suffers from a frequent lack of celerity to handle legal actions. Public awareness grew with the coverage of Operation Car Wash, leading to mounting criticism against defendants’ non-incarceration after a condemnation in the second instance. Yet, as this measure directly affects the Constitution, some stress it should lead to a constitutional amendment.  

The bill also provides for the flexibilization of punishment in the case of eventual fatalities under police action. Bolsonaro regularly raised this issue to gather popular support during his campaign in view of Brazil’s high levels of violence. Hence, the text contains many links to the fight against criminal organizations: it provides that a judge can deny provisional release if the defendant is a recidivist or part of a criminal faction, and carried a firearm of restricted use; he can also sent to a high security prison and cannot have access to a progressive sentencing.  

Some of Minister Moro’s suggestions were influenced by the American legal system. The Congress still needs to discuss having “whistleblowers” during criminal investigations, and including the “plea bargain” to reduce a defendant's sentence and save money on a trial where the outcome is obvious. For some the “plea bargain” is positive as it allows the defendant to have a choice based on free will and consensus between the parties”.