Home Corruption Financial Times: Culture of corruption engulfs Brazilian elite

Financial Times: Culture of corruption engulfs Brazilian elite

Presidential scandal strikes at the core of the system of patronage but incentives that fuel bribery will be hard to eradicate

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President Temer and Joesley Batista former J&F CEO

When Brazilian lawmaker Rodrigo Loures entered the traditional Sao Paulo pizzeria Camelo late last month, he could not have known he was about to spark a political crisis so severe it might precipitate the downfall of the country’s president, Michel Temer.

Under surveillance by federal police investigating political corruption in Brazil, Mr Loures used the toilet before going to the parking lot where he met a contact driving a Maserati sports car — Ricardo Saud, an executive of JBS, the world’s largest meatpacker.

Mr Loures was then seen walking away wheeling a suitcase containing R$500,000 ($153,000) — the first instalment of an alleged R$15m bribe from JBS for him and Mr Temer, according to documents filed with the Supreme Court. Unbeknown to Mr Loures, Mr Saud was co-operating with the police as part of one of the biggest plea bargains in Brazilian history, involving seven senior executives of São Paulo-based JBS and its holding company J&F.

“It’s unbelievable, these guys were doing their dirty business here . . . they are shameless,” says a manager of Camelo, who declined to be identified. He says police had told him before the sting that they wanted to use his security cameras to catch a “paedophile”.

The JBS plea bargain, made public by the Supreme Court last week, has sent the centre-right government of Mr Temer, who has proved to be a competent leader despite low approval ratings, into what many analysts believe is a death spiral. Markets have crashed as investors who had bought into Mr Temer’s promises of delivering an ambitious reform programme to rescue Latin America’s largest economy from its worst recession sold their holdings.

Rating agencies have placed sovereign and corporate ratings on notice for a possible downgrade and shares of JBS, one of the country’s biggest multinationals, have plunged. On Wednesday, the army quelled anti-Temer protests in Brasília.

The bribery scandal involving Mr Temer and JBS has struck at the core of the system of political patronage and corporate favouritism that has poisoned the country’s attempts to realise its full potential.

For Brazil’s increasingly bold independent prosecutors, federal police and judges, the JBS plea bargain represents a new triumph in their three-year battle to tackle endemic corruption. An investigation that started with a probe into the state-owned oil company, Petrobras, and its largest construction group, Odebrecht, is focusing on JBS, one of the principal beneficiaries of huge subsidised public loans.

Yet the unanswered questions are whether the spectacular results of these investigations, which have implicated a large swath of the political elite, will end up dismantling the corrupt nexus between government and big business, or whether it will leave the incentives that give rise to bribery in place.

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