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Brazil’s Politicians Share the Spoils

Brazilian state controlled company Furnas

Brazilian state controlled company Furnas Trying to explain Brazilian society to western Europeans and Americans can be frustrating. When you tell people, for example, that public employees can go on strike and receive full pay and then retire in their mid-40s with a lifetime pension, that one of the country’s leading politicians is widely believed to have ordered the murder of his son-in-law, that college graduates who turn to crime have special cushy prisons to keep them apart from the unwashed majority of common criminals, and that there are more private security guards than police, they think you are exaggerating.

This article attempts to highlight another feature of life which many foreigners will find hard to believe – the blatant way in which politicians slice up the national cake among themselves. 

Almost four months into his second term, President Luiz Inácio Lula da Silva finally announced his government. His new ally, the PMDB, and his own Workers Party (PT) have been given the main ministries. However, the second tier of power is where the real wealth lies and the parties within Lula’s alliance are now scrambling to get their hands on much of the country’s assets as they can.

During this process politicians gain control of state-owned enterprises, organizations and agencies and use the resources to benefit their own parties, reward allies, repay favors and enrich themselves and, in many cases, their relatives and friends.

We are not talking about ambassadorships, for example, which are often used as gifts of patronage in other countries, including the United States, but utilities and commercial companies like Petrobras.

These entities have enormous budgets which fall into the hands of the politicians who are free to do with them as they please. This often leads to technically competent key people being fired and replaced by people with no experience. 

The PMDB, a grouping of regional, vested and personal interests, has the highest number of members of Congress. It is now handing Lula its bill for the support he can expect in the coming years. The cost of this bill is pretty steep – over six billion reais (about US$ 3 billion). 

The Estado de S. Paulo newspaper published a list of the PMDB’s demands covering 14 companies and organization. Here are some of them:

* Petrobras, the biggest company in Latin America. The PT runs it but the PMDB wants the oil exploration department. which has planned investments of 28.2 billion reais (US$ 13.87 billion) this year.

* The chairmanship of Funasa, the national health foundation, has been promised to a politician related to Jader Barbalho, the former governor of Pará, who faces allegations of corruption on a massive scale and was once (briefly) arrested. Funasa has planned investments for 2007 of 1.5 billion reais (US$ 740 million).

* The chairmanship of Furnas, an electrical energy company active throughout the country, has been promised to the PMDB. Furnas has planned investments for 2007 of 1.2 billion reais (US$ 590 million).

Other companies and organizations up for grabs include Eletronorte, the Caixa Econômica Federal bank, BR Distribuidora, a Petrobras subsidiary, and the Post Office.

This way of apportioning Brazil’s assets is one of the main reasons why corruption is endemic and entrenched. Giving politicians control of entities like this is like handing them a blank cheque.

This was shown during the bribes-for-votes scandal in 2005 when publicly-owned companies and banks were involved in the laundering of money the government paid to ensure that its shakier allies would support its programs.

The catalyst which started the whole scandal was an incident in which a low-ranking manager in the Post Office was filmed pocketing a modest 3,000 reais (US$ 1,470) bribe.

This system is unlikely to change in the near future. All the parties are in favor of it and, in fact, rely on it and the public does not seem to care. In fact, the latest opinion poll shows that Lula still enjoys massive support and had an approval rating of 63.7%.

Notes: For more on the new government see my article "Lula Finally gets His Act (Almost) Together" on Brazil Political Comment, 20.03.2007. The Estado article "PMDB recebe Lula hoje para cobrar fatia de poder de R$6 bi" appeared on 11.04.2007. CNT/Census opinion poll released on 10.04.2007.

John Fitzpatrick is a Scottish writer and consultant with long experience of Brazil. He is based in São Paulo and runs his own company Celtic Comunicações. This article originally appeared on his site www.brazilpoliticalcomment.com.br. He can be contacted at jf@celt.com.br.

© John Fitzpatrick 2007

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