Brazil: Oily mess

Joe Leahy – The Financial Times, 05/14/2015

In Brazil’s hyper-consumerist society, people are accustomed to paying for everything in instalments, from fridges and televisions to silicon breast implants. But less commonly known is that even bribes to political parties can allegedly be paid parcelado, as the practice of paying in instalments is called.

That is what Augusto Ribeiro de Mendonça Neto, a former board member of oil and gas services company Toyo Setal, claimed in testimony in March. He alleges that he paid bribes to the ruling centre-left Workers’ party, or PT, between 2010 and 2013 in exchange for winning contracts with state-owned oil company, Petrobras.

The allegations form part of an investigation into a vast corruption scandal at Petrobras known as “car wash”. As part of the probe, Mr Mendonça told prosecutors that João Vaccari Neto, former PT treasurer, asked him to disguise the bribes as payments to a printing and advertising company named Editora Gráfica Atitude.

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Brazil: Oily mess

Brazil’s faltering economy needs some tough love

Samantha Pearson – Financial Times, 5/12/2015

For Brazil’s economists, 2015 will certainly be a year to forget. Latin America’s biggest economy is expected to contract by more than 1 per cent this year, marking the country’s worst recession in 25 years.

Meanwhile, inflation is set to end the year above 8 per cent, breaking the target range for the first time since 2003.

To add to the country’s woes, the corruption scandal at state-controlled oil company Petrobras — believed to be the biggest of its kind in Brazilian history — has the potential to slow growth further and accelerate job losses.

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Brazil’s faltering economy needs some tough love

Carlyle’s Rubenstein: Brazil best, despite problems

Lawrence Delevigne – CNBC, 5/12/2015

Once an investor darling, Brazil is hardly a consensus target for international cash today.

High inflation, a sluggish economy and a massive corruption scandal at state energy company Petrobras have caused many investors to flee. But others are sticking with the beleaguered South American country.

One example is $193 billion private equity giant Carlyle Group. Co-CEO David Rubenstein thinks Brazil is actually the most appealing market for investment after the U.S., Europe and China, according to remarks made Tuesday at the Global Private Equity Conference in Washington, D.C.

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Carlyle’s Rubenstein: Brazil best, despite problems

Brazil Witness Alleges Politicians Knew About Alleged Petrobras Scheme

Luciana Magalhaes and Will Connors – The Wall Street Journal, 5/11/2015

CURITIBA, Brazil—A convicted money launderer at the heart of an investigation into an alleged corruption scheme at Brazil’s state-run oil company Petroleo Brasileiro SA alleged President Dilma Rousseff and former President Luiz Inácio Lula da Silva knew about the alleged scheme.

Alberto Youssef, a currency dealer who was convicted of money laundering and sentenced last month to three years in prison, made the allegations to a congressional commission investigating the alleged corruption at Petrobras. Mr. Youssef had previously made the allegations to investigators as part of a plea deal for a lesser sentence.

When asked by lawmakers Monday if Ms. Rousseff and Mr. Lula da Silva, along with other top government officials, knew of the alleged scheme, Mr. Youssef said, “It is my understanding that [they] knew everything.”

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Brazil Witness Alleges Politicians Knew About Alleged Petrobras Scheme

The Betrayal of Brazil

Michael Smith, Sabrina Valle, Blake Schmidt – BloombergBusiness, 05/08/2015

In mid-2013, Brazilian federal police investigator Erika Mialik Marena noticed something strange.

Alberto Youssef, suspected of running an illicit black-market bank for the rich, had paid 250,000 reais (about $125,000 at the time) for a Land Rover. The black Evoque SUV ended up as a gift for Paulo Roberto Costa, formerly a division manager at Brazil’s national oil company, Petrobras. “We were investigating a money-laundering case, and Petrobras wasn’t our target at all,” says Marena. “Paulo was just another client of his. So we started to ask, ‘Why is he getting an expensive car from a money launderer? Who is that guy?’”

Marena had spent the previous decade building cases against money launderers, and Youssef had been a perennial target. He’d been arrested at least nine times for using private jets, armored cars, clandestine pickups by bagmen, and a web of front companies to move illicit cash. But Youssef had been spared serious jail time by testifying repeatedly against other doleiros, Brazilian slang for specialists in laundering unreported cash.

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The Betrayal of Brazil

Brazil is suffering from recession and scandal

Financial Times, 5/4/2015

In a world of near-zero interest rates, how about this? Last week, Brazil’s central bank increased its main interest rate to 13.25 per cent. The 50 basis-point rise is part of Brazil’s efforts to put its house in order. The economy is expected to shrink by 1 per cent this year, the deepest recession in 25 years; unemployment is rising; while inflation is running at over 8 per cent — almost twice the official target, hence the rate rise. After years of fast growth and easy credit, Brazil is on its back.

Latin America’s biggest economy is also reeling from a corruption scandal at Petrobras, believed to be the largest in national history. Release of the state-controlled energy company’s long-delayed results last month estimated losses, due to corruption, of more than $2bn — much of them due to political kickbacks. Combined with the recession, this has savaged President Dilma Rousseff’s standing. Even in a region of weak leaders, her dismal approval rating stands out. At 13 per cent, it is lower even than that of Nicolás Maduro, the president of Venezuela.

There are three main reasons for Brazil’s gloom. China’s slowing economy has punctured the commodity price boom forcing Brazil, and other commodity countries in the region, to tighten their belts. The prospect of higher US interest rates threatens to suck international liquidity out of the country. Most of all, it is paying the cost of Ms Rousseff’s mistaken faith during her first term in so-called “developmentalism”.

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Brazil is suffering from recession and scandal

Brazilian Economy Struggles to Take Off

Loretta Chao and Rogerio Jelmayer – The Wall Street Journal, 5/4/2015

SAO PAULO, Brazil—With Brazil dogged by drought, a sluggish economy and a corruption scandal at its most important company, businesses in Latin America’s largest economy have little to be optimistic about.

Economists expect Brazil’s gross domestic product to contract 1.18% this year and growth of just 1% in 2016. Federal prosecutors are in the midst of an investigation involving hundreds of millions of dollars allegedly skimmed from Brazil’s state-run oil giant, Petroleo Brasileiro SA, by the country’s top construction companies. A multiyear drought is threatening water supplies in São Paulo state, which accounts for 40% of Brazil’s industrial production.

All that makes this a fraught time for business in Brazil, which, fueled by a commodities boom, reached 7.6% economic growth in 2010 but has been slowing ever since. Amid bad news and uncertainty, the hope that the country would become an economic superpower has fizzled. Executives and investors say sentiment about Brazilian business inside and outside the country is the lowest it has been in years.

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Brazilian Economy Struggles to Take Off