Brazil Scandal Sends Multinationals Running to Attorneys

April 17, 2015

Joel Schectman – The Wall Street Journal, 4/16

Multinationals with operations in Brazil are making frightened calls to their lawyers, as the country’s spreading corruption scandal reaches more companies.

The bribery investigation known as “Operation Carwash,” which has already sent Brazil’s state-run Petroleo Brasileiro SAPBR +1.15% into a tailspin, is spreading across the country’s largest construction companies and its third largest bank. Brazilian prosecutors say shipbuilding arm of South Korean conglomerate Samsung paid bribes to a former executive at Petrobras. Brazilian prosecutors have also accused Swedish builder Skanska ABSKA-B.SK -2.11% of taking part in the corruption at Petrobras. Skanska didn’t respond to requests for comment. Samsung couldn’t be immediately reached for comment.

Brazilian investigators have said they are investigating large international firms that they believe have paid bribes, Reuters reported.

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Investors tiptoe back into Brazil markets as inflation peaks

April 17, 2015

Walter Brandimarte – Reuters, 4/17/2015

Some investors are carefully betting that the recent selloff in Brazilian financial markets was overdone, pointing to signs that inflation is slowing and the government is getting its finances in order.

Many expect inflation will come down from its current 11-year high of 8.13 percent, thanks to the central bank’s interest rate hike cycle of 1.75 percentage points since October, as well as the economic slump’s effect on demand.

Meanwhile, state-run oil company Petrobras is expected to this month post financial statements that have been delayed by a huge corruption scandal, greatly reducing the risk of a major debt crisis that could have cost Brazil its investment grade credit rating.

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Protests in Brazil: Tropical tea party

April 17, 2015

The Economist (print edition), 4/18/2015

BY NEARLY any standard, the protests to denounce the president, Dilma Rousseff, and to rail against corruption in Brazil were huge. Some 660,000 people turned out on April 12th, in 152 cities. Yet that is compared with roughly 2m Brazilians who rallied a month ago. The drop in numbers is sobering for a movement that dreams of toppling the president with massive shows of street support. It means the organisers will have to change tactics and refine their muddled message.

The anger has not ebbed, and the movement is not going away. According to Datafolha, a pollster, three-quarters of Brazilians support the protests. Two-thirds want Ms Rousseff to be impeached over a multi-billion-dollar bribery scandal surrounding Petrobras, the state oil company. Members of her Workers’ Party (PT) and others in the governing coalition are under investigation, although the president herself has not been implicated. Her popularity has sunk from 40% at the start of her second term in January to 13%. Even in the PT’s heartland in the poor north-east, a majority thinks she is doing a poor job.

The movement against her resembles insurgencies in Europe and the United States, but with big differences. Unlike Syriza in Greece or Podemos in Spain, the organisers of Brazil’s protests are not left-wing and do not constitute a political party. Some compare the protesters to America’s Tea Party, which agitates for small government within the Republican Party. That is closer to the mark. The protesters lean towards Brazil’s opposition parties and hope to influence them. Renan Hass of the Free Brazil Movement (MBL), a main organiser of the protests, wants the Party of Brazilian Social Democracy to be “more macho”. But the movement is too young, and too fragmented, to have infiltrated Congress, unlike the American Tea Party. Dozens of grassroots organisations called protesters onto the streets.

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Brazil’s president names progressive lawyer to Supreme Court

April 15, 2015

Reuters, 04/14/2015

President Dilma Rousseff nominated a law professor close to leftist social groups on Tuesday to sit on Brazil’s Supreme Court as it begins to investigate dozens of ruling coalition politicians for corruption.

If confirmed by the Senate, Luiz Edson Fachin, a civil law expert from Parana state, will take the seat of Joaquim Barbosa, the former chief justice who retired last year after leading Brazil’s highest-profile political corruption trial to date.

Rousseff, who was narrowly re-elected last October, has been criticized for taking more than eight months to fill the 11th seat on the top court that will play a key role in a widening probe into a bigger scandal involving graft and political kickbacks at state-run oil company Petrobras.

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Three Former Brazil Lawmakers Arrested in Petrobras Probe

April 10, 2015

Rogerio Jelmayer – The Wall Street Journal, 4/10/2015

Brazil’s federal police arrested three former lawmakers Friday as part of an investigation of alleged corruption involving contracts between state-run oil firm Petroleo Brasileiro SA, construction firms and politicians. Petrobras officials took a cut of the cash from inflated contracts, funneling the rest to lawmakers and political parties, according to investigators.

Police arrested Andre Vargas, a former lawmaker of the ruling Worker’s Party; Luiz Argolo, a former lawmaker of political party Solidariedade; and Pedro Correa, of the Progressive Party (PP) related to corruption allegations, said federal police spokesman Paulo Roberto da Silva. He said more details of the operation would be disclosed later Friday at a news conference.

Mr. Vargas and Mr. Argolo are accused of involvement with currency dealer Alberto Youssef, previously arrested by the federal police as part of “Operation Car Wash.” Messrs. Vargas and Argolo have previously denied involvement in the alleged corruption scheme. It is not clear what the accusations are against Mr. Correa.

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Political theatrics that are dividing Brazil

April 7, 2015

Otavio Frias Filho – Financial Times, 4/5/2015

To watch the political theatre now unfolding in Brazil is to behold a country licked by discontent and scandal. An economy that had already been drifting for years is now in recession, and inflation is on the rise. Dilma Rousseff, narrowly re-elected to the presidency late last year, has had little choice but to renege on campaign promises and resort to harsh austerity.

While spending cuts are a necessary corrective to the fiscal complacency of her first term, many accuse Ms Rousseff of deception. They are embittered, too, by allegations of multibillion dollar kickbacks connected to Petrobras. No evidence has emerged to implicate Ms Rousseff, who as minister of mines and energy headed the Brazilian state-owned oil company’s board of directors when much of the corruption is said to have occurred. Still, large crowds of protesters gathered across the country last month, calling for her to be impeached.

Brazil is one of the few democracies to have removed a sitting president before (Fernando Collor was turfed out of office in 1992). Lawmakers may be tempted to unsheathe their daggers once again. As recently as December, fewer than a quarter of Brazilians disapproved of Ms Rousseff’s administration. Now the figure is over half.

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BlackBerry Messenger helped catch allegedly corrupt officials in Brazil

April 7, 2015

Joshua Barrie – Business Insider, 4/7/2015

Prosecutors in Brazil have used BlackBerry Messenger (BBM) to expose alleged corruption, the Wall Street Journal reports. Alongside confessions from insiders at energy corporation Petroleo Brasileiro, information was uncovered on BBM and used to shine a light on suspects.

According to the WSJ, thousands of instant messages were uncovered using search warrants and in cooperation with Canada smartphone company BlackBerry. The communication helped authorities make key connections between alleged money launderers and supposed clients, which included lawmakers and construction contractors.

So far more than 100 people have faced criminal charges, the WSJ says, and the investigation has included nearly 50 Brazilian politicians. The probe is called “Operation Car Wash” and has had a huge impact on the country’s establishment and Petrobras, which largely deals with oil.

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