Brazil, one of the world’s largest emerging markets with the ninth largest economy, has a population of 208 million and GDP of $1.8 trillion.97 In 2014, a federal police superintendent in Brazil began an operation codenamed ‘Lava Jato’ (Car Wash),98 one of largest anti-corruption investigations in the world. It unveiled the shady relationships between government contractors, political campaign agencies and high-profile politicians in what were known as ‘pay-for-play’ schemes – bribes and campaign contributions paid by major corporations to government officials and political parties in exchange for lucrative government contracts which were over-invoiced to ‘cover the costs’. A number of stateowned companies including Petrobras, the national oil company (over $88.8 billion in revenues in 2017),99 were part of a system of institutionalized corruption whereby corporate executives overpaid an average of 3 per cent for contracts that were awarded on the basis of their political ties. Operation Car Wash uncovered ‘backstage’ agreements struck by public officials involving billions of dollars (Petrobras alone was estimated to have paid out over $2 billion).

Federal Judge Sérgio Moro was a key protagonist in Operation Car Wash and subsequently named among the ‘World’s Greatest Leaders’ by Fortune, the ‘100 Most Influential People’ by Time and the

‘Fifty Most Influential’ list by Bloomberg Magazine.

Moro’s convictions included former president Luis Inácio Lula da Silva (one of the most popular politicians in Latin America), a former speaker of the House of Representatives, two former ministers of state and a former governor of Rio de Janeiro (the state with the second-highest GDP). Operation Car Wash also resulted in the imprisonment of some of Brazil’s most powerful businessmen.

By 2019, $3.4 billion in public funds had been recovered and 445 people indicted, many officials from the leftist Workers Party who had been in power since 2003. By June 2020, the investigations had led to prison sentences totalling over 2,200 years for 165 prominent Brazilians.100 The combined efforts of Operation Car Wash in Curitiba, Rio de Janeiro and São Paulo resulted in more than 200 penal actions, with 217 defendants convicted, 256 individual plea bargains, 21 corporate agreements and 121 investigations. Operation Car Wash prompted a number of reforms in Brazil that forced companies to take measures against corruption. Among 250 Brazilian companies interviewed by KPMG in 2015, 57 per cent had ethics and compliance programmes in place; a year later the figure had risen to 76 per cent and by 2019 only 3 per cent did not have compliance procedures. However, 18 per cent of respondents in 2019 said they had no dedicated area for compliance, 32 per cent thought their resources were inadequate and 16 per cent believed there was a lack of independence/

autonomy.

Operation Car Wash had repercussions in other Latin American countries, including the resignation in March 2018 of Peru’s president, Pedro Pablo Kuczynski, who was accused of taking bribes from engineering company Odebrecht when he was a cabinet minister.103 Others involved in scandals were Colombian president Juan Manuel Santos and Venezuelan president Nicolas Maduro.

New president: After a turbulent campaign, Jair Messias Bolsonaro was sworn in as President of Brazil on 1 January 2019. He appointed Sergio Moro as Minister of Justice and Public Security.

Moro accepted the post believing it was an opportunity to consolidate the achievements of Operation Car Wash and permanently strengthen the rule of law from Brasilia. Moro was replaced in the Car Wash cases, resulting in a slowdown in the speed cases were judged. Some said it was because the judge had to get acquainted with the cases, others blamed his profile. On average, it took Moro eleven and a half months to issue a verdict. In September 2019, cases awaiting a decision from Judge Luis Antonio Bonat had taken twenty-six months.

From the start, Minister Moro and the Operation Car Wash team experienced difficulties. As Moro had been responsible for the conviction of former president Lula, Moro’s new role in the government led to accusations of a conflict of interest. Lula would have been the Workers’ Party (PT) presidential candidate in 2018 and was ahead in the polls even from jail. Some said that Lula being blocked from running paved the way for Bolsonaro’s victory.

In June 2019, a whistleblower delivered files containing thousands of confidential messages exchanged among the leaders of Operation Car Wash to Intercept, an investigative left-leaning website.107 The recordings and text messages appeared to show prosecutors colluding with Moro during the investigations, prompting claims that the trials were unfair.108 Moro and the prosecutors claimed that the alleged recordings had been obtained illegally by hacking their accounts and insisted there was nothing illegal in the leaked dialogues.

Congress passed legislation in 2019 aimed at preventing the abuse of power by prosecutors109 and later by rejecting an anti-corruption package proposed by Moro to strengthen the fight against corruption, notably the institutionalization of prison after the first appellate court conviction.110 In April 2020, Sergio Moro resigned as Justice Minister, alleging that Bolsonaro had interfered in the federal police by replacing its main leaders in an attempt to protect his family and friends from ongoing investigations. His resignation triggered a political crisis for Bolsonaro, adding to the health crisis sparked by the Covid-19 pandemic. On resigning, Moro said, ‘I didn’t enter the government to serve a master. I entered it to serve the country, the law.’

When Moro returned to Curitiba, he could not resume his previous role since when agreeing to become Justice Minister he had had to resign and renounce all benefits associated with the twenty-two years he had served as federal judge.

Covid-19: In March 2020 Brazil was in crisis following the outbreak of Covid-19. Lockdowns and social distancing measures were responsible for economic debacle. Brazil was one of the most affected countries globally. Bolsonaro’s opponents blamed the president as he downplayed the pandemic, railed against lockdown and promoted unproven cures. Covid-19 showed that systemic corruption was still alive and kicking in Brazil. During the pandemic, local and state governments had to make urgent purchases of ventilators and other medical equipment using more flexible procurement processes because of the emergency situation. It soon became clear Brazil was facing not only a new disease but an old one: widespread corruption was back. The press started to disclose corruption cases linked to Covid-19 purchases. As of June 2020, purchases under investigation amounted to more than R$1 billion (US$200 million). A new probe opened every three days in response to allegations of financial irregularities involving public budgets intended for coronavirus relief.

Questions:
1 What do you believe were the most important achievements of Operation Car Wash in the fight against corruption?
2 Do you believe Brazil will be a better place to do business going forward or will the achievement brought by Operation Car Wash be ephemeral?