A culture of corruption and a weak judicial system hinder Petrobras probe

by Enrique Xavier López

In Giant—George Stevens’ 1956 Hollywood blockbuster—oil tycoon Jett Rink, played by 24-year-old James Dean, is a man blinded by greed and corruption. In this classic rise-and-fall story, Rink is able to extend his wealth and influence beyond the oil business, where even the sitting governor and U.S. Senator of Texas are at his every beck and call. The climactic scene unfolds when Rink, who in his youth was a poor wildcatter, attends an Austin gala honoring his success. After a brief squabble with his longtime rival, Bick Benedict, Rink staggers into the party drunk, takes his seat at the head table, and then passes out. All the politicians and guests leave in disgust, and an almost incoherent Rink ends up speaking to an empty room.

Today, Brazil’s own oil giant, Petrobras, finds itself speaking to an empty room—an entire nation refusing to stand idly by as a multibillion-dollar corruption scandal continues to engulf the company and the Brazilian economy. For the past year, federal prosecutors have accused Petrobras executives of inflating the value of service contracts, and then illegally extracting nearly 2 billion reais (or $700 million) in the excess funds for personal use or to bribe officials. The probe, known as “Operation Car Wash,” has led to at least 97 indictments, including of four former company executives, senior engineering executives, and João Vaccari Neto, the treasurer of President Dilma Rousseff’s ruling Workers’ Party. Almost 50 politicians from various political parties, and more than 750 individual projects, are also under investigation.

Petrobras, a giant once hailed as one of the most profitable companies in the world, is now $106.2 billion in debt—an alarming figure that prompted Moody’s to downgrade the company’s debt to a junk rating a few weeks ago. The scandal has even forced Petrobras to write off $17 billion due to losses from bribes and overvalued assets. Hit by falling oil prices, Petrobras’ stock has also been down 60 percent in the past six months.

In the spirit of Jett Rink, The Wall Street Journal has dubbed the embattled Petrobras “an oil major with the leverage of a Texas wildcatter.”

Yet the damage done to the Petrobras brand is not so much the result of poor decision-making by its top executives, than a reflection of the culture of corruption that permeates Brazilian society. For one, there is the jeitinho (or “little trick”), a term used to describe the dexterity required to circumvent laws or social conventions. Examples range from the harmless (like exchanging small favors) to the morally ambiguous, such as Brazilian diplomats abusing parking privileges or parents bribing their children’s driving instructors so they can pass their tests and obtain licenses in record time. As the Petrobras scandal has made clear, the jeitinho has proven to be particularly dangerous when dealing with corrupt Brazilian institutions, and especially when navigating massive government bureaucracy. As Brazil expert Larry Rohter puts it, the alternative to applying a jeitinho is, of course, to play strictly by the rules “and be classified as an otário, a dupe or a sucker, an object of ridicule and derision, and no one wants to be in that category.”

This informal code of rule-bending mirrors the Brazilian judicial system, where courts often have unclear or overlapping jurisdictions. For instance, Petrobras defense lawyers argue that key elements of the case should not be tried under federal Judge Sergio Moro’s jurisdiction in Curitiba, but in Rio de Janeiro, where Petrobras is based.

Also, in late April 2015, the Supreme Court decided to release from jail nine construction executives implicated in the Petrobras scheme, and place them under house arrest instead. This coincided with a separate decision by the court to halt some new depositions—actions that will likely make it more difficult for prosecutors to strike plea bargain deals that could result in more charges. The Supreme Court’s recent actions are further troubling when one considers the fact that elected officials enjoy special protection in Brazil, which means that those politicians who have been named as possible suspects, including the leaders of both houses of Congress, must be tried before the same court.

In light of the ongoing Petrobras probe, many Brazilians understandably see the laws in place as instruments of power and coercion, and not of justice. Unless more is done to curb corruption in Brazil, millions of Brazilians will continue to employ the jeitinho, or take to the streets, as they did in March and April of this year, and demand more accountability from their leaders. There is a fear that the corruption scandal will soon spread to other state companies, such as electricity giant Eletrobras. But many more Brazilians fear that once the dust settles and the scandals wind down, little will have been accomplished to counter that old Brazilian maxim, “The sun rises for everyone, but only the crafty get to stand in the shade.”

---

Enrique Xavier López is a Master’s candidate at Columbia University’s Graduate School of Arts and Sciences. His areas of focus include Brazil, human rights, and immigration policy. He can be reached at exl2103@columbia.edu for questions or comments.