The Car Wash operation (Operação Lava Jato) is bringing a new wind of business relations changes. Many companies are reviewing their compliance and conduct standards. Many companies are modifying their bidding procedures. More prosecutors and judges are working to investigate bad conduct by public managers. Many politicians are adjusting their speech to meet the clamor of the streets for less corruption and more justice.
Some leaders and churches linked to leftist parties were against the movement. His mouth was open to the king’s delicacies but his ears closed and eyes have not seen the movement of the streets since June 2013.
Brazilian engineering conglomerate Odebrecht SA has agreed to plea bargains and a massive leniency deal under which it would pay around 7 billion reais ($2.1 billion) in fines for its role in Brazil’s biggest corruption scandal, a person familiar with the matter said.
The deals sent shockwaves through Brazil’s political establishment as they could incriminate as many as 200 lawmakers for taking graft money from Odebrecht , which prosecutors said had a department dedicated to bribery.
If approved by the judge leading the “Operation Car Wash” probe into corruption at state-controlled oil firm Petrobras, the Odebrecht deal would be the world’s largest plea and leniency agreement.
How exactly will the case end? When? What percentage of Brazil’s political and business elite will end up behind bars? Will the case result in a substantial long-term improvement in Brazilian justice and institutions, as its supporters hope?
The core of the con was to overcharge on contracts at Petrobras, the state-run oil company, and use the proceeds to fund campaigns and buy political support. To date, prosecutors have jailed the Workers’ Party treasurer, a senator, some of Brazil’s most powerful executives, and others. In all, they’ve brought criminal accusations against 239 people, sought information from 30 countries, levied about $10 billion in fines and dished out 1,148 years of criminal sentences.
Felipe Monteiro, professor of strategy at INSEAD business school in Paris and senior fellow at Wharton’s Mack Institute, notes that “as Brazil looks at the future, a major question is whether Brazilian companies can be part of the global value chain, and thus less subject to the negative consequences of downward spirals in commodities.”
Monteiro cites two reasons why most Brazilian exports continue to be commodities. First, “It is very comfortable to be a commodity exporter when commodity prices are booming.” Second, many of the Brazilian companies that could have made an effort to compete abroad “are being too lazy” when it comes to globalization. Their experience with the region’s long history of price cycles has led them to believe that commodity prices will eventually bounce back strongly, making arduous efforts to join global value chains unnecessary, he says. Nevertheless, Monteiro is hopeful that, given current circumstances, many Brazilian firms that are focused entirely on the large domestic market will seriously reconsider the long-term advantages of exploiting opportunities abroad. A few leading companies – such as Brazil’s Embraer, the aerospace conglomerate – have built their own global value chains. Embraer is “definitely part of a global value chain. They import so many different parts and work with different suppliers; they assemble, and then they export again.” However, “unfortunately, few Latin American companies pursue this approach. [More commonly], what happens is either they do a lot of local production for local consumption or what they provide to the rest of the world is just commodities.”
Like the U.S., Brazil is a huge nation in which all too few companies have exploited their opportunities to access foreign markets. In 2013, Brazil’s total exports represented only 13% of the country’s GDP, compared with 32% in the case of Mexico’s exports (and 14% in the case of U.S. exports), according to the World Bank. At that time, Brazilian commodity export prices were high. Nowadays, notes Monteiro, “When you look at exports and foreign trade, Brazil is not doing well, because commodity prices are depressed. And when you look at its internal economy – most of which is services — [Brazil] is also not doing well there [either], because in the internal economy, people are not consuming. So this pattern is putting so much pressure on Brazil.”