Fighting Corruption in the Tropics

After writing about infrastructure on Tuesday, I want to turn to the one issue that seems to weigh even more heavily in Brazilians' minds: corruption. Most tend to agree that this is the biggest problem holding the country back in its quest to become a world power. However, I am more optimistic on this front. While corruption is certainly a major issue facing this country, the situation may not be as dire as many seem to think.

Corruption, of course, is a problem all over the world. In the U.S., citizens constantly complain about the rot at the heart of politics, public institutions, and businesses. From Indonesia and South Africa to Turkey and Italy, ordinary people fear that those in power are working not to serve the public interest, but rather to line their own pockets. Brazil is no exception to this rule.

Brazil’s Corruption Problems

The situation here is problematic for several reasons. One major issue is the sprawling size of the government bureaucracy. Over the last 15 years, the tax take has risen from 22% of GDP to 36%, leading the government to grow enormously in size and opening up opportunities for rent-seeking. Over the last ten years, the number of national ministries has ballooned from 26 to 38, and a rotten system has developed in which the ruling party must win over coalition partners by promising them the right to run certain ministries, thereby giving each party its own personal patronage network. The larger the government gets, the more opportunities abound for insiders to skim money off the top, or to simply reward themselves directly through absurdly generous “super-salaries”.

Another issue is a long history of leniency toward corrupt politicians. Former president Fernando Collor de Mello resigned in disgrace in 1992 after being charged with running an influence-peddling scheme. He was later convicted, but returned to the political scene in 2006 after being elected to the Senate, where he still serves today. Jader Barbalho, a senator from the state of Pará, was forced to resign in 2001 due to fraud and corruption charges against him. In 2011 he was reelected to the Senate, where he is currently serving a new eight-year term. While politicians are often forced to resign amid corruption probes (as was the case with many of the ruling party deputies found to have participated in vote-buying schemes during the 2005 Mensalão scandal), there is often expectation that by doing this they will be able to avoid public scrutiny and return to power at a later point in time.

The third problem is lack of independent watchdogs. I have been following Brazilian politics through several media outlets recently, and have been struck by the lack of impartiality in many reports. Most sources tend to have a clear bias in favor of one political party or another. This is most obvious when looking at the country’s two major weekly magazines. Veja serves as a mouthpiece for the opposition Social Democrats, while Carta Capital does likewise for the ruling Workers’ Party. Both sides use investigative journalism to expose corruption scandals by the other party while virtually ignoring any blemishes of their own political allies. (The hyper-partisan cable news networks in the U.S., Fox News and MSNBC, make for a good comparison.) This cozy relationship has been underscored by a congressional investigation into Veja’s involvement in a recent corruption scandal involving a number of high profile politicians and businesspeople. While these tit-for-tat measures do have the effect of keeping both sides honest and exposing a large number of illicit acts, they do little to provide a balanced, reasonable assessment of the state of corruption in the country. Instead of sensationalist, accusatory media outlets, Brazil needs more independent, authoritative sources.

A Changing Dynamic?

Despite these problems, there is room for optimism regarding the corruption problem. First off, the situation is not as bad as it may look. This helpful graph (courtesy of The Economist) illustrates that Brazil is one of the countries in the world where people tend to think corruption is much worse than it actually is:

While Brazil scores poorly on the Corruption Perceptions Index, it outdoes many of its emerging market peers on the Bribe Payers Index, coming in at 7.6 compared to 6.1 in Russia, 6.5 in China, 7.0 in Mexico, and 7.5 in India. In fact, Brazil practically pulls even with emerging market star South Korea, ranked at 7.7. The country clearly has a long way to go before it can be considered on par with most developed countries, but it is performing relatively well by this measure.

Several new pieces of legislation, taken together, represent Brazil’s most earnest attempt to stamp out corruption since the country’s return to democracy. The “Clean Record” law (Ficha Limpa) passed in 2010 rules that any public official who is convicted of misusing public funds or resigns to avoid charges is ineligible to hold office for eight years. This law will first take effect with the 2012 municipal elections later this year. Last week the government passed a Freedom of Information Act that will open up government records to the public and allow ordinary citizens to investigate how their tax money is being spent. A law currently making its way through the Congress will seek to hold businesses legally responsible for the illicit acts of their employees, forbid any convicted institutions from receiving government contracts for ten years, and create a national registry of “corrupt firms”. These represent major steps to impose the rule of law and improve Brazil’s public administration.

President Rousseff has also taken an earnest stand against Congress’ machine politics. In the last year, she has sacked six ministers facing corruption charges and cut back on dispersing funds to several ministries. This led to a public stand-off earlier this year when several of her major coalition partners rebelled against her reforms and demanded the immediate release of money earmarked to their ministries. While Ms. Rousseff’s principled stand against the patronage networks won her high praise from voters and led her to record-level approval ratings, she was eventually forced to relent in order to avoid a collapse in her coalition and to pass key legislation regarding pension reform and World Cup preparations.

There can be no doubt that Ms. Rousseff’s willingness to challenge the status quo through her faxina (“house-cleaning”) has changed the nature of the political debate and offers a sharp contrast to her predecessor, President Luiz Inácio Lula da Silva, who was more willing to accommodate coalition partners in order to pass his agenda. Yet there is a limit to how much the president can do. As a technocrat who has never before held political office, she has no natural independent political base and is dependent on her party and its political allies to govern. As a result, she has had trouble confronting corruption in the establishment head-on, instead choosing to adopt a more reactionary posture, purging officials only once allegations against them have come to light in the media. (I will return to this issue in a later post regarding the 2014 elections.)

Slowly but surely, the tide is moving against the entrenched, corrupt elements in the Brazilian political system. Growing public awareness and information technology is empowering citizens to fight back and demand a more just, equitable public administration. Anti-corruption efforts by the federal police and judiciary are getting better. But serious work remains to be done. Organized crime is still a scourge on the country, as evidenced by the continued popularity of the jogo do bicho gambling networks run by criminal gangs. Most importantly, serious reforms are needed to get the bloated government down to size, reducing the number of elected politicians and consolidating ministries at the national, state and local levels. Major reform of the public sector will wipe out many of the existing patronage networks, reduce traditional inequalities, promote meritocracy, and improve the business climate without jeopardizing the government’s ability to provide important services such as education and health care. If Brazilians can do this, they will take a major step in leaving their country’s corrupt past behind them.