One day after Brazil’s Economy Minister Paulo Guedes was implicated in the Pandora Papers scandal — showing that he has stashed assets in offshore bank accounts — the news has created ripple effects in the political, judicial, and financial spheres. Prosecutor General Augusto Aras is set to lodge a request for clarification from Mr. Guedes, but is cautious about requesting a formal Supreme Court inquiry, saying the Economy Minister must first have the right to explain himself.
Beyond Paulo Guedes, Central Bank Chairman Roberto Campos Neto was also implicated in the data leak, showing that he owns substantial bank accounts in tax havens. Both men have stressed the funds have been declared to revenue services.
On Sunday, opposition politicians announced they would approach the prosecutor general to request investigations into Messrs. Guedes and Campos Neto, claiming they had engaged in conflicts of interest.
“It is unethical to have accounts in tax havens to evade financial charges. If the account belongs to an economic authority and has been declared, it may well be legal, but it is serious,” said prominent opposition figure Fernando Haddad. “If there have been any financial transactions, it’s misconduct in office. If they used non-public information, it’s a crime. If it is not investigated, it’s collusion!”
Financial markets are keeping a close eye on the case, but the news was met with caution due to the fact that owning offshore companies in tax havens is not illegal, providing they are declared to the Federal Revenue Service.
Messrs. Guedes and Campos Neto are believed to have made significant financial gains in their offshore accounts due to the weakening of the Brazilian Real. When he opened his offshore company in the British Virgin Islands in 2014, Mr. Guedes had USD 9.55 million in his account. Due to exchange rate fluctuations, the Brazilian Real value of this account would have almost doubled over the last seven years.
“It is fundamental to note that whoever owns assets, of any form, has a chance of making profit,” explains Ativa Investimentos head economist Étore Sanchez. “That the U.S. Dollar rose during their time in office, mostly because of the pandemic, is beyond the responsibility of both men.”
While he believed the revelation may go no further, Mr. Sanchez notes that it is “likely that part of the media and politicians will hope to transform this into an event, we have to see how government leaders will respond to the provocation.”