U.S. reportedly joins Operation Car Wash

. Feb 08, 2019
us doj car wash

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In today’s issue: U.S. Department of Justice reportedly joins Operation Car Wash. President’s health leaves the government with no guidance. One week in, 15% of senators change parties.

U.S. reportedly joins Operation Car Wash

A Houston-based oil trader who worked with Petrobras and some of the world’s largest commodity companies is reportedly cooperating in a corruption investigation by the U.S. Department of Justice. It would be the first confirmation that American investigators have joined Operation Car Wash — which has toppled presidents in two countries and jailed over 130 Latin American politicians since its launch, in 2014.

Authorities say oil trader Rodrigo Berkowitz was involved in a scheme in which commodity companies — such as Vitol SA, Glencore PLC, and Trafigura AG — paid millions of dollars in bribes to Petrobras executives. The three sector giants paid at least USD 31m over a six-year span to secure advantages in deals, according to Brazilian prosecutors.

The DoJ will look into U.S. branches of the involved companies, as well as the funds used for bribes that were transferred through the American and European banking systems. The scheme could be investigated under the Foreign Corrupt Practices Act, and could be a boost to Op. Car Wash.

President’s health leaves government with no guidance

A recent medical report indicates that President Jair Bolsonaro might have contracted pneumonia, following a January 28 surgery to remove a colostomy bag. The head of state cannot speak nor work at the moment — and no release date has been set by the medical staff at São Paulo’s Albert Einstein Hospital. However, Mr. Bolsonaro has not placed Vice President Hamilton Mourão as the acting president until he is medically cleared.

In the meantime, the government remains more or less paralyzed, with no one really knowing what will happen to the administration’s top priority: the pension reform. Mr. Bolsonaro is the one who will choose which proposal will be presented — and what will be the strategy in Congress to pass it.

What is especially concerning about the president’s health is the number of conflicting reports from the government’s camp. Despite the reported pneumonia (which would not be a rare complication), Congressman Eduardo Bolsonaro said in an interview his father is steadily improving and already talking. But VP Mourão was more enigmatic, saying he wouldn’t comment on the president’s condition until he has more information about it.

One week in, 15% of senators change parties

The Senate is now filled with fresh faces — only 8 of 54 seats were re-elected — but their practices are nothing new. Just one week into their terms, 12 senators have already changed their party allegiances. Parties offer promises of hefty campaign financing in exchange for more power to negotiate with the Executive branch. After this round of musical chairs in the Senate, five parties disappeared from the upper house (click on chart below for a larger view). Similar negotiations for party exchanges are happening in the lower house, as congressmen are taking advantage of an allocated “window” in which they can switch parties with no risk of losing their terms.

500 people evacuated for risk of another Vale dam collapse

The National Mining Agency determined the removal of 500 people from the municipality of Barão de Cocais (80km from Belo Horizonte) due to risks associated with a dam owned by Vale. At around 1 am this morning (Brazilian time), warning sirens were sounded and people were temporarily housed in a local gymnasium. The Gongo Soco Mine is about 120km away from the Brumadinho dam which burst on January 25, killing at least 150 people.

According to Vale, a security consultancy firm denied the dam a stability report, which triggered the company’s emergency plan for risky mines. The mining company had rated the risk at an intermediate level 1, but authorities raised it to level 2 — closer to potential collapse. A further inspection will be carried out on Sunday. The dam in question is one of the 10 Vale plans to deactivate.

A group of 44 senators has requested a Parliamentary Committee of Investigation be launched to investigate the Brumadinho dam collapse. The recent discovery of emails attesting to the fact that Vale knew about the imminent risk of collapse just days before the dam burst have increased the chances of arresting members of the company’s top brass.

Rio assessing the damage caused by storms

Severe tropical storms are as typical of a Rio summer as its Carnival celebrations. However, the city has proven once again its inability to foresee their potential effects. A major storm recorded on Wednesday night killed at least 6 people, caused blackouts in several neighborhoods, and provoked numerous landslides. Mayor Marcello Crivella declared a state of emergency.

While a few parts of town saw more rainfall in a day than had been expected for the entire month of February, volume of rain is not the only reason for the damage. Investments in flood prevention measures have been cut down by 3.5 times since 2014. The mayor’s office ignored alerts from meteorologists about the risks of intense rainfall and didn’t shut down a busy avenue at the bottom of a hill — where there was a lethal landslide.

This week’s storm once again showed Rio’s lack of urban planning. In recent years, administrations were more focused on bringing international events such as the 2016 Olympics and the 2014 World Cup — instead of focusing on issues such as public sanitation and urban occupation. Over 80,000 families live in risky areas in Rio de Janeiro, said Governor Wilson Witzel on Thursday. And in many areas, the lack of proper sewage systems makes flooding a part of everyday life.

What else you should know

  • Ratings. S&P kept Brazil’s sovereign debt ratings at BB- with a stable outlook. The ratings agency believes President Jair Bolsonaro will be able to conduct austerity measures — but at a slow pace. The company said it could improve Brazil’s ratings over the next two years if profound reforms suggest a better fiscal situation for the country and the resumption of growth.
  • Public finances. Eight state administrations (three of which have declared a state of financial calamity) have requested permission from the Supreme Court to cut down working hours of civil servants, as a desperate measure to reduce spending on wages and pensions. The Supreme Court has scheduled a trial on the issue for February 27.
  • Defense. The Nigerian government has announced the purchase of 12 A-29 Super Tucano fighter jets from Embraer’s defense unit. This aircraft is used by 14 countries, and has accumulated over 46,000 hours in combat and 360,000 hours of flight.
  • Institutional crisis. Once again, Congress is at odds with the Justice system. Senators have gathered enough signatures to open a hearings committee to investigate high courts in Brazil. Justices have called it an attempt to intimidate judges, adding that, without a clear scope, the creation of such a committee would be unconstitutional.

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