The links between Jair Bolsonaro and organized crime

. Oct 04, 2019
bolsonaro organized crime Josinaldo "Djaca" Freitas took pictures with President Jair Bolsonaro. (Instagram)

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Good morning! Today we are covering the possible ties of the Bolsonaro family to organized crime. One of Brazil’s largest investment banks suspected of insider trading. The downfall of the Brazilian Mint. And a new crisis in South America. (This newsletter is for platinum subscribers only. Become one now!)

The links between Jair Bolsonaro and urban militias

In yesterday’s Briefing, we informed you about the new arrests in the case of Marielle Franco, the left-wing Rio city councilor assassinated in March 2018. Over the course of the day, however, it became public that

one of the four people arrested has at least some kind of connection with the Bolsonaro family (appearing in photos with President Bolsonaro himself, and his son Carlos—who serves as a city councilor in Rio).</p> <p><strong>Why it matters.</strong> Mr. Bolsonaro and his sons were elected to public office based on an anti-corruption campaign. But, as new information appears in the Marielle Franco case, one question becomes more and more relevant: how deep do the president&#8217;s connections with organized crime run?</p> <p><strong>Important.</strong> Before exploring these apparent ties, it is important to note that <em>no member of the Bolsonaro family is formally under investigation in connection to the murder of Marielle Franco or illegal militias</em>. These connections could, of course, be just a major coincidence.</p> <p><strong>Small world.</strong> We list the main connections between the Bolsonaro clan and urban militias:</p> <ul><li>Two of the suspects under arrest (including a former police officer thought to be the man to pull the trigger) lived in the same gated community as Jair Bolsonaro—whose youngest son briefly dated the daughter of the suspect. </li><li>Then there are also pictures of the suspect arrested yesterday with his arms around the president. The man is a jiu-jitsu instructor in Rio das Pedras, a militia-controlled region where the notorious death squad Office of Crime is based. He is believed to have disposed of the murder weapon.</li><li>The link between the &#8220;Office&#8221; and the president comes through Fabrício Queiroz, a friend of the president&#8217;s—and former aid of Senator Flávio Bolsonaro, the eldest of the Bolsonaro sons. Mr. Queiroz is suspected of operating a money-laundering scheme for Flávio, during his stint as a Rio state lawmaker, from 2007 to 2018. As Flávio&#8217;s chief of staff, Mr. Queiroz <a href="">employed two relatives of a man police say is a leader of the Office of Crime</a>.</li></ul> <script src="" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p><strong>Bolsonaro on militias. </strong>In 2003, President Jair Bolsonaro—a congressman at the time—took the stand in the lower house to praise the work of death squads, saying they did the job of punishing criminals in a way the state failed to do. &#8220;They are, of course, illegal groups, but my congratulations—criminality rates are down.”</p> <p><strong>Power.</strong> When they came to be, a couple of decades ago, Rio&#8217;s militias were well-regarded. They acted as a kind of &#8220;neighborhood watch&#8221; service carried out by current and former policemen against drug gangs. Now, they dominate regions in Greater Rio de Janeiro where over 2 million people live. They charge &#8220;protection services&#8221; to business owners in their controlled community, and monopolize services such as illegal cable TV and internet hookups, furniture, transportation, water, and gas. Nothing is sold without their blessing—and without giving them a cut of the profits.</p> <p><strong>Bible. </strong>As Mr. Bolsonaro constantly quotes the Bible, we have picked a fitting passage for the president. &#8220;Walk with the wise and become wise, for a companion of fools suffers harm,&#8221; <a href=";version=NIV"><em>Proverbs 13:20</em></a>.</p> <hr class="wp-block-separator"/> <h2>Investment bank suspected of buying privileged information</h2> <p>The Federal Police carried out search and seizure operations yesterday at the headquarters of BTG Pactual—one of Brazil&#8217;s leading investment banks. The institution is suspected of receiving privileged information from the Central Bank&#8217;s Monetary Policy Committee (which sets Brazil&#8217;s Selic benchmark interest rate). The leaks allegedly happened between 2010 and 2012—and would involve kickbacks to former Finance Minister Guido Mantega.</p> <p><strong>Why it matters.</strong> The benchmark interest rate has a considerable effect on the economy—affecting inflation and having an influence on how much funds will pay to investors. Getting information ahead of time would give a bank a major head start over its competitors.</p> <p><strong>Context.</strong> One of the alleged cases of insider trading happened in 2011, when the Central Bank surprised markets by lowering the Selic, following an upward trend.</p> <p>The allegations against BTG Pactual come from Antonio Palocci, a former finance minister under the Lula administration—who has been convicted of multiple corruption crimes. He has agreed to a plea-bargain deal in order to cut down his sentences. For over a year, prosecutors were reluctant to accept his collaboration, as they believed Mr. Palocci offered little proof to back up his words and made dozens of mentions of Brazil&#8217;s major banks, at the time untouched by Operation Car Wash. However, the Federal Police thought otherwise and stuck a deal.</p> <p><strong>BTG.</strong> This is not BTG&#8217;s first run in with the Justice system. In November 2015, former fund controller André Esteves was briefly arrested for allegedly paying rush money to an Operation Car Wash witness (he would be found not guilty). And in August, the bank&#8217;s stock lost 18 percent after rumors that it was linked to a money-laundering scheme. According to reports, law enforcement believes BTG had a bribery division in the molds of the one created by the notoriously corrupt construction group Odebrecht.</p> <p><strong>Banks on the spot.</strong> The operation against BTG Pactual comes after Wednesday’s news that Car Wash investigations have identified accounts opened in <a href="">Brazil’s five biggest banks were used to launder a total of BRL 1.3 billion</a>. Prosecutors are now attempting to determine whether failures in control systems at Itaú, Banco do Brasil, Bradesco, Caixa, and Santander could lead to the criminal liability of these major financial institutions.</p> <hr class="wp-block-separator"/> <h2>Brazilian Dutch-made money</h2> <p>Later this month, Brazil is set to receive the first batch of Brazilian Real coins produced by the Royal Dutch Mint, out of a total of 144.6 million coins. The European institution, created in 1567 and supplying over 40 central banks worldwide, will produce 5- and 50-cent coins.</p> <p><strong>Why it matters.</strong> The outsourcing of coin production is a statement of the Brazilian Mint&#8217;s decline. The once-proud institution has been plagued by terrible administrations and a lack of creativity that has reduced its profile internationally. Moreover, as the government tries to digitize services such as bond issuance, and is carrying out measures to reduce the use of cash (in favor of digitized, traceable operations), the Mint&#8217;s very <em>raison d&#8217;être</em> is jeopardized.</p> <p><strong>Privatization.</strong> Economy Minister Paulo Guedes badly wants to privatize the Mint—a move that makes total sense. The institution currently operates at an 80-percent idle capacity, and the government has launched several voluntary redundancy programs to reduce its staff. But, as <a href="">Bernard Quirin wrote on <strong>The Brazilian Report</strong></a>, it will take much more than privatization to save the Brazilian Mint.&nbsp;</p> <p>The company must invest in innovation, design, and commercial strategies to snatch central banks as clients.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Moro speaks.</strong> In an interview with weekly magazine <em>Veja</em>, Justice Minister Sergio Moro said he wouldn&#8217;t run for president in 2022 and reaffirmed he enjoys a &#8220;great&#8221; relationship with President Jair Bolsonaro (who has, however, constantly undermined Mr. Moro). However, he claims that all reports of a possible rift with Mr. Bolsonaro are nothing more than attempts to destabilize the administration.</p> <p><strong>Car Wash leaks.</strong> Since June, private messages exchanged between members of Operation Car Wash have been leaked by the press—exposing illegalities committed by prosecutors. Supreme Court Justice Gilmar Mendes, arguably the operation&#8217;s biggest enemy, will try to get the Federal Prosecution Office to attest to the messages&#8217; authenticity—which then could be used to nullify several cases.</p> <p><strong>Odebrecht.</strong> Caixa, a public bank, has asked that courts declare the Odebrecht construction group officially bankrupt. That is a desire of many of the group&#8217;s creditors—who want new conditions imposed on to its court-supervised administration process (which they deem &#8220;too vague&#8221;). While the motion is likely to be dismissed, it is a consensus that Odebrecht will probably be forced to present a new proposal for its many creditors.</p> <p><strong>Privatizations.</strong> The Economy Ministry announced that the government raised BRL 96.2 billion with the privatization of federal assets. Only BRL 6 billion, however, entered the National Treasury Department—as the calculations include divestments made by federally-controlled companies, such as Petrobras. Destatization Secretary Salim Mattar said he is frustrated with what he called the &#8220;slow pace&#8221; of privatizations this year.</p> <p><strong>Latin America.</strong> Ecuador President Lenin Moreno declared a national state of emergency due to mass protests against the end of fuel subsidies. The state of exception grants the executive greater powers such as the ability to mobilize funds, censor the media, deploy police and military, and close transportation hubs—all in the name of &#8220;national security.&#8221; Despite calls for his resignation, Mr. Moreno says he will not yield.

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