Brazil's anti-corruption law celebrates its 5th anniversary

In the very first document produced on Brazilian soil, Portuguese knight Pêro Vaz de Caminha announced to King Manuel I of Portugal the discovery of a new land. He also took the opportunity to ask the monarch for the pardon of his son-in-law, who had been banished to Africa. Political patronage, as we see, was present from the very beginning of Brazil’s history.

Scandal has become an integral part of Brazilian politics, it seems. Over the past four years, Operation Car Wash – among other probes – has exposed the deeply-rooted corruption relations between corporations and public officials. According to Transparency International, Brazil is ranked 79th of 179 countries in the NGO’s perception of corruption ranking. While that may not paint a particularly promising picture, the truth is that Brazil has taken steps towards fighting corruption.

In August 2013, the country approved the so-called anti-corruption law, which would revolutionize how this crime is dealt with by our Justice system. Until that point, Brazil didn’t recognize criminal liability from corporations. But the anti-corruption law changed that paradigm. 

</span></p> <hr /> <h2><strong>Corruption perceptions index 2017</strong></h2> <p><img class="alignnone size-large wp-image-6923" src="https://brazilian.report/wp-content/uploads/2018/08/anti-corruption-transparency-international-1024x852.png" alt="anti-corruption transparency international" width="1024" height="852" srcset="https://brazilian.report/wp-content/uploads/2018/08/anti-corruption-transparency-international-1024x852.png 1024w, https://brazilian.report/wp-content/uploads/2018/08/anti-corruption-transparency-international-300x250.png 300w, https://brazilian.report/wp-content/uploads/2018/08/anti-corruption-transparency-international-768x639.png 768w, https://brazilian.report/wp-content/uploads/2018/08/anti-corruption-transparency-international-610x508.png 610w, https://brazilian.report/wp-content/uploads/2018/08/anti-corruption-transparency-international.png 1552w" sizes="(max-width: 1024px) 100vw, 1024px" /></p> <hr /> <p><span style="font-weight: 400;">The new legislation focuses especially on those who pay bribes rather than the public officials who pocket them. It also hits corporations just as hard as individuals &#8211; meaning that simply firing people that got their hands dirty is no longer enough to end a crisis. It also establishes that, besides regular fines for corruption, companies could also have to pay from 0.1 to 20 percent of their gross income to compensate the public administration (the value can never be lower than the profit obtained from corruption).</span></p> <p><span style="font-weight: 400;">According to the anti-corruption law, the Comptroller General&#8217;s office centralizes control duties and has a blacklist of </span><a href="http://www.portaltransparencia.gov.br/sancoes/cnep"><span style="font-weight: 400;">companies which have been punished</span></a><span style="font-weight: 400;">. Besides fines, companies can be banned from entering into government contracts.</span></p> <h2>The origins of the anti-corruption law</h2> <p><span style="font-weight: 400;">The bill that originated the anti-corruption law was first proposed by the president&#8217;s office in February 2010, after massive pressure from international organizations for Brazil to have a more advanced anti-corruption legislation, comparable to such countries as the United States.</span></p> <p><span style="font-weight: 400;">It took Congress three years to approve it, doing so in August 2013, when Brazil witnessed massive popular protests in hundreds of cities. What had started off as a small demonstration against rising bus fares in São Paulo evolved into a popular movement against corruption and the political establishment. It was in that context that the anti-corruption law was approved.</span></p> <p><span style="font-weight: 400;">However, the law was only regulated in March 2015, after another wave of protests.</span></p> <h2>The positive aspects of the anti-corruption law</h2> <p><span style="font-weight: 400;">Thanks to the instruments created by the new legislation, authorities can negotiate leniency deals &#8211; where companies agree to give information about corruption schemes and pay fines, in exchange for lighter sentences. It also started analyzing corruption as an objective act &#8211; punishable regardless of the intent of the corrupting agent. </span></p> <p><span style="font-weight: 400;">As the law gives authorities the power to sign deals without the need for a lengthy criminal process, punishment began to come much faster than it used to. With the launch of Operation Car Wash, in 2014, for the first time Brazil started seeing </span><a href="https://brazilian.report/money/2018/07/10/brazil-odebrecht-leniency-deal/"><span style="font-weight: 400;">billionaires in handcuffs</span></a><span style="font-weight: 400;">, spending real time behind bars.</span></p> <p><span style="font-weight: 400;">Between January 2014 and December 2017, 183 </span><a href="http://agenciabrasil.ebc.com.br/geral/noticia/2018-01/em-4-anos-da-lei-anticorrupcao-uniao-abre-183-processos-e-penaliza-30-empresas"><span style="font-weight: 400;">cases</span></a><span style="font-weight: 400;"> were filed against companies, resulting in the penalization of 30 groups. In that time span, 23 fines were issued, totalling BRL 12 million.</span></p> <p><span style="font-weight: 400;">This stricter legislation pushed Brazilian companies into the &#8220;age of compliance.&#8221; A diagnosis published by KPMG, one of the Big Four consultancy firms, shows that the number of big corporations without a compliance sector has dropped from 12 percent in 2015 to 8 percent in 2016. The study &#8211; a survey held with 250 companies, 54 percent of which with a turnover of BRL 1 billion or more &#8211; also shows that more groups are spending at least BRL 2 million per year on compliance.</span></p> <hr /> <p><img class="alignnone size-large wp-image-6926" src="https://brazilian.report/wp-content/uploads/2018/08/export-7TflF-1024x435.png" alt="compliance anti-corruption law brazil scandal corruption kpmg" width="1024" height="435" srcset="https://brazilian.report/wp-content/uploads/2018/08/export-7TflF-1024x435.png 1024w, https://brazilian.report/wp-content/uploads/2018/08/export-7TflF-300x128.png 300w, https://brazilian.report/wp-content/uploads/2018/08/export-7TflF-768x326.png 768w, https://brazilian.report/wp-content/uploads/2018/08/export-7TflF-610x259.png 610w, https://brazilian.report/wp-content/uploads/2018/08/export-7TflF.png 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></p> <hr /> <h2>The glass half-empty</h2> <p><span style="font-weight: 400;">If on one hand the new model improved the efficiency in persecuting illicit actions, it revealed a mismatch between control and inspection agencies</span><i><span style="font-weight: 400;">.</span></i><span style="font-weight: 400;"> Brazil created a &#8220;multi-agency&#8221; institutional design, in which a multitude of public entities have the jurisdiction to act to prevent or punish illegal acts: the Federal Prosecution Office, the Federal Accounts Court and its state-level counterparts, the Solicitor General&#8217;s office, and the Comptroller General.</span></p> <p><span style="font-weight: 400;">That design helps ensure that, no matter how extensive a corruption web is, it will not be able to sequester the entire state apparatus. However, it creates unhealthy competition between the controlling institutions, bringing about judicial insecurity.</span></p> <p><span style="font-weight: 400;">We saw this last month, when the Federal Accounts Court threatened to decline a leniency deal struck by the Odebrecht construction group and the Comptroller General&#8217;s Office. In the end, the court played along, but not without creating unnecessary friction between the parties involved. The deal states that Odebrecht must </span><a href="https://www1.folha.uol.com.br/mercado/2018/07/tcu-mantem-acordo-de-leniencia-da-odebrecht.shtml"><span style="font-weight: 400;">return</span></a><span style="font-weight: 400;"> BRL 2.7 billion to the federal government, for its participation in the Petrobras corruption scheme.</span></p> <p><span style="font-weight: 400;">It would also be positive to have clearer, more objective criteria to define how much money companies have to pay when caught in wrongdoings. Last year, the Federal Prosecution Office proposed that the JBS meatpacking group paid 5.8 percent of its annual revenue. For Odebrecht, it was 4 percent, and for Andrade Gutierrez, another construction group, 7 percent.</span></p> <p><span style="font-weight: 400;">While the anti-corruption law is far from perfect, we can&#8217;t label it a failure. Quite the contrary. It could be the spark to change the culture in Brazil&#8217;s business and political environments. But, like any cultural change, it takes time.

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PowerAug 07, 2018

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