What’s Next Brazil, Now that the Party is Over?

Written By: CENSA Editorial Board

The Summer Olympic Games are over; and while they were not perfect, they can be viewed as an overall success! Yet now that the party is over, Brazil must more earnestly deal with a host of looming crises largely overlooked and kept from the international eye during the events. The Rio Games experienced funding challenges and were held, for instance, even as the nation faced a growing corruption scandal, experienced a deteriorating economy, and endured widespread political turmoil. The extent of the social upheaval has proven to be impactful enough to also awaken and exacerbate long-dormant political rivalries.

The Olympic funding shortage was a significant challenge and yet the struggle was recast in a positive light in an effort to personalize and motivate more interest in the Games. This act of recasting called for an invigorated spirit of innovation and improvisation affectionately known as jeitinho Brasileiro, or the Brazilian way of doing things, and it produced positive results.[1] Not only were competition venues ready by the Games’ start, but local officials provided an eleventh-hour pledge to fund the Opening Ceremony. This last-minute cash infusion appears to have broken a promise to avoid public assistance. Despite assurances to the contrary from the head of the International Olympic Committee (on the eve of the closing ceremonies, no less), suspicion about the use of public funding is widespread..[2]

The Games took place a mere seven years after Brazil outbid several rivals to serve as host, besting even a proposal put forth by an Obama-backed, Chicago-based group.  The Brazilian government, once the toast of investors worldwide, has since experienced a downgrade in its investment rating and continues to be rocked by a serious and ever-growing corruption scandal. Thus far, the scandal has resulted in the impeachment of President Dilma Rousseff and the ouster of the left-leaning Workers’ Party (PT), a political machine that had been in power for 13 years – the longest democratically-elected reign in Brazil’s history. [3]  To make matters worse, the Brazilian economy continues to suffer from its worst recession in three decades, with unemployment and inflation at frighteningly high levels (the former hovers above 11 percent, and the latter above eight).

In Rio, crime remains a serious problem. During the week ending 18 August, more than 70 shootings occurred, mostly concentrated in Rio’s North Zone. The highest number of incidents took place in the notoriously violent areas of Complexo do Mare and Complexo do Alemao. And additional shootings have taken place on Linha Vermelha, the transit link between the international airport and Rio’s South Zone and the areas of Copacabana and Leme.[4]  Presumably in response to these developments, and in anticipation of additional violence, Defense Minister Raul Jungmann announced that the 23,000-strong military and police force previously engaged in Olympic-related security will remain in the Rio area until the October elections. [5] While additional security is an admirable response, the extent and depth of poverty in Brazil’s poorest neighborhoods and other underlying structural problems (i.e., a lack of access to public services) remain.

The deep economic recession has negatively affected the entire country and is largely a result of both the global economic slowdown and the decline in commodity-based revenues especially important to Brazil:  oil, iron, and soya. The drop in commodity income has helped to precipitate and sustain a plunge in Brazil’s Gross Domestic Product (a 3.8% decline in 2015 and another 3.2% drop for 2016) as well as increase Brazil’s national unemployment rate (above 10% earlier this year).[6] A rebound in the commodities market is unlikely to occur anytime soon, especially because Beijing’s appetite for both oil and steel continues to wane and Riyadh’s high rate of oil production continues (to maintain its own competitive advantage in the global market).

As if the negative economic trends are not enough of a challenge to manage, the governing elite of Brazil must also focus on a widening corruption scandal that initially came to light during Operation Lava Jato (“Car Wash”), a fairly straightforward money-laundering investigation. The investigation has since expanded and has not only implicated the major Brazilian construction firms of Oderbrecht and OAS, but has brought to light a number of bribes and kickback-for-contracts schemes at the state-owned oil firm Petrobras and Electronuclear (a subsidiary of the state-owned electricity firm Electrobas). Electronuclear’s president has been removed, convicted for corruption, and sentenced to 43 years.[7]

The corruption investigation has also implicated several important political figures, including former President Rousseff and her predecessor and mentor, the still widely-popular (and darling of the now out-of-power PT) Luis Inacio Lula da Silva, on suggestions of graft linked to Petrobras; Lula has been officially charged with corruption and obstruction.

Other PT members have also been implicated, including Antonio Palucci, a finance minister and Chief of Staff during the Lula Administration, leading to counter-claims that the current level of investigations are politically motivated.[8] Lula has in fact filed a petition with the United Nations High Council of Human Rights, alleging persecution and accusing federal prosecutors involved in Operation Lava Jato of abusing their power. Lula’s political allies have joined the chorus of protests, insisting that the charges are primarily designed to prevent him from running for President again in 2018; such an argument, however, is beginning to lose credence as the investigation’s scope expands to implicate an even larger number of PT political opponents.[9] Nevertheless, former President Rousseff continues to maintain her innocence and characterizes her impeachment as little more than a coup d’etat. 

The recent developments in Brazil and the strategic challenges they present for American policy makers are both vexing and problematic. Until the recent downturn – and especially during the Lula Administration – Brazil had become a significant economic and political force within the region. More than 20 million of its citizens had escaped acute poverty; its economy had transitioned to net-creditor status for the first time in history and had grown into the 8thlargest economy in the world; and Brasilia had forged stronger alliances abroad by signing new agreements in trade and military assistance, especially with Beijing. Indeed, Brazil has become China’s most important ally in the region for economic and military cooperation, leaving some to question the strength and influence of Washington in the corridors of Brazil’s capital.[10][11][12]

Should Brazil’s recent plight and political assertiveness on the world stage be seen by the United States as reason to increase America’s level of engagement in the South American nation, and perhaps as cause to reassert Washington’s political interests in the region? Should Brazil’s economic downturn be viewed as an opportunity for American investors to secure investments on the cheap in anticipation of a rebound in prices? Should Washington attempt to double down on military-to-military cooperative engagements with Brazil – especially in training and education related matters – in the wake of Brasilia’s decision to modernize its Air Force with Saab JAS-39 Gripen aircraft rather than Boeing’s F/A-18 E/F (a decision allegedly made in retaliation for U.S. electronic eavesdropping on Brazilian political leadership)?[13] Should Washington offer to assist with additional economic assistance or anti-corruption initiatives in an effort to repair bilateral relations at the highest levels, or should it remain at a distance out of absolute respect for Brazilian sovereignty? And perhaps the most important question of all: with crime, suspected terrorist activity,[14] and Chinese interest in the region on the rise, can Washington afford not to get more involved?

[1] Bloomberg; 5 August 2016; Olympic Opening Ceremony Puts Brazil Cash Crunch on Displayhttp://www.bloomberg.com/news/articles/2016-08-05/rio-olympic-ceremony-marks-festive-showing-of-brazil-cash-crunch.

[2] Bloomberg; 20 August 2016; Olympics Head Says no Public Cash Used for Rio after Bailouthttp://www.bloomberg.com/news/articles/2016-08-20/olympics-head-says-no-public-funds-used-for-rio-after-bailout.

[3] Bloomberg; 5 August 2016; Olympic Opening Ceremony Puts Brazil Cash Crunch on Displayhttp://www.bloomberg.com/news/articles/2016-08-05/rio-olympic-ceremony-marks-festive-showing-of-brazil-cash-crunch.

[4] U.S. Department of State, Diplomatic Security Service, OSAC; 18 August 2016; Daily Report: 2016 Rio Olympicswww.travel.state.gov.

[5] Campos 24 Horas; 20 August 2016; TSE Pede Permanencia no Rio de Tropas Destinadas a Olimpiada ate as Eleicoeshttp://campos24ho.com.br/portal/tse-pede-permanencia-no-rio-de-tropas-destinadas-olimpiada-ate-as-eleicoes/.

[6] http://www.focus-economics.com/countries/brazil

[7] R7 Noticias; 17 August 2016; TCU Bloqueia R$ 2,1 Bilhoes em Bens de Construtoras Investigadas na Lava Jatohttp://noticias.r7.com/brasil/tcu-bloqueia-r-21-bilhoes-em-bens-de-construtoras-investigadas-na-lava-jato-17082016.

[8] https://www.washingtonpost.com/world/the_americas/brazil-arrests-silvas-ex-finance-minister-in-graft-probe/2016/09/26/a8172312-8408-11e6-b57d-dd49277af02f_story.html

[9] Rio Times; 29 July 2016; Former President Lula Seeks U.N. Help Against Investigationhttp://riotimesonline.com/brazil-news/rio-politics/former-president-lula-seeks-u-n-help-against-investigation/.

[10] http://fmso.leavenworth.army.mil/Collaboration/Interagency/chinese-imperialism.pdf, p.6.

[11] https://en.wikipedia.org/wiki/Brazil–China_relations


[13] https://www.defenseindustrydaily.com/brazil-embarking-upon-f-x2-fighter-program-04179/

[14] U.S. Department of State, Diplomatic Security Service, OSAC; 19 August 2016; Daily Report: 2016 Rio Olympicswww.travel.state.gov.