Corruption in Rio de Janeiro

State is at scandals’ center: what will the cleanup be like?


State assembly facade in 2014: few smiles today

The gas station where the Lava Jato investigation began is in Brasília, but you could say that the biggest corruption scandal of all time began and will most likely end in Rio de Janeiro.

Clique aqui para português

Today, the slogan of Rio’s Olympic candidacy — “Viva sua paixão” (Live your passion) — points more toward greed for Swiss bank account deposits than any other sort of fascination.

Rio is home to Petrobras headquarters, the vipers’ nest of the famed construction cartel. It’s also the hometown of the story’s greatest villain, congressman Eduardo Cunha, who began his political career as Rio treasurer for presidential candidate Fernando Collor. National treasurer Paulo César Farias, involved in the corruption scandal that led to Collor’s impeachment in 1992, brought Cunha on board.

The headquarters of Furnas,Eletrobras and Eletronuclear, all under investigation in connection with the cartelization of construction contracts and bribes that are said to have fed election campaigns, are in Rio. Out of the FGTS financing of the Rio de Janeiro port area revitalization, Porto Maravilha, came the fatal plea bargain testimony of Fábio Cleto, who named Eduardo Cunha as its alleged manager. Cunha is said to have used his connections to put Cleto in the key job of managing FGTS funds at the Caixa Econômico bank (which is in Brasília).


Swiss francs more sought after than reals

Here we also have Maracanã stadium and the enormous, aborted refinery, Comperj, both mentioned in plea bargained testimony detailing bribe payment and money laundering by builders and politicians.

Part of the Lava Jato investigations were sent to Federal Police offices in Rio (from Curitiba, seat of the main investigation) . Today, Globo columnist Lauro Jardim published the news that a new task force will be set up here to investigate the national development bank, BNDES, another federal institution that never moved to Brasília.

Does Rio incite wrongdoing? Economist Mauro Osório, president of the municipal Instituto Pereira Passos and a specialist on metropolitan Rio, told RioRealblog that this is not the case. Corruptor and corruptee find each other anywhere, he said, in private as well as public business arenas. “I think we need to improve our institutions and make elections less costly,” he added.

In a recent article, New York Times correspondent Simon Romero suggested that the current national crisis is rooted in the modus operandi of the PMDB, Rio’s dominant political party.

At very least, the state is certainly at the heart of the petroleum curse, which afflicts almost every place where the fossil fuel lies. In addition, for decades Rio has constituted a troubled political patchwork, largely unconcerned with the common good, united by a constant exchange of favors– not so different from the country as a whole.

Who knows if this quasi-medieval system has anything to do with the former capital’s decadence, as of 1960. The move to Brasília left behind several federal institutions, which apparently became piggy banks for election campaigns. The Rio state sewage and water company Cedae, some observers say, also served the same function for many years (instead of investing in sewage collection and treatment), especially under Cunha’s influence, up to 2008.


With petroleum royalties, Rio metro region Itaguaí mayor Luciano Mota (second from right to left) bought a Ferrari

He certainly cut his teeth here. Named by then-president Fernando Collor, he was president of Telerj, the Oi telephone company’s predecessor from 1991 to 1993.

Of course our rival metropolis, São Paulo, has its own issues. The names of Governor Geraldo Alckmin and of former governor and current Foreign Minister José Serra have appeared in Lava Jato documents. And there are previous corruption cases, such as that of the French company, Alsthom.

While corruption gets investigated and corrected at the national level, we do have our local scandals.

In Rio, governors and mayors tend to rule with little interference from legislators or the courts. The system of appointing secretaries, judges and councilors supports and protects them.

Despite investigations and media reporting, this has been the case for a long time.

Former governor Sérgio Cabral (2007-2014), for example, has figured since 2011 in suspicions and accusations of illegal behavior. His name has come up in Lava Jato plea bargained testimony. If the information is proven, he can be tried and jailed. For now, he’s quietly living and working in Leblon, according to a recent report.

His sucessor, Luiz Fernando “Pezão” de Souza, is also said to be involved in the case, according to testimony. On medical leave, Pezão is in treatment for lymphatic cancer.

It could be that not even the acting governor, eighty-year-old Francisco Dornelles, will be free of the Lava Jato investigations.

Last week, Dornelles issued a decree that could absolve  pre-2014 corporate VAT tax evaders. Later, he explained that the impoverished state of Rio won’t close an eye to repeat offenders.

In May of this year, O Globo newspaper published a series of investigative stories about Jorge Picciani, president of the state assembly, known as Alerj. According to the paper, he is allegedly involved in a VAT tax evasion scheme, in league with state Finance Secretariat inspectors and Itaipava beer manufacturer Grupo Petrópolis. The scheme includes the purchase and sale of cattle semen at exorbitant prices — well above the market, according to a São Paulo blog source.

Picciani also has a share, set up in an unusual manner, of a company that supplies gravel for public works, including the Olympics.

In the boom years, the state of Rio awarded companies with tax cuts that have become huge headaches for budget balancing.

While the mud surfaces at the state level, mayor Eduardo Paes touts his untarnished record. Last week, however, the Municipal Accounts Court, which had always cooperated with his administration, recommended that the city’s revenue and expenditure accounting be rejected — but this may spring from politics.

In March of this year came the news that Paes was allegedly the man behind the code name “nervosinho” (little nervous guy), in an Odebrecht construction company bribes spreadsheet.

Some good things we never had before

Didn’t turn out this way

Aside from this we have no public concrete information linking Paes to illegal activity. Olympic-related construction contracts are said to be under investigation. Just as he blocked the City Council’s bus investigative committee in 2013, Paes has weakened the Council’s committee to investigate the Olympics.

When we get to the end of Lava Jato and its court decisions and sentences, given the way the story has been going (read Vladimir Netto’s newly-launched book, on this), Rio will surely see local politicians in jail.

We will then have to deal with a serious power vacuum. Rio’s financial/economic problem, however, demands more attention just now.

One hopes the arrested criminals will be taken to another state; a report delivered last week to acting governorFrancisco Dornelles reveals that much crime here is run from behind Rio prison bars.

Friday, a judge released five arrestees, accused of Lava Jato construction company bribe money laundering, from the local Bangu 8 prison. The release order came after the state realized it couldn’t comply with another order regarding the five, for house arrest. It had run out of ankle monitors.

The state government owes almost R$ 3 million to the device supplier.

About Rio real

American journalist, writer, editor who's lived in Rio de Janeiro for 20 years.
This entry was posted in Brazil, Transformation of Rio de Janeiro / Transformação do Rio de Janeiro and tagged , , , , , , . Bookmark the permalink.

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