Brazil Heads Toward 2018: Originalities and Tendencies

This week in North Philly Notes, Philip Evanson, co-author of Living in the Crossfire, pens a dispatch on Brazil’s anti-corruption campaign and next election.

Brazil’s ongoing investigations into corruption have been discussed with a certain sense of national pride, that they may offer something in the way of originality. The targets are white collar criminals in high places of government and the economy. Everybody knows there will be more revelations, arrests and indictments of political and business leaders that will continue to scandalize voter citizens. The judiciary remains diligently engaged in uncovering and prosecuting the guilty within the framework of law and established democratic institutions. It’s an effort to discover crime and punish the guilty carried through WITHOUT THE USE of exceptional powers of which there are few examples in history, certainly none in Brazilian history.

Are there other Brazilian originalities? President Michel Temer heads a conservative government that responds to wishes of entrepreneurial much more than labor groups. The former want more flexibility in hiring and laying off workers, outsourcing, etc. With Temer’s encouragement, the Brazilian congress revised parts of the 1943 Consolidation of Labor Laws (CLT). The CLT had acquired an almost sacrosanct status. Some of it is imbedded in the 1988 constitution. It served workers, employers and Brazil well during periods of economic growth, and economic turmoil. However, the Temer government now argued that changes were necessary, that the CLT needed to be modernized in order to satisfy domestic and foreign investors. It was necessary to break away from the bondage of bureaucracy and labor courts where workers bring thousands of suits each year against employers. Changes to the CLT enacted in 2017 were hailed with government fanfare. But there is also resistance to applying them led by labor court judges, lawyers practicing labor law, and labor law intellectuals. Labor law is a major area of Brazilian jurisprudence. The labor courts or Justiça do Trabalho are organized in a national system with regional tribunals. Critics of the changes argue that important principles protecting workers present in the constitution, obviously inspired by the CLT, cannot be modified by simple legislation. A new collective bargain agreement cannot leave workers worse off in benefits, working conditions, and salaries. Courts will be deciding these issues. A young Brazilian lawyer said to me, “No country has the kind of labor law and labor courts that we have.”

Layout 1Yet another originality, or at least unusual, is the system of election courts (tribuna eleitoral) which like labor courts are organized throughout the country in regional jurisdictions. There is a supreme court. In 2017, its members in sharply divided opinions voted 3 to 2 not to cancel the candidacy, and therefore of election of Michel Temer as Vice-President in 2014. Among the charges against him: Accepting illegal campaign contributions. While Temer survived, other executive branch office holders have not. In 2017, the judiciary has removed on average one mayor a week on charges of corruption.

Of corse, there are ways in which Brazil stands alone, or nearly alone in disrepute. Brazil has greater socio-economic inequality than any Latin American republic as measured in income distribution. The issue goes beyond Brazil’s standing in Latin America. Brazil belongs to a small group of countries that include Middle Eastern oil states, and the Union of S. Africa as examples of extreme inequality. New studies by both foreign and Brazilian researchers have focused on this issue, putting it in the spotlight of public discussion. One study compares bolsa familia or family grant program with investments in public education and asks how much each might reduce inequality. The conclusion: Both contribute, but investments in public education contribute more to reduce inequality. While the Temer government continues to proclaim its support for bolsa familia, it has cut support for education, and otherwise largely ignored mass anxieties. Another study by Irish economist Marc Morgan, a member of the Thomas Piketty, CAPITALISM IN THE 21ST CENTURY research group, produced the conclusion that if the annual income of the top 1% of the richest 10% of Brazilians, a group of 140,000 people, was reduced to that of the top 1% in France and Japan, and the money transferred to the poorest 50% of Brazilians, their income would nearly double. This is a striking demonstration of how low is the income of the bottom 50% of the population. The income of poor Brazilians, and for that matter a large portion of the Brazilian middle class is in fact very low both by world and Latin American standards. The income of the 80% of the Brazilian population below the top 20% is comparable to the poorest 20% in contemporary France. Low income helps explain why people in Rio de Janeiro are not riding a new Metro subway line in expected numbers. A preference for riding busses continues though surely not because the trip takes longer, and can be far less comfortable than the Metro. However, bus fare is R$3.60 while the Metro charges R$4.10 a ride. The difference is 50 centavos or about 16 cents which nonetheless represents an all-important difference for low income riders. Moving up to the richest 10% of Brazilian households does not mean immediately moving from low to high income. Entry into this group begins at 4,500 reais per month or about US$1,500.

The issue of high cost and low quality bus transportation remains a source of intense public dissatisfaction in many large Brazilian cities. Some of the blame can surely be placed on corrupt ties between bus owners and local politicians. The facts and dimension of this corruption are not fully known. However, a Federal police investigation in Rio de Janeiro—Operation Final Stop—culminated in August, 2017 with the announcement that R$500 million reais (about US$175 million) in bribes had been paid by bus owners to former governor Sérgio Cabral (in office from 2007 to 2013, but now serving a lengthy jail term for corruption) in exchange for higher fares, and other favors such as suppressing freelance van competition. However, bus riders are finally getting some relief. This discovery of large bribes paid by bus owners to politicians led to a judge to lower fares. The Federal police, a zealous army of young federal prosecutors, and a growing group of determined, well prepared judges are acting against white collar crime in an ever widening gyre of investigations, arrests, indictments and punishments.

Meanwhile, public security continues in a state of crisis in many areas of Brazil. I can attest to this in my Rio de Janeiro neighborhood of Leme. A Sunday in October saw an invasion of the nearby hillside favela of Babilonia by drug traffickers with a noisy exchange of gunfire. A group of Sunday visitors walking up the winding road of the nearby Duque de Caxias army base heard a soldier explain how the clearly audible gunfire was coming from both automatic rifles and hand guns. He added the army could stop the wars in the favelas in a week—there are conflicts in several of them between different drug gang factions–but the politicians won’t allow it. Too much money “esta rolando” or turning over. These are declarations the public is ready to hear and endorse.

Public security budgets have been cut since the great Brazilian recession of 2015. Gangsters or bandidos as Brazilians call them have been emboldened, and the police less and less able to respond. The violence often seems unchecked, and receives ample media coverage.  Public security has always been a leading issue on any list in which the public is polled. Brazil leads the world in number of homicides. The official count was 61,619 in 2016, and includes people murdered by the police. The crisis in public security more than any other issue will test the mettle of presidential candidates in the 2018 election.

As Brazilians approach 2018, they are processing new information about democracy and the rule of law under the socially progressive Constitution of 1988. Thirty or forty years ago, the leading issue was how to pay the tremendous social debt defined as raising the poor out of destitution and poverty. Now it is confronting white collar crime. There is consensus that the investigation and punishment of corrupt actors will continue. Otherwise what should be done, and is likely to shape the coming 2018 election ferment can be best observed by following the broad range of public and media discussion, and the actions of groups throughout Brazil ranging from landless rural and homeless urban workers to wealthy investors creating funds such as Vox Capital, a new fund with social impact ambitions led by Antônio Ermírio Moraes Neto, an heir to the Votorantim group, Brazil’s (and Latin America’s) largest industrial conglomerate. An example of Vox Capital funding is for production of a low cost respirator with easy maintenance requirements for ambulances and hospitals.  The idea of investing with social impacts in mind is said to be new in Brazil. A Brazilian banker explained: “In my 20 years in banking, I never had clients disposed to link the social with the financial.  They want to make money.” But Brazilians are always open to new ideas, and the appeal of the ethical is in ascendance.

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