Sergio Moro, the face of the Petrobras investigation.

Photographer: Nelson Almeida/AFP/Getty Images

Brazil's Corruption Crackdown Can't Be Stopped

Mac Margolis writes about Latin America for Bloomberg View. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”
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In a continent of peacocks, Brazilian federal judge Sergio Moro makes an unlikely celebrity. Laconic and poker-faced, he has little time for the spotlight, and yet his name is emblazoned on t-shirts and protest banners, and splashed across social media.

Why the fuss? Check out the 13th federal district court, where Moro has presided over the largest corruption investigation in the country's history, sent muckety-mucks to jail and helped restore civic pride in a land where too often justice has been honored in the breach.

So after the Brazilian Supreme Court ruled last month to take a high-profile defendant named by witnesses in the landmark Petrobras case away from the 13th district, worried citizens hit the streets. Is the so-called Operation Carwash investigation into looting at the state oil company in danger of getting derailed, as some claim?

Brazil's white-collar crooks should be so lucky.

QuickTake Corruption

True, the scope of the scam at Latin America's biggest corporation might never have come to light had it not been for the 43-year-old judge, who specializes in money-laundering cases, and a dedicated cadre of prosecutors. From their base in Curitiba, a city in southern Brazil, investigators exposed what Prosecutor General Rodrigo Janot called a "complex criminal organization" bent on skimming money from padded supply contracts with Petrobras into political coffers.

But getting to Curitiba took the collaboration of the best minds in public service, from the federal police to the Finance Ministry's financial intelligence unit. That web of sleuths and wonks is the best assurance that the effort to shut down Brazil's most brazen political crime ring will carry on, no matter who holds the gavel.

The probe began when federal police watching a gas station and one-time car wash (hence the name) in the nation's capital uncovered a money-changing scheme to spirit gains overseas. The public prosecutor's office took up the chase and, tapping into finance ministry data, followed the money trail to Petrobras.

Janot took the investigation across the Atlantic, where Swiss prosecutors found evidence pointing to the head of Brazil's lower house, as well as to corporate leaders. Some of Brazil's biggest oil and construction executives are behind bars, and dozens of politicians are under investigation, including the head of the senate.

And despite recently ruling to spin off parts of the investigation, the Supreme Court has consistently buttressed Moro's authority in the past. "The corruption investigation is the result of a suite of institutions, working in sync," said Joaquim Falcao, dean of the law school at the Getulio Vargas Foundation in Rio de Janeiro.

That's remarkable in a region where the rule of law has been frail, and too often public institutions have become clay in the hands of the moneyed and powerful. Little wonder Latin America routinely fares poorly on Transparency International's corruption index.

Operation Carwash may be setting a new precedent. Judges have backed Moro, while the news media competes for scoops on misdeeds. The arrest of the head of a big Petrobras supplier -- which has global contracts -- has inspired investigations beyond Brazil's borders.

The institutional awakening has also spread. On Oct. 7, the Federal Accounts Court ruled unanimously that the government resorted to financial tricks to disguise a chunk of its multi-billion dollar budget deficit in 2014, violating the nation's fiscal responsibility law. It was the first time in 78 years that the court advised Congress to reject a government's accounts; if lawmakers agree, President Dilma Rousseff could face impeachment.

The previous day Brazil's top electoral court also showed its independence by authorizing an investigation into charges that Rousseff took illegal campaign donations during the 2014 election. If those allegations stand, the court could remove Rousseff from office.

That may not happen. Rousseff hasn't been accused of stealing public money, and the final word on her alleged fiscal mess will fall to congress, where pork and patronage can sway convictions. But the fact that even the tallest authorities are being called to justice is a sign that Brazil's democratic checks and balances are working, and not just in Curitiba.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mac Margolis at mmargolis14@bloomberg.net

To contact the editor responsible for this story:
Zara Kessler at zkessler@bloomberg.net