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FOREIGN REPORTFOREIGN REPORT
Brazil’s Spectacular Fall – When Corruption Meets Incompetence
Maeng Jun Ho  |  juneau0317@korea.ac.kr
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승인 2016.05.03  15:07:51
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▲ The former President Lula da Silva. Provided byonewayempire.com.

With the 2016 Rio Olympic Games just around the corner, the eyes of the world are turning towards Brazil, a country known for its festivities and sports. However, 2016 just might be the worst time for Brazil to be hosting the Olympics. A series of catastrophic political scandals that were hastily swept under the rug have resurfaced to rock the nation, and the embattled government is barely staying afloat in the face of an ongoing economic recession. Just add Zika virus on top of all these, and Brazil has got itself a recipe for disaster.

Demonstrations are no longer rare sights nowadays as the seeds of democracy have taken root in many parts of the world. However, when the number of protesters in one demonstration exceeds three million, it is a clear sign that there is something fundamentally wrong at hand. This is the case for Brazil, whose future looked so promising just a few years ago. The country now seems to be unravelling from within, beset not just by political turmoil, but also social and economic distress.


A Country of More Than Just Samba and Soccer
As the largest country in South America, Brazil has made a name for itself in certain areas, namely its vibrant culture. In the economic front, Brazil has stolen the limelight with its remarkable economic growth for the past decade, along with China, Russia, and India. The country is also heavily endowed with an abundant reserve of natural resources, which serve as a major source of its Gross Domestic Product (GDP), and a vast expanse of arable land for agriculture.
 
On the other hand, its recent political history is nothing but stable. Only after a series of military regimes ensued by coups was Brazil able to establish a fledgling democracy. Yet, even after the efforts of democratization since 1985, the country’s politics have been so deeply plagued by a widespread culture of corruption that it underwent a vicious cycle of political upheavals, with one corrupt president after another on the verge of being impeached.
   
 
Lula da Silva: a National Hero or a Backstabber?
After years of violent ups and downs in its political landscape, Brazilians finally found some solace during the former President Lula’s reign that lasted from 2003 to 2011. Perhaps one of the most popular politicians in the history, President Lula left his mark in many parts of Brazilian society. “Coming from a humble background himself, he actively advocated for the rights of the working class,” explained Professor Lee Jaehak (Spanish Language and Literature). For instance, he enacted several game-changing social welfare programs, which “dramatically reduced the poverty rate through the spread of education among the have-nots,” according to Professor Lee.

He added that such efforts to enlighten and pull young generations of Brazilians out of poverty have led to a “proliferation of an educated middle class.” Indeed, such increased social mobility is surely one of Lula’s enduring legacies. Unfortunately, however, when something seems too good to be true, it usually is. 

   
▲ President Rousseff. Provided by theguardian.com.
Petrobras Scandal and the “Operation Car Wash”
To Brazilians’ horror, an investigation into his involvement in the Petrobras bribery scandal has laid bare his ugly side, sending shockwaves across the globe. Petrobras, a government-funded petroleum giant, has orchestrated an elaborate bribery scheme that implicated an alarming number of Brazil's leading business executives and politicians, Lula being one of them.

More specifically, this corruption network of a jaw-dropping scale traces back to 2004 when several executives of Petrobras started a chain of collusion among oil companies in an attempt to overcharge the oil price and rig the contracts for large-scale construction projects. Needless to say, such outrageous misconduct would have been impossible had it not been for the 200 million dollar kickback to appease the ruling Worker's Party.

The total amount of money lost through the back door in this scandal alone amounts to whopping three billion dollars, which was more than enough to infuriate the entire population that had been kept in oblivion. In fact, “infuriate” is a massive understatement. People’s pent-up frustration towards a long streak of self-serving politicians, who managed to steer the up-and-coming nation right into a catastrophe, has finally come to a breaking point. In that sense, the Petrobras fiasco has served as a painful wake-up call for Brazilians, resulting in an unprecedented number of people taking to the streets to call for justice.

In response to such rampant corruption, a so-called “Operation Car Wash” was launched two years ago and has made more than 100 indictments so far. Yet, many remain skeptical as to whether the dirty politics can be “fully washed,” since the powerful graftring might have infiltrated even the investigation itself.
   
▲ A demonstration for President Rousseff’s impeachment. Provided by nbcnews.com.
Dilma Rousseff: the Most Hated Person in Brazil
While secretly fattening his own pocket, Lula triumphantly hands over the baton to Rousseff in 2011, the current president of Brazil who stood by as her nation was hopelessly spiraling out of control. Not only has she made history once as the first female president of Brazil, but she is also setting another record in terms of the approval rating that hovers around a single digit. How could a nation’s head of state, who once boasted a 75 percent approval rating, end up with such a different fate?

For one, her economic policies have cataclysmically failed to reverse the tide of economic slowdown and her austerity measures have alienated the low-income class. The government is up to its neck in debt and seems to have run out of policy ammunition to turn things around.

More importantly, however, her alleged connection to the Petrobras scandal has decimated what little faith Brazilians had left in her. The factthat she was serving as the chairwoman of Petrobras when the corruption was at its peak makes her denial of any involvement highly suspicious. On top of this, she is accused of cooking the books on the national budget deficit to try to conceal the ever-worsening financial state of the country, in pursuit of her second term as the president.

Consequently, all of these reasons have formed the basis of a growing movement to impeach President Rousseff. In fact, the impeachment proceedings have been gaining momentum lately and her ill-advised attempt at appointing Lula as her Chief of Staff in mid-March conveniently added one more item in a long list of reasons to hate her. The decision to bring Lula into her cabinet is presumed to be a calculated move to keep Lula out of the prosecution’s reach.
   
▲ A graph showing Brazil’s GDP growth. Source: World Bank.
Economic Woes–An Endless Cycle of Recession
Not surprisingly, the repercussions from Brazil’s political crisis have spilled over to its economy, which had already been vulnerable. “In the early to mid 2000s, Brazil benefited from exporting a tremendous amount of oil and natural resources to the global powerhouse–China,” said Professor Lee. Nevertheless, the worldwide economic slowdown following 2008 global financial crisis and historically low oil prices have dealt a “serious blow to its exports and oil revenue,” a main source of its Gross Domestic Product (GDP). Coupled with the government’s short-sighted microeconomic meddling, Brazil has ended up with a budget deficit of more than 150 billion dollars.

To paint a more accurate picture of Brazil’s financial state, the “Big Three” major credit rating agencies–Moody’s, S&P, and Fitch Ratings–have unanimously downgraded its credit rating to “junk
status.” Its unemployment rate has been skyrocketing, consumer confidence is at a historic low, and the chronic issue of income inequality is more pronounced than ever. Strictly looking at the numbers alone, China’s economic slowdown that paralyzed the global financial sector at the beginning of 2016 appears much more benign in comparison to Brazil’s economic crisis.

Furthermore, Petrobras’ fall in disgrace has had disastrous economic implications as well. As one of the largest oil companies in the world, its deeply tarnished reputation has severely damaged Brazil’s economy, given that oil has always served as the linchpin of its economy. More specifically, Petrobras’ market value has been halved from last year and the irreversible damage has put an end to a steady flow of foreign investment.
   
▲ The Olympic logo and a mosquito icon. Provided by the nounproject.com.
Zika Virus and the 2016 Rio Olympics
As if Brazil did not have enough on its plate with its political and economic meltdowns, Brazil has been in the center of unintended media attention since early this year, owing to the outbreak of Zika virus. Declared as a “global health emergency” by the World Health Organization (WHO), this mosquito-borne virus has been linked to microcephaly, a condition that causes an abnormally small brain and neurological damage in infants. In Brazil, the ground zero for Zika virus, 7000 cases have been reported, with 4000 confirmed cases of microcephaly.

Although the panic over Zika virus has somewhat simmered down, international health agencies are
becoming increasingly concerned with the insidious spread of this virus. WHO has predicted that the number of patients could rise to four million at the end of this year. More importantly, given the enormous influx of spectators and tourists that will jam-pack the densely populated city of Rio de Janeiro during the Olympics, Brazilian authority cannot afford to turn a blind eye to the grave threat that Zika virus poses to the global population.

Nevertheless, this is precisely what has been happening in Brazil lately. Amidst the political and economic chaos that are tearing the country apart, Olympic preparations have been put on the back burner. Even worse, Brazilian authority has recently dug up another high-profile scandal that involves a large construction firm, Odebrecht, and the sports minister of Brazil who oversaw the preparations has resigned with the Olympics just a few months away. The Brazilians’ wish to showcase its progress by hosting South America’s first-ever Olympics has backfired, unveiling its
rotten politics and crumbling economy. 

All in all, Brazil’s future appears murky at best and it has a long way to go until it can pick up the pieces. However, what it needs to do to get back on its feet is clearly laid out. The deep-rooted
culture of corruption has to be done away with by ramping up the pressure on the government to increase transparency.

The upcoming Olympics will serve as a litmus test to see whether this once rising star of the developing world can rise to the occasion.
 
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