Brazil is Digging its Own Grave

Many years ago, Brazil presented an opportunity for investors. Many signs within the Brazilian economy reflected positive trends that appealed to stakeholders; mainly, the nation’s GDP skyrocketed by 7.5% in 2010, its highest growth rate in 24 years. Brazil was also attractive to investors because it possesses a unique abundance of natural resources. Notably, the nation is self-sufficient in oil, signifying that it belongs as a major player in the global market. While Brazil’s oil production was a primary asset in its attempts to legitimize itself within the global economy, its prized enterprise has actually generated negative worldwide attention. Currently, Brazil is recovering from the humiliation of the Petrobras scandal, in which prominent employees were indicted for money laundering. Specifically, executives of the state-owned oil company were accused of accepting bribes from construction companies in return for lucrative contracts. It is estimated that bribes equating to 5% of contract values were funneled to officials in the ruling coalitions of the Workers’ Party and the Brazilian Democratic Movement Party. Although there is no concrete evidence to suggest that President Dilma Rousseff was complicit in the scandal, the fact of the matter is that she served as Energy Minister and Chairman of the company during the period the corruption allegedly occurred. Because of the possibility of Rousseff’s involvement, it is difficult to detect the level of corruption in Brazil. However, what is entirely certain is the adverse effect it has on the advancement of the country. It is evident that the persistent culture of corruption in Brazil has prevented the nation from transcending into an economic powerhouse.

As the Petrobras scandal unfolds, it is increasingly clear that corruption is a serious problem in the Brazilian economy. A major factor behind prevalent corruption in Brazil is its bureaucracy; Brazilian businesses are forced to address a variety of regulatory hurdles to conduct business, which allows for bribery and other illegal activity to transpire. This culture allows corruption to thrive, producing harmful effects towards Brazil’s economic goals. The reality, then, is that corruption is deeply rooted in Brazilian business culture, and companies operating in Brazil consistently fail to value business ethics.

Although Brazilians are accustomed to corruption, recent efforts by President Rousseff’s administration suggest that the nation is prepared to exploit and eradicate it. Stemming from the Petrobras scandal, Rousseff spearheaded an economy-wide anti-corruption campaign, specifically intended to increasingly punish newly discovered offenders. The decree states that guilty firms can expect fines of up to 20% of their gross annual revenue, regardless of the bosses’ intent or knowledge. In extreme situations, courts are now able to intervene and dissolve an egregious company. This national effort increases intra-company accountability and instills hopes for change.

Despite these efforts, corruption is directly to blame for Brazil’s recent economic woes. Indeed, Brazil has failed to materialize as the international force experts predicted it would become because of the corruption plaguing the nation. Brazil recently announced that the economy had shrunk by two percent in 2014. The Brazilian Real has also declined by 35% of its value this year as inflation has increased to almost 10%. Ironically, oil production was central to Brazil’s economic planning for the 21st century. Thus, the demise of Petrobras – a company that accounted for roughly 10% of Brazil’s GDP at its peak – has severely weakened Brazil’s economic prowess. Because of the scandal’s public nature, Petrobras has shrunk by 50% this year, damaging its appeal to foreign investors while simultaneously undermining the overall allure of the Brazilian market.

Ultimately, corruption has a deeply engrained position in the Brazilian economy. President Rousseff faces an uphill battle in her attempt to reform Brazilian business culture. The president’s potential involvement in the Petrobras scandal has certainly impacted the public’s perception of her leadership. Whether or not she actually was complicit in the money laundering, her credibility is weakened, and a culture of distrust exists amongst the general population. To lead Brazil in a positive direction, away from the abyss of corruption, Rousseff must regain support of her people and emphasize an honest and moral approach to economic growth.

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