Opinion, by Michael Royster

RIO DE JANEIRO, BRAZIL – One of the little noted features of the “Lava-Jato” scandal has been the influence of US law. This influence affects not only the investigations, but perhaps also the future of public works in Brazil. The Curmudgeon will explain.

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“Plea bargaining”, where one criminal “blows the whistle” on others in exchange for a reduced sentence has long been a useful tool in U.S. criminal prosecutions. It was rarely used in Brazil, but has now become the principal “carrot” offered by the public prosecutor, while brandishing the “stick” of jail time at “malefactors”.

Another feature of U.S. law is that both the SEC (a regulatory agency) and the DOJ (Department of Justice) have the power to investigate any company with securities traded in the United States. Petrobras stock trades there and several huge Brazilian construction companies issue bonds in the US. Brazilian executives don’t want to face Uncle Sam.

Under U.S. law, the SEC regulates all large auditing companies based in the U.S., and does not hesitate to go after them when it suspects their audits have not been thorough enough. Petrobras accounts have been audited by one such firm which, in the face of the “Lava Jato” revelations, has refused to sanction Petrobras financials. It doesn’t want to face Uncle Sam.

The future is looking brighter, though, for large U.S. construction companies. The Brazilian cartel members have long been protected against competition from abroad by their government. But, once convictions are imposed on their executives, they can be declared ineligible for government contracts.

This is Dilma’s worst nightmare, because public works would grind to a halt—unless, of course, suitable foreign companies could be found to step in and carry on work here. If Brazil’s principal public works programs look like “going south”, US construction companies will soon be heading south.

Enter Uncle Sam, wearing a hard hat.

The Curmudgeon will emit more Smidgens opportunely. That’s a threat, not a promise.

5 COMMENTS

  1. Ah a classic western thought. Let us save the South Americans from their farcical protectionist laws that protect the rights of their workers and pray for exploitative American corporations to liberate Brazilian profits. If the military coup and the US’s stealthy complicity has taught us anything, foreign involvement protects foreign interests, and cares little for its effect on Brazilians. We would rather Dilma’s projects take place and inject $$$ into the economy and provide proper employment opportunities (at the expense of local corruption) rather than American contractors seeking to exploit Brazilian workers show up, ensure their profit margins, endanger our workers lives, and then leave behind whatever mess they stir up. It is comical that you refer to Brazilian companies as cartel members, seeing as how American interests have certainly applied a stranglehold on the economies of numerous 2nd and 3rd world countries while extorting wild profits. The fact that the Rio Times is willing to publish this time of imperialist and colonial rhetoric is severely disappointing and a disservice to the nation it operates within.

  2. Dont want to generalise but you sound quite western Jake…. Brazilian companies have it to easy, their cosy relationship with the government needs to end. A friend of mine works in logistics and told me that they had an edict from high up in the company (3 times) to “lose / divert” massive steel girders for the construction of the new Corinthians stadium. The result, massive cost overruns paid for by, you guessed it, Brazilian taxpayers – I dont really understand why you want to maintain this status quo…

  3. I first read this opinion when it came out and delayed my comments. At first I thought, Hooray! US contractors will come in and solve the problem. Until I realized that they too are subject to corruptions’ temptations.

    Changing the contractors will not solve the root problem of Crooked politicians. I think I read that 40% of the federal level politicians are under investigation. Where are the trials, the convictions, the seizures of all their ill gotten gains? And, why not use the Chinese example and allow for the death penalty for corruption? Or the Japanese method and allow these disgraced politicians the chance to commit hara-kiri before disgracing their family.

    As to Jake’s comments above, No Comment.

  4. “why not use the Chinese example and allow for the death penalty for corruption?”

    Because it just doesn’t work. Simply that. Corruption is higher in China than in the U.S. and even Brazil. By the way, Chinese Party leaders always get richer while in charge. Connect the dots.

    I don’t think Michael’s article is an argument that American Contractors are more honest than our contractors, but an argument for more competition on Brazilian Construction Sector.

  5. I don’t think American Contractors are more honest, but I do think that the FCPA makes it much more of a risk for them to bribe foreign politicians. Furthermore, most American companies that come here don’t have the long term connections with politicians that large Brazilian companies have.

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