Opinion, by Michael Royster

RIO DE JANEIRO, BRAZIL – The title is a phrase used Thursday, March 5th, by Luis Carlos Adams, head of AGU, the equivalent to the Solicitor General’s Office in the U.S., when talking to Luciano Coutinho, the President of BNDES, Brazil’s development bank. “Reputational rescue” is a euphemism for “whitewash”.

Michael Royster, aka The Curmudgeon.
Michael Royster, aka The Curmudgeon.

Adams has gone to Coutinho, hat in one hand and tin cup in another, to plead for BNDES to lend money to all those big construction companies currently confessing they have been not only a cartel illegally rigging government bids, but also actively corrupting government officials.

In other words, these companies are confessing to criminal activities. Brazil’s banks have recently become reluctant to lend money to confessed criminals, because the banks know that, under Brazilian law, these companies should be declared unfit for any government contracts.

Adams, though, has a different viewpoint. It’s not the companies that are corrupt criminals, it’s the individual officers and directors of those companies. Hence, only these individuals should be punished.

According to Adams, if these companies are barred from government jobs, workers will suffer because they will be laid off. Moreover, efforts to recuperate the Brazilian economy will suffer, because these contractors are mainstays of the government’s mammoth infrastructure projects. Thus, in order to foment development and preserve the government’s economic program, the government’s lawyers (AGU) are asking the government’s bank (BNDES) to become the lender of last resort.

There is logic in this position. Petrobras has banned many companies from working on existing projects, such as COMPERJ in Itaboraí where workers are being laid off in droves as the contractors’ cash flow dries up.
Further, while many of the infrastructure projects are mere boondoggles designed to reward powerful politicians (e.g. refineries Premium I and II), some are essential for Brazil’s economic growth.

The Ministério Público, in charge of the criminal investigations for the Petrolão scandal, has blasted AGU for its proposal, saying its investigations will be hindered. It further claims that the “malfeasants” will be free to continue business as usual.

The Ministério Público has a point. So far, all the attention in the Petrolão scandal has focused on the officers and directors of the contractors, almost all of which are family controlled corporations. No one wants to ask whether the owners knew about the corruption.

The Curmudgeon simply does not believe that the owners of the corrupt companies did not know what their officers and directors had been doing all those years. If the current officers and directors go to jail, the owners will hire new officers and directors, and will tell them to carry on as usual.

Worse yet, once the companies’ “reputations” have been “rescued” by AGU, there will be no grounds for government to ban them from bids, or for banks not to lend them money, as they will be presumed to be honest, upright and law-abiding—something they have confessed they were not.

AGU says government agencies (TCU and CGU) will now exercise oversight, and will not permit “rescued reputations” to commit any more “malfeasances”. Sadly, these agencies have always been toothless lackies of the federal executive. Needless to say, AGU is also pressuring both agencies to forgive the companies’ transgressions, whitewash their reputations and let them carry on business as usual.

It’s impunity. And it’s shameful.

Michael Royster, aka THE CURMUDGEON, fetched up on Carioca shores some 37+ years ago and still loves them; his favorite spectator sport is politics, viewed from a WASP-like perspective.


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