Is Bolsonaro About to Fall?

Part I: On Corruption and Its Uses

May 5, 2020

This piece is the first installment in a two-part series by Brazilian economic historian, Pedro Paulo Zahluth Bastos. Read together as a single essay, these pieces consider the prospects for Brazil’s President Jair Bolsonaro being forced from office. This is, Zahluth Bastos argues, a product of emergent antagonisms in Bolsonaro’s ruling coalition. The first of these is the subject of today’s article: the question of corruption. More specifically, he examines how the anti-corruption drive spearheaded by the Law and Order bureaucracies, which were in turn empowered during the Operation Carwash investigations, began to unravel under the weight of its own contradictions. In a follow-up piece, to be published very shortly, he examines a second antagonism: internal debates over the regime’s radical neoliberal agenda, and how this has been the source of internal rifts in the time of the pandemic and its attendant economic depression.

The emergence of the COVID-19 pandemic, and the inevitable economic meltdown it entails, are wreaking havoc around the world, but history is moving unusually fast in Brazil. The lousy governmental reaction to both public health and economic problems accelerated the development of contradictions inherent in the coalition that brought Jair Bolsonaro to power. The sacking of Justice Minister Sergio Moro on April 24 only exacerbated a dire situation, elevating the crisis to the point of a potential impeachment of the president.

To understand why the pandemic shook the basis of Bolsonaro’s power, we must delve into the loose coalition that coalesced around him. Even though the coalition mingles progressive neoliberals and staunch cultural conservatives, all of  its factions coalesced around an intense disgust of the Worker’s Party (the PT), its social base, and its economic, social and cultural policies. The way forward, however, was rife with at least two contradictions that may become open antagonisms: one, regarding the survival of the radical neoliberal agenda in times of economic depression and the pandemic; the other, being the anti-corruption drive led by the Law and Order bureaucracies empowered during the so-called Lava-Jato or Operation Car Wash (OCW). It was the contradiction inherent in the anti-corruption (a codeword for anti-PT) alliance that exploded in Moro’s forced dismissal. Both contradictions might severely harm Bolsonaro’s popularity and electoral prospects, though he will probably maintain the hardcore of his social and cultural conservative base.

How is the coalition structured? Pulling strings at the top of the power bloc, are global capital and investment banks (even more than universal banks) clustered around a radical neoliberal program of public expenditure cuts (to fund tax cuts), privatizations, and capital-friendly labor-market regulation. Of course, middle and small-sized capital would get part of the bounty in the form of rising market valuations of financial assets, lower labor costs, and (promised) tax cuts. However, Paulo Guedes, the Chicago Boy at the Finance Ministry, would not hesitate to privilege global capital and big finance capital in four potential areas of contention:

  • the cuts to cheap commercial credit available to smaller firms that are characteristic of the drive to shrink the public banks’ balance-sheets—possibly to privatize them when circumstances allow but at least to increase market shares and credit spread of the big private banks;
  • the fall in the public procurement of goods and services, and hence in incomes of private suppliers due to the austerity program requested and daily appraised by the bond vigilantes;
  • before the pandemic, the rising prices of oil and other governmentally administered prices due to cuts in subsidies and to the insistence on treating state corporations as if they were finance-led corporations, subject to strict shareholder-value maximization rules, even before being privatized;
  • toleration of the foreign takeover of local corporations (such as Embraer) that might hurt minority shareholders, and other kinds of stakeholders, such as local suppliers, workers, and municipality finances. It might also bring higher prices due to market concentration, and both rising import coefficient and profit evaluation in dollars.

The only area where it is fair to say that the Bolsonaro administration privileges smaller capital in the face of apparent big capital opposition is the anti-environmental agenda. Meant to unleash the primitive extraction of natural resources and indigenous peoples’ lands, especially in the Amazon green forest, it might hurt progressive neoliberal sensibilities. More importantly, it could induce spontaneous bouts of retaliation by conscientious consumers in the Global North, harming Big Agribusiness’ exports. That fear was apparent when massive fires raged in the Amazon in June 2019.

The emergence of the Covid-19 pandemic and the inevitable economic meltdown that it entails are wreaking havoc around the world, but history is moving unusually fast in Brazil.

This radical neoliberal agenda is different from the PT’s more moderate adherence to the conservative rules of macroeconomic management up until 2012. Incidentally, its temporary abandonment of economic orthodoxy under the Dilma Rousseff administration was one reason for the political crisis that was solved, temporarily, by her impeachment, despite her turn toward austerity in 2015. Until 2015, the PT administrations, in fact, had: increased the public expenditures-to-GDP ratio, especially with social outlays; not only suspended privatizations, but supported the expansion of state corporations and public banks’ market shares; deradicalized social movements by absorbing their leaders into the state apparatus, while implementing part of their agenda as public policy; enforced sterner environmental, racial, and gender-equality rules, especially the protection of indigenous people’s lands, the containment of gender-based violence, and affirmative action on college enrollment; moderated and emboldened trade unions, enforcing labor rights, and proposing legislation to increase the minimum wage by 70% while presiding over rising wages in general (and strikes) from 2004 to 2014; controlled prices of basic supplies when politically expedient, regardless of the cry from capital markets; and blocked some foreign takeovers of local capital and, instead, funded the outward expansion of  domestic capital, especially in Africa and South America (where the PT backed Left administrations against the U.S. and the local conservative backlash). Its main weakness was to conduct these policies without organizing its mass political base, and without challenging campaign finance rules or breaking the mold of neoliberal economic policy, counting instead on horse-trading with traditional clientelistic parties.

The inverse agenda enacted since 2016 by Rousseff’s successor, former VP Michel Temer, was backed in the November 2018 Presidential Election, except for by the Center-Left (PT, and Ciro Gomes by the PDT) and the Left (PSOL, basically). On the Right, though both big banks and media clearly preferred the progressive neoliberal PSDB of former President Fernando Henrique Cardoso, Bolsonaro was the favorite of the smaller business class (urban and rural), big agribusiness, the upper middle class, and the Law and Order bureaucracies (LOB, including prosecutors, judges, the Army, the military and civilian police). Of course, he wouldn’t be elected without the allegiance of the social conservatives, both from the elite and the poor (especially neo-Pentecostal Evangelicals). However, on average, the poor seem much more worried about high levels of crime than with homosexuality and women’s emancipation. Through Operation Carwash, the LOB was crucial to hasten Rousseff’s impeachment and, even faster, the jailing of Luis Inacio Lula da Silva, the former PT president who was by far the front-runner in the 2018 election.

Justice Sergio Moro was the political leader of the LOB, operating illegally both as judge and as prosecutor-in-chief in Operation Carwash. Telegram messages revealed by The Intercept revealed his political partiality, and even crimes when judging Lula in time to remove him prior to the 2018 Presidential election. Bolsonaro’s despotic instincts are well-known, but Moro’s authoritarianism also revealed itself when, as Minister of Justice, he tried to persecute Intercept co-founder Glenn Greenwald after the leaks. In addition, Moro admitted a crime in his farewell address on April 24, most likely to inoculate himself against Bolsonaro’s reaction. He denied again having traded his discharge from the office at the lowest-level of the Brazilian judicial system for an eventual post at the Supreme Court, but revealed that he asked that his family be compensated with a life-long pension, above what he would be legally entitled to, in case he died in office. Bolsonaro illegally accepted the deal, failing to deny or even mention the mutual crime in his reply.

It is not a stretch to say that Bolsonaro rewarded Moro with an appointment as Minister of Justice and with the promised nomination to a vacant bench at the Supreme Court on November 2020, for pushing Lula out of the 2018 election and airing new accusations against the PT, by the convicted Antonio Palloci, Lula’s first Minister of Finance, nine days before the election. However, from Bolsonaro’s perspective, the rationale is two-fold. First, Moro would give him popularity, international respectability, and leverage in the judicial branch. And second, he would help him intimidate clientelistic parties in the legislative branch. From Moro’s perspective, he accepted the nomination to superintend legal and administrative reforms that would increase the autonomy of the LOB, both to protect police brutality from accountability, and to discipline and punish the traffic of influence between corporations and politicians, in line with the U.S. ideal of transnational “fair” competition.

The PT's main weakness was to conduct these policies without mobilizing its mass base, counting instead on horse-trading with traditional clientelistic parties.

The first task was in line with Bolsonaro’s history as a champion of the military and civilian police, if not with the president’s links with mobs of ex-service policemen that were, for instance, behind Marielle Franco’s assassination. Moro’s anti-crime proposal in March 2019 effectively granted immunity to cops who killed civilians, though he tried to moderate Bolsonaro’s dispensation of rules of access to heavy armament by civilians. This failed to become law even in Brazil’s conservative Parliament. And his immigration policy toughened the treatment of foreigners to the point of speedily extraditing those suspected of crimes within a mere two days after the initial accusation, and without judicial process. Poor immigrant Haitians, Bolivians, and Venezuelans have been the main targets. Indeed, Moro is an astute student of Trump’s lessons.

Another more long-lasting U.S. priority that Moro learned much earlier, is to discipline and punish the traffic of influence between local corporations and politicians in the Global South; but this task would drive him away from Bolsonaro. As explicitly laid out in the 2017 U.S. National Security Strategy:

Using our economic and diplomatic tools, the United States will continue to target corrupt foreign officials and work with countries to improve their ability to fight corruption so U.S. companies can compete fairly in transparent business climates. (NSS, p. 20)

Moro became a widely-acclaimed international hero in this “fight” that linked him to the U.S. State Department and the DOJ’s imperial drive to root “unfair competition” out of the way of global corporations vying for contracts against local players. In effect, there is documentation of the Carwash Operation’s backchannel with the DOJ, that incidentally ravaged Petrobras and local suppliers in the construction, oil and gas sectors. And Kenneth Blanco, the U.S. Acting Assistant Attorney General, admitted on July 19, 2017,  in a speech in which he eventually came to celebrate Lula’s condemnation by Moro, that the exchange of information was not made through the Brazilian Ministry of Justice, the entity solely responsible for international cooperation, under Brazilian law. The Brazilian Attorney General by the time of Operation Carwash (CWO), Rodrigo Janot, admitted the connection with the State Department and the DOJ in his memoirs:

Evidently the Americans didn’t want the success of the CWO because they were nice guys, but because they had interests in opening up the Latin American market to their corporations. For them to compete here, it was necessary to diminish the degree of corruption and cartelization in the public works’ market. In many informal talks with American authorities, I’ve always heard the same question: “Why can Odebrecht build Miami’s airport, and we can’t build an airport or a highway in Brazil?”

This U.S. connection makes the anti-corruption drive congruent with the neoliberal economic priorities of global capital, investment banks, and the Trump administration, though discordant with Bolsonaro himself, no matter how much of a Trump fan he may be.

The fundamental problem is that Bolsonaro surfed the anti-corruption wave created by Operation Carwash with credentials that were clearly fake. As a life-long congressman, Bolsonaro had never associated himself with any former anti-corruption drive in the Parliament before CWO, nor would he in office, despite his use of Moro for cover. In fact, Bolsonaro’s campaign was flooded with a huge slush fund used primarily to disseminate fake news over social media (especially WhatsApp). This scandal came out before the inauguration and apparently did not bother Moro, at all. Incidentally, Bolsonaro’s first cabinet was rife with traditional clientelistic politicians already convicted or investigated for embezzling public funds. Less than a month after the election, in November 2018, Moro went out of his way to publicly pardon the newly announced Chief of Staff, Onyx Lorenzoni, for having repented for the use of slush funds from JBS, the world’s largest meat processor. This corporation has been subject to many investigations by the Federal Police (FP, the Judiciary investigative police). Lorenzoni has never been subject to the LOB’s scrutiny, neither before nor after the confession— leniency that, as leader of Operation Carwash, Moro has never dispensed to the Left in the face of much flimsier accusations.

The fundamental problem is that Bolsonaro surfed the anti-corruption wave created by Operation Car Wash (CWO) with credentials that were clearly fake. As a life-long congressman, Bolsonaro had never associated himself with any former anti-corruption drive in the Parliament before the CWO, nor would he in office, despite his use of Moro for cover.

Whenever new evidence of corruption in the administration emerged during his months in office, Moro remained silent, while Bolsonaro accused the media of spreading fake news. Moro did not utter a word when the Attorney General opened up and later shelved the investigation of Bolsonaro’s participation in another scandal (slush funds from Furnas, the state electricity giant), which had to receive a green light for investigation until February 2019.

Finally, not only did Moro pave Bolsonaro’s road to power with illegal judicial practices, but once in office, he also silently tolerated and normalized the increasing number of Bolsonaro’s overtures to his neofascist base. As Fogel and Richmond recently pointed out, though the neofascist mobs that openly preach a military dictatorship to wipe the Left out are mostly composed by civilians, the greatest danger to Brazilian democracy is that they would intermingle with police and paramilitary groups, as in Colombia. In this regard, Moro’s performance is mixed at best, especially when it comes to the military police (MP).

Although Moro’s proposed immunity for cops who kill civilians has not become law, the MP did kill more in 2019 (with massive evidence tampering), not to mention those killed by stray police bullets. And the MP’s increasing meddling in politics became clear during the coordinated rebellion in many states governed by the opposition last January—allegedly to demand wage raises. The colonel Moro nominated as chief of the National Security Force—and who had the task of “pacifying” the conflicts after Senator Cid Gomes, the former governor of Ceará state, was shot by policemen in sedition—instead praised the “titans” and “brave [people]” of the armed uprising, with no reprimand from Moro. Incidentally, Moro was the best man in this colonel’s wedding to the far-right congresswoman, Carla Zambelli. Since the pandemic broke out, Bolsonaro’s neofascist drive intensified, culminating in his participation in an April 19 rally in front of the barracks in Brasilia, explicitly calling for a military dictatorship.

While putting up with Bolsonaro’s flirtation with neofascism, Moro has protected the autonomy that the FP needed to investigate the president’s family. He could not do otherwise, given the fact that most investigation orders come from the judicial branch rather than the Ministry of Justice. But this was also due to his own political calculus. On the one hand, covering up Bolsonaro’s family misdeeds by muzzling the FP would mean irreparable damage to Moro’s reputation and his leadership over the LOB. On the other, the investigations could deal a fatal blow to Bolsonaro’s chances of reelection, leaving Moro as the indisputable hero of the anti-corruption (read: anti-PT) movement in the 2022 Presidential election. That’s the main political plot in Brazil for the next months, and that is the reason why Moro headed for the exit this time around.

Against Moro’s threats of resignation, Bolsonaro decided to replace the FP chief on April 23, forging Moro’s signature in the process. In his farewell address, Moro declared that he was given no option but to resign, for Bolsonaro desired to intervene in several police investigations, something that Moro conceded that the PT had never tried while he was in charge of the investigation into CWO. Moro did not need to specify Bolsonaro’s misdeeds, as these were effectively common knowledge:

  • Fake news: Both the Congress and the Supreme Court reacted to the spread of misinformation on social media, ordering investigations by the FP of its sources, which seem to lead to a network, led by Bolsonaro’s sons, which is misappropriating public funds and operating from the Presidential palace itself;
  • Pro-dictatorship rallies: As mentioned above, on April 19, Bolsonaro participated in a rally calling for a military dictatorship. Since pro-dictatorship acts are prohibited by law, the Supreme Court initiated an investigation into the organization of the rally, which may lead to Bolsonaro’s inner circle;
  • Marielle Franco: Members of the Bolsonaro clan have close relationships with some of the mob members suspected of killing the Rio de Janeiro City Councilor, and the investigations came close to suggesting that the main suspects contacted the president’s family moments before the assassination;
  • Petty corruption: Senator Flávio Bolsonaro is being investigated for conducting a corruption scheme in which, while he was lawmaker in Rio, his staffers gave back part of their salaries. It seems that the money was then laundered through the purchase and sale of apartments from a famous Rio mob, the same one connected to Marielle Franco’s killing;
  • Mafia connections: Bolsonaro’s family has many connections with a Rio Mafia known as the “Office of Crime,” an organization of active and retired police officers like many others—named “Militias” in Brazil—that “sell” security and other services in favelas at the barrel of a gun and carry out hired assassinations;
  • Dummy candidacies: Female candidates were recruited to comply with a gender-equality election law, but were forced to channel electoral funds back to the Social Liberal Party (PSL), the party to which Bolsonaro and some of his macho ministers were affiliated during the 2018 campaign.

The investigations could deal a fatal blow to Bolsonaro's chances of reelection, leaving Moro as the indisputable hero of the anti-corruption (read: anti-PT) movement in the 2022 Presidential election. That's the main political plot in Brazil for the next months, and that is the reason why Moro headed for the exit this time around.

Any of these investigations can incriminate Bolsonaro and lead to his impeachment or even imprisonment. Events are moving fast. On April 29, a Supreme Court judge blocked the appointment of the new FP chief, a friend of Bolsonaro’s family, allegedly to preserve the impersonality and autonomy of the armed bureaucracy, keeping it under the supervision of a Moro appointee. The day before, another Supreme Court justice had ordered an investigation of Moro’s accusations. Two days later, he commanded that Moro should substantiate the allegations in five days, to which Moro acquiesced in a seven-hour testimony on May 2. As its content is confidential, we’d rather wait for the eventual accusation by the Attorney General or for probable leaks to assess the extent of the judicial and political damages that Moro’s revelations would entail.

As with Lula and Rousseff, Moro seems capable and eager to take another president down, probably having recorded many dialogues with Bolsonaro to back his denunciation. An impeachment would leave Moro as the clear leader of the rightwing camp, as many business leaders and representatives of global capital seem to prefer, given the permanent instability caused by Bolsonaro’s truculent political style, neofascist project, and Mafia connections. That does not mean that the group of local business leaders that actively supported Bolsonaro would shun him, given their adherence to the radical neoliberal program and alignment with Bolsonaro’s stance against lockdowns during the pandemic.

Be that as it may, it seems that Moro is a safer bet in the 2022 presidential election, against any left or center-left alternative, to deepen the neoliberal transformation of Brazilian society and state alike. Even though he might have lost the aura of neutrality after The Intercept‘s revelations, and his participation in what is perhaps the most extremist government in any major democracy since Adolf Hitler was named Chancellor in January 1933, I would guess that Moro’s confrontation with Bolsonaro might maintain his appeal to an enormous bloc of centrist voters that dislike the president’s antics. And he would probably get a big chunk of Bolsonaro’s support by rightist “anti-corruption” voters. It remains to be seen, however, whether a neoliberal “anti-corruption” platform might retain the weight it had in 2018, if Brazil is unable to recover quickly from the economic depression brought by the pandemic, as is likely.

How can Bolsonaro react? I’ll leave the answer to the second part of this article, not without pointing out that, on May 3—the day after Moro’s testimony—Bolsonaro cheered on a rally in front of the Presidential palace where his supporting mob beat up journalists. Meanwhile, the President declared in a live video posted to social media, “I am sure that we have the people on our side; we have the Armed Forces on the people’s side, in the name of the law, order, democracy, and freedom. And, most importantly, we have God on our side.”

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