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BY CHARLES FIERTZ

Brazil continued the four-year slide that began in 2014, the year that saw the beginning of Operação Lava Jato (“Operation Car Wash”) as well as the global crash of commodity prices that had driven the Brazilian boom in growth that had helped lift tens of millions out of poverty. In contrast, the intervening years have seen the country roiled by surging unemployment and widening corruption investigations that threaten to engulf the entire political system. These difficulties have encompassed most of the pressures covered by the Fragile States Index, with fully two-thirds of its indicators seeing a significant decline.[1] This year, however, the rate of worsening slowed substantially, with Brazil’s total score increasing by only 0.5 points and, although serious challenges remain, the first tentative signs of economic recovery may be evident.

The effects of Operação Lava Jato have now reached far beyond Brazil’s borders, implicating three former presidents in Peru, a sitting vice president in Ecuador, and a Colombian senator amongst others in at least fourteen countries in the region and further abroad.[2] The process that led to the investigation began with nationwide anti-corruption protests that rocked Brazil in 2013. In response, then-president Rousseff fast-tracked a series of laws aimed at rooting out corruption, supplementing the earlier increases in budget and authority the Federal Police had been given by Rousseff’s predecessor, Luiz Ignacio “Lula” da Silva.[3] These new measures played a key role in enabling what began as an investigation into money laundering to uncover an extensive web of corruption centered around Petrobras, the state oil company, which years earlier in 2008 had somewhat ironically been named the world’s most ethical oil and gas company.

Dozens of Brazilian politicians from all parts of the political spectrum have been implicated including most recently former president Lula, who was convicted in July 2017. Despite having the lowest approval ratings since polling began, current president Michel Temer survived two votes in Parliament in 2017 to send him to trial in the Supreme Court for obstruction of justice and bribery.[4] While initially popular, the investigations are now eroding Brazilians’ faith in and support for democracy, which fell 22 percentage points, to 32%, from 2015 to 2016, with 55% of Brazilians saying that a nondemocratic government would be acceptable as long as it solved problems.[5]

Around the same time Operação Lava Jato began jailing corporate executives and powerful politicians, the high commodity prices that had helped sustain the country’s highest economic growth in fifty years began to collapse. Due in part to the slowdown of Chinese growth and the consequent slackening in its demand for raw materials, the prices of commodities such as soybeans and iron ore – key Brazilian exports – fell by between one-half and two-thirds from their peak by the end of 2015. Combined with crippling regulations and extremely high levels of public spending, record growth was quickly followed by Brazil’s worst ever recession. Unemployment more than doubled, reaching a peak of nearly 14%, and poverty increased for the first time in a decade, threatening the social gains of the Lula era.[6] Thanks in part to a slight recovery of commodity prices, Brazil finally exited its recession in 2017, growing at just over 1%. Unemployment is also falling, although most of the gains are being made in the informal economy, and inflation ended 2017 at the lowest level since 1998.[7]

Perhaps even more concerning than the corruption scandals and the poor economic performance is the resurgence of violence in Brazil. Police reforms and anti-violence initiatives in Rio de Janeiro and Pernambuco had previously managed to reduce homicide rates there by up to 50%, but the relief was local and temporary. Brazil’s Security Apparatus score has also been worsening since the 2014 FSI, and while the homicide rate in Rio is still far below the heights of the late 1990s and early 2000s, the countrywide rate has been climbing to new highs, with the increase concentrated in the northeastern states. With police strikes in Espirito Santo and Rio de Janeiro in February 2017 and prison riots that claimed over 140 lives in January 2017 as part of a broken truce between two of the country’s most powerful gangs, the Red Command and the First Capital Command, the first six months of 2017 saw a 6.8% increase in the national homicide rate compared to the same period in 2016.[8][9]

Although Brazil is current dealing with an outbreak of yellow fever, in May Brazil announced an end of its public health emergency over Zika with 95% fewer cases in the first four months of 2017 compared to the same period in 2016. Combined with the recent improvement in economic performance and elections upcoming in October 2018, Brazil may have a chance to reverse its recent misfortunes. Such a reversal is far from assured, however. Fueled by the corruption scandals and the increase in crime, Jair Bolsonaro, a former army captain who has openly called for a return to military rule and denounced the “human rights agenda” has been drawing large crowds to gymnasiums and schools around the country in preparation for an expected presidential run. Brazil has the opportunity to both clean up its political system and improve its economic governance, thereby setting itself up for a more successful future — but doing so will require a political will which has not always been evident in recent years.

ENDNOTES
1. Of 0.5 or greater
2. “The corruption scandal started in Brazil. Now it’s wreaking havoc in Peru” Washington Post
3. “Operation Car Wash: Is this the biggest corruption scandal in history” The Guardian
4. “Brazil’s President Temer avoid corruption trial” BBC
5. Latinobarómetro
6. “Brazil – Economic forecast summary (November 2017)” OECD
7. “Brazil inflation ends 2017 below official target range” FT
8. “Rising violence across Brazil hits north especially hard” InSight Crime
9. “Brazil’s biggest problem isn’t corruption – it’s murder” The Conversation

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