Lava jato

These are Portuguese words for car wash.  But for 200 million inhabitants of Brazil,  it is a scandal of the highest proportion.  All accusations involve kickbacks totaling billions of dollars.

It began by investigating a money laundering operation in Brasilia, at the Posta da Torre (Tower Gas Station).  The roots of this investigation date back to accusations as far back as 2008.  It soon zeroed in on Petrobras and their corrupt supply procurement  officials.

Lavo Jato Analysis by the Brunswick Group

Both the Executive and Legislative branches of the Brazilian government are under investigation.

I remember back in the 1990’s, a  Brazilian joke about the “Brazilian triangle”  which they said was like the Bermuda triangle.  Apparently Petrobras and two banks (Banco do Brasil and BNDES)  owned three buildings in Rio  which formed a triangle.  They said money went in and disappeared.

The arrests started in March 2014, and likely many more are to come. Recent arrests include a Brazilian billionaire who has resigned as president of BTG and a prominent Senator:

Supreme Court ordered arrests of BTG Pactual’s Esteves and Sen. Delcidio do Amaral

Normally,  cleansing of corrupt officials would lead to a stronger government, able to bring badly needed reform and austerity  measures to Brazil.

However, as the magnitude and intricate nature of  bribery network has been exposed,  President Dilma Rousseff  popularity has plummeted.   As stated in the Brunswick article, since Petrobras is listed on the NYSE stock exchange, the  US Securities and Exchange Commission has opened up its own investigation.

The rather cynical joke that the light at the end of the tunnel is actually another  train coming in the opposite direction,  may  be true.  If the Brunswick’s prognostications hold true,  President Rousseff  will not be impeached, but she loses all chances of advancing the needed fiscal reforms.

The corruption scandal, I believe, has arrested most of the core players within Petrobras.   These new arrests  appear to be more  at the periphery of the scandal.

Petrobras, the Brazilian oil company,  is too big to fail.  It fortunately sells oil in dollars, which it desperately needs.  It is developing a number of large discoveries in deep water, which might be the real light at the end of the tunnel.

Petrobras

Stay tuned,

Dave

 

 

 

 

 

 

 

 

 

 

 

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