Brazil’s former rockstar president Luiz Inacio Lula da Silva has a clear conscience, he says, about the two federal criminal court charges he now faces. They’ve got nothing on him. He is sleeping well. Fica tranquilo.
Although Wall Street has clearly moved on from Brazil’s political drama,
They’re not going to cut oil and gas production, but they are going to sell assets to pay down their $130 billion debt. If the company was not pillaged over the last decade by Lula’s Workers’ Party (PT) and its allies, Petrobras would not be a company forced to shrink.
And so as Petrobras tries to stop the bloodletting after losing 52% of its market cap in the last 10 years, hitting $2.90 a share on Feb. 11, nobody to this day has been able to explain what the hell happened at Brazil’s flagship enterprise.
"Lula's trial has little market relevance unless it touches upon political actors in the (new Michel) Temer administration," says James Barrineau, co-head of emerging market debt at Schroders in New York. "I think Petrobras is healing. It's being run as a private company instead of a state-run piggy bank for the government for the first time in years, perhaps ever."
We may be approaching a point where Petrobras' past no longer matters.
For Lula, today, it matters. For those that have been incarcerated, it still matters. They were either former PT officials or executives at Petrobras contractors like OAS, Andrade Gutierrez, Camargo Corrêa and Odebrecht, owned by the billionaire Odebrecht family. Like any man behind bars, they are pointing fingers at their former friends in plea bargain arrangements designed by the prosecutors to milk confessions from those caught in the Petrobras drag net. Are they lying? Are they telling the truth? That’s for the courts to decide. But one thing is certain, somebody knows where the bodies are buried. The problem is that those that do are the ones making the rules.
The Petrobras scandal was more than a scandal. It was a national swindle.
Federal prosecutors have information a mile long. They charge that Lula was the lead swindler in the case, though for a guy who orchestrated billions in contract rigging deals and millions more in off-the-books campaign donations to PT and friends, all he got out of it was renovations to a beach house.
What did Lula know about the graft scheme? Apparently nothing, so his story goes.
Was Lula and his successor Dilma Rousseff just totally asleep at the wheel? Were the leaders of the country -- for the past 14 long years, mind you -- taken for fools by underlings in the political pecking order and by the oligarchical families they all cut deals with? To anyone who believes that, I have a herd of flying reindeer to sell you. They are warehoused in a castle in the North Pole, cared for by Elves.
For his part, Lula has done an absolutely atrocious job at explaining what went on with Petrobras. Dilma, chairwoman of the board of directors, pleaded ignorance to tens of millions of dollars overspent on a 90 year old Texas oil refinery that was so outdated, it has no chance of registering a return on investment for Petrobras. In fact, the $1.2 billion junk yard Dilma’s Petrobras bought caught fire in March.
To PT and every political heavyweight implicated in Brazil’s crime of the century -- the money laundering and the racketeering and the influence peddling -- no one for the life of them can explain who did what, where, when and why. It’s all a mystery what these prosecutors and Federal Police have found, like the fog of war. Only this scheme is not some 007 covert operation shrouded in state’s secrecy. A lot is known. The ones who don't seem to know anything are the politicians. Lula? Knows nothing. Dilma? Nada. Former house speaker charged with receiving at least $5 million in bribes, Eduardo Cunha? Pure as the driven snow.
Earlier this week, PT and its allies tried cutting an amnesty deal to keep the secrets locked. But it was blocked by parties on the left. This amnesty deal will likely pop up again, like a winter's cold. Something like a third of congress has had its hand in the Petrobras cookie jar to some extent. If it was business as usual, then maybe amnesty is the best way to move on, as unpopular as that might be.
The developments of the last couple years exposed the way the political system works in Brazil and how much it still needs to evolve, says Andrea Murta, deputy director of the Adrienne Arsht Latin America Center in Washington. “The progress of Brazil’s democracy will continue, perhaps with even more public engagement. The problems in Brazil are caused by a very flawed electoral and political system, which lead to fragmentation and encourage illicit ties between businessmen and political candidates,” she says.
Will Lula go to jail? I have no idea. Will he pay a fine and therefore not be allowed to run for office in 2018 under Brazil’s Clean Slate rules? I have no idea.
Lula’s base of support argues that the charges against him are politically motivated. “They”, these rabid right wingers, are scared of Lula 2018.
Lula never said he was definitely running in 2018.
Brazil’s “vast right wing conspiracy” is supposedly being led by the Democratic Movement Party and the Social Democrats. The Democratic Movement Party is a non-ideological party, which means neither left nor right wing. The Social Democrats were founded by liberal intellectuals who first launched the popular Bolsa Familia program that Lula expanded upon, and the PT heralds as his greatest achievement. If being right wing in Brazil means being pro-business, then Lula is a right winger because he was also pro-business.
Mark Mobius, head of emerging markets investing for Franklin Templeton told me that “If they bring down Lula, it will be a giant step against corruption. I think it’s great what Brazil is doing in going against those that brought down Petrobras.”
I was in São Paulo when Lula was first elected in Nov. 2002. I was there when he gave his first speech as president elect at the
I know wealthy business owners, CEOs and bank executives from the city all the way down to Porto Alegre who voted for Lula. They believed in him and many of them voted for him twice. From 2003 to 2010, Luiz Inacio Lula da Silva was the most popular president in the Americas, if not the world.
But the Lula of the mid-2000s no longer exists. He may poll well in sample surveys for presidential picks in 2018, but he is the Trump-Clinton-Blair of Brazil – the most reviled of those who would-be president. His disapproval rating is nearly 50%, when his approval rating when leaving office in 2010 was around 80%, and that includes support from the rich and middle class in the south. Those voters are unlikely to vote for him and PT for many years to come.
Lula is being charged on many counts. Maybe he is an innocent man, as he says. In many ways, I think that just as many Brazilians who would like to see him in jail would also like to see him proven innocent.
If he is proven innocent, who then allowed for Petrobras to be strip-mined like this on PT’s watch?
It is going to take years of China-like economic growth before Brazilians forgive Lula and the PT for this mess. They were in charge. They failed to protect the most important asset in the country. And by doing so, failed to protect the legacy of the Party's biggest name: Lula.
