Over the past several years, both Brazil and Guatemala have been rocked by revelations of widespread corruption at the highest levels of government. Former presidents in both countries are now standing trial for their alleged roles in the respective scandals. InSight Crime explores some of the similarities and differences between these cases.
In addition to reporting by InSight Crime and other outlets, this article also draws on a discussion InSight Crime moderated recently between Mike Allison, an expert on Central American politics who serves as an associate professor and chair of the political science department at the University of Scranton, and Matthew Taylor, an associate professor at American University's School of International Service who focuses on state capacity and corruption in Latin America and who has extensive experience in Brazil. An edited transcript of that conversation has been published here.
Who was involved?
Guatemala: Former Guatemalan President Otto Pérez Molina and former Vice President Roxana Baldetti were accused in June 2016 by the United Nations-backed International Commission against Impunity in Guatemala (Comisión Internacional Contra la Impunidad en Guatemala - CICIG) of leading a "criminal mafia structure that had co-opted power through the ballot box." The criminal network also allegedly included Baldetti's private secretary Juan Carlos Monzón as a key intermediary, as well as numerous other government officials and business elites.
Brazil: The cast of characters in the Brazilian case bears a striking resemblance to the Guatemalan one. Former Brazilian President Luiz Inácio "Lula" da Silva was accused in September 2016 by prosecutors in the South American country of "setting up and controlling an illegal scheme…to buy partisan support in Congress and thus ensure the perpetuation of his party in power." In March 2016, Lula's former chief of staff José Dirceu was convicted and sentenced to 23 years in prison for his role in the scandal. Involvement in this scheme also allegedly extended to a slew of politicians including current president Michel Temer as well as private business elites and executives of state companies, particularly the government-run oil giant Petrobras.
How did the schemes work?
Guatemala: After losing a bid for the presidency in 2007, Pérez Molina and Baldetti allegedly set up a network of front companies that accepted and laundered illicit campaign funds from prospective state contractors, which helped finance their successful 2011 run for office. Once in power, investigators say Pérez Molina and Baldetti rewarded these contributors with state contracts, some of which were used to fund kickbacks to the president and vice president. This case became known as the "Cooptación del Estado," or "Cooptation of the State." But the "cooptation" case was not the only corruption scheme in which Pérez Molina and Baldetti were allegedly involved. Other investigations have resulted in at least three additional sets of accusations against the former president and vice president.
One of these plots, known as "La Linea," involved companies paying bribes to customs officials in exchange for help avoiding import taxes; Pérez Molina and Baldetti allegedly received a percentage of those bribes. Another scandal involved allegations that Pérez Molina accepted bribes from a Spanish company in exchange for help obtaining a contract for upgrading a major shipping terminal, the Quetzal Port. Shortly after the "cooptation" case broke, the Attorney General's Office described yet another corruption scheme dubbed "Cooperacha," or "Kick-in," in which Pérez Molina and Baldetti allegedly received gifts purchased by government employees with state funds. Attorney General Thelma Aldana said the purchases were made "with the intention of 'pleasing the boss,' much like the practice of [members of] organized crime structures that guarantees their position within the hierarchy and their license to operate."
Following the revelation of the "cooptation" case, CICIG head Iván Velásquez said the evidence uncovered by the investigations indicated the existence of "structural corruption" in Guatemala, involving "consolidated structures" that could "reach relationships and understandings with each government." InSight Crime spoke with a source in CICIG who asked not to be identified, who described illicit campaign funding as "the original sin" by which powerful actors "substitute the public interest for the interests of certain elites who finance the campaign." In other words, political and business elites created illicit networks that served the dual purpose of keeping each other in power while siphoning off government resources for their own personal enrichment.
Brazil: Prosecutors in Brazil allege that Lula was at the "vertex of various criminal schemes" aimed at keeping the political party he founded, the Worker's Party (Partido dos Trabalhadores - PT), in control of the levers of government. The September 2016 indictment of Lula (pdf) described two separate alleged corruption schemes as "sides of the same coin." The first scheme, known as the "Mensalão," or "big monthly payment," came to light in 2005 during Lula's first term as president. In this case, prosecutors alleged that public funds were used to make illegal payments to members of Congress in return for political favors. More than two dozen politicians and businessmen, including Lula's chief of staff Dirceu, were convicted of involvement in the scandal, but the president himself was not directly implicated at the time.
The other "side of the coin," according to prosecutors, was a corruption scandal that broke in 2014 primarily revolving around the state oil company Petrobras. At first, the investigations focused on accusations that Petrobras executives had awarded public works contracts to private companies at inflated prices in exchange for kickbacks, some of which were funneled into political campaigns. More recently, however, prosecutors have accused Lula of using his position as president from 2003 to 2010 to appoint participants in the corruption scheme to important government positions. There, they could accept bribes for their own personal enrichment, while funneling some of the money into a "general fund" for buying political favors and covering the costs of disguising its illicit origin.
Using a phrase similar to the one used by CICIG's Velásquez, the judge in charge of the Petrobras case, Sergio Moro, has described the scandal as an example of "systemic corruption" in Brazil. However, there are a few key differences between Guatemala's "cooptation" case and the Petrobras scandal. For one, the bribery in the Brazilian case appears to be more closely linked to political incentives than the desire for personal enrichment on the part of the participants, though the latter certainly played an important role. As the Washington Post explains, Brazil's fractured political party system makes it difficult to form governing coalitions to pass legislation. One solution to this problem -- which was apparently applied in this case -- is to offer illicit payments to members of Congress in exchange for their votes. In Guatemala, on the other hand, the evidence suggests personal enrichment trumped political expediency as the primary motivation for the graft.
Another key difference between the two corruption cases is who benefitted, and how. Brazilian prosecutors allege that Lula received upwards of $1 million in free construction work on a luxury apartment connected to one construction firm involved in the Petrobras scandal. He is also accused of accepting speaking fees from another construction firm in exchange for helping the company obtain contracts and financing. But unlike in the Guatemala case, the former president is not accused of personally taking a cut of a multitude of graft schemes occurring at various levels of government. This suggests that the corruption in Brazil took place in a much more decentralized fashion than in Guatemala, where Pérez Molina and Baldetti appear to have acted like mafia bosses, personally taking a cut of each of the numerous illegal activities occurring under their direction.
What is the outlook?
Guatemala: The charges against Pérez Molina, Baldetti and others accused of involvement in Guatemala's recent graft scandals came after a years-long struggle to establish a mechanism for dealing with the influence wielded by corrupt, clandestine networks of elites in Guatemalan politics. This process eventually resulted in the formation of CICIG. As InSight Crime has extensively reported, CICIG has a long and complicated history that is still being written. Nevertheless, it is clear that the investigation and prosecution of the former president and vice president have had far-reaching implications for Guatemalan politics and society.
One of the most profound impacts of the revelation of the various corruption schemes was the resignation of Pérez Molina in September 2015. The fact that the president was forced to step down and was soon jailed for his alleged involvement in the graft clearly signaled the diminishing power of these illicit networks as well as citizens' declining tolerance for corruption. Even before his resignation, the growing public pressure for strong anti-corruption efforts led Pérez Molina to renew CICIG's mandate -- a decision that somewhat ironically contributed to his downfall. In the October 2015 presidential election, Guatemalans reiterated their concern with government corruption by rejecting several candidates dogged by allegations of graft and instead choosing Jimmy Morales, a comedian with almost no political experience who ran with the campaign slogan "not corrupt, not a thief." Morales has subsequently requested the renewal of CICIG's mandate and expressed support for continuing anti-corruption efforts, even as some of his close family members face accusations of corrupt behavior.
The recent scandals appear to have marred the reputation Guatemala's armed forces and political elites, while CICIG has become the most trusted institution in the country. At the same time, however, the ongoing efforts by CICIG and Guatemalan authorities to combat corruption are not universally popular. In June, Guatemala Attorney General Thelma Aldana publicly stated that "hidden powers that proliferate in the country" were attempting to undermine her office's efforts to prosecute elites like Pérez Molina and Baldetti. And while the ongoing prosecutions serve as signs of progress for the country's judiciary when it comes to fighting corruption, it remains unclear how successful these efforts will be in the long run; past political corruption cases have often ended with mixed results from the perspective of anti-corruption advocates.
Brazil: Like Guatemala, Brazil has a long history of struggling to deal with widespread government corruption. The above-mentioned Mensalão scandal brought the issue of political graft to the fore, and subsequent revelations of deep-seated corruption fueled calls for greater efforts to clean up the country's political scene. The Petrobras scandal seems to have touched a particular nerve with the Brazilian public, sparking a series of anti-corruption protests that have brought hundreds of thousands of citizens into the street in recent years. Recent public opinion surveys show that more Brazilians than ever consider corruption the biggest problem facing their country. And as in Guatemala, the revelations appear to have contributed to a declining confidence in institutions. According to the most recent Latinobarómetro survey, Brazilians have some of the lowest rates of confidence in government of any country in Latin America.
Indeed, the Petrobras scandal has seen quite a few elites jailed for their alleged involvement in the graft. Some have even described the judge handling the Petrobras case as a "hero" for overseeing the successful prosecution of numerous powerful suspects in the scheme. However, the long-term impact of these actions seems even less clear in the Brazilian case than in the Guatemalan one. The investigations and prosecutions thus far have faced several criticisms, most notably that they have become politicized, focusing mostly on former President Lula and his Workers' Party. And while the probe has targeted several powerful figures, many have been able to significantly reduce their prison sentences by entering into plea bargains. Moreover, it has proven difficult to prosecute sitting politicians due to the immunity they enjoy under Brazilian law.
Still, as judge Moro put it, the Petrobras case has shown that "much can be done even under the current system, as long as the problem is confronted and treated with seriousness." It is impossible to completely eliminate government graft, especially when it has become a deeply ingrained feature of the political system. But investigating and prosecuting corruption when it occurs is a crucial first step towards addressing the issue.
In Brazil as in Guatemala, it is too soon to definitively assess the ultimate impact of these ongoing cases, though it does seem clear that business executives and politicians in those countries are now likely to think twice before offering or accepting bribe payments. But the most profound effect of these cases may be the lessons they provide for other countries struggling with government corruption. Several governments across the region, including Mexico, El Salvador, Honduras and Peru, have established anti-corruption bodies or passed anti-graft laws in recent months. The outcome of such efforts may hinge, at least in part, on their ability to draw on the successes -- and failures -- of the Brazilian and Guatemalan examples.