Economy

Panama Papers lob ‘atomic bomb’ on Brazil’s political class

This view of Deodoro Olympic Park shows the canoe slalom circuit, center, and BMX circuit, right, during a flight on an army helicopter in Rio de Janeiro, Brazil, April 6, 2016. Brazilian Army aviation battalions, special forces, paratroopers and soldiers from various parts of Brazil are in Rio training for the Olympic games.
This view of Deodoro Olympic Park shows the canoe slalom circuit, center, and BMX circuit, right, during a flight on an army helicopter in Rio de Janeiro, Brazil, April 6, 2016. Brazilian Army aviation battalions, special forces, paratroopers and soldiers from various parts of Brazil are in Rio training for the Olympic games. AP

A widespread corruption probe and fast-moving impeachment proceedings are rocking Brazil just months before it gears up to host the Summer Olympics.

A global leak of documents that offers details about offshore investments by some of Brazil’s top elected officials is landing like “an atomic bomb” on some of the very legislators undertaking impeachment proceedings against President Dilma Rousseff.

This summer was supposed to show how a sleeping giant had awakened to take its rightful place on the world stage, much as China did when it hosted the 2008 Summer Games.

Instead, Rousseff sent word to Greece, the birthplace of the global games, that she won’t attend the ceremonial re-creation on April 21 of the original flame lighting in Ancient Olympia.

Brazil’s president has faced angry street demonstrations against the sour economy, mired in a stubborn recession, and a widening judicial investigation that’s reaching into the highest echelon of her ruling Workers Party.

Just this week, a committee in Brazil’s lower chamber of Congress advanced a motion to remove Rousseff from office. The allegation is that her government borrowed money illegally from state banks in an attempt to mask budget shortfalls.

The president’s potential ouster continues to gain momentum, with a vote possible in the full lower house as early as this weekend. Opponents, who will need to secure a two-thirds majority, vow to send the matter to the Brazilian Senate, where lawmakers would decide whether Rousseff goes on trial. That would force her to step aside, at least temporarily, and hand reins to the vice president, Michel Temer.

And then there’s Operation Car Wash. That’s the name prosecutors have given to a probe into politicians skimming money from the state oil company, Petroleo Brasileiro S.A., or Petrobras.

That scandal is exploding across the front pages of Brazilian newspapers and television screens here, due to a yearlong collaborative effort by journalists from more than 100 news organizations around the globe, including McClatchy, the only U.S. newspaper partner.

Journalists examined the cache of 11.5 million leaked documents from the Panamanian law firm Mossack Fonseca, a global leader in the formation of offshore companies. Police already raided its Brazil office in January.

The results of the collaborative effort, released April 3 under the umbrella of the Washington-based International Consortium of Investigative Journalists, revealed at least 57 names and 106 shell companies linked to the Operation Car Wash investigation.

Eduardo Cunha, the speaker of Brazil’s lower chamber of Congress and the man leading attempts to impeach Rousseff, was arguably the biggest Brazilian player tied to the document leak. Vice President Temer, who is a member of Cunha’s political party, also faces impeachment proceedings on the same allegations as Rousseff.

“It’s an atomic bomb that’s exploding exactly during the impeachment proceedings in Congress,” said David Fleischer, a political scientist at the University of Brasília. “The problem is it is catching people on both sides – those favorable to Dilma and those against.”

Cunha’s party, the centrist Brazilian Democratic Movement Party (PMDB), recently broke from its coalition with Rousseff’s party but now has to answer for Cunha, who is accused of receiving bribes from offshore companies registered by the Panama law firm. And it’s unclear how legislators will proceed with the potential impeachment proceedings pending against Temer.

How the Panama Papers, as the leak has become known, will affect the impeachment saga depends partly on how they’ll be used in future court proceedings, said Emil Sobottka, a professor at the Pontifical Catholic University of Rio Grande do Sul.

“The plot will become clearer because the money trail will be documented,” he said.

Also important is whether the new names enable prosecutors to connect the dots more easily, said Fabio Bechara, a state’s attorney in Sao Paulo.

“If there are possible links, I don’t have the slightest doubt this data will greatly contribute in adding a little more fuel to this (fire),” Bechara said.

Brazil’s political drama made global headlines in early March when police hauled in the popular former populist president, Luiz Inácio Lula da Silva, for questioning. Offshore shell companies found in the Panama Papers, some established in Nevada, figured in his interrogation and in the wider scandal.

The government’s Operation Car Wash probe focuses on bribes and embezzlement at Petrobras. Prosecutors allege that numerous political figures, past and present, used offshore companies to hide ill-gotten gains and some have reinvested them in seaside real estate under the cloak of anonymity.

Vagner Silveira is disgusted by it all. The 49-year-old works a construction job, one of several laborers racing to complete an expansion of a metro stop before the start of the Summer Games in early August.

Ordinary Brazilians work hard, he complained, adding that politicians and their cronies “take money that’s practically ours, that we generate, pay through taxes … and we remain without raises, working like hell with little money. And they’re doing fine, because we don’t make them face consequences because they’re politicians.”

What does he hope will come from the Panama Papers?

“The right thing would be arrests. If it were up to me, all of them would be in prison, but Brazil is Brazil,” Silveira lamented.

Offshore corporations have one main purpose - to create anonymity. Recently leaked documents reveal that some of these shell companies, cloaked in secrecy, provide cover for dictators, politicians and tax evaders.

Kevin G. Hall in Washington contributed to this article.

This story is part of a larger series, involving McClatchy and other news organizations, working under the umbrella of the nonprofit International Consortium for Investigative Journalists.

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