Brazil

It is Latin America’s anticorruption season. Deep beneath the waves of revulsion about scandal, graft, and the general filthiness of local politics has been a profound concern with democracy. In particular, there is a growing awareness that the dangerous liaisons between corruption and electoral finance threaten the stability and legitimacy of elected governments in the region. While there is plenty of good news about the impressive corruption busters who are shaking up settled patterns of corruption and impunity in the region, many of the underlying links between corporate transparency, corruption, and campaign finance remain deeply troubling and potentially destabilizing. Of eighty-seven companies mentioned in the FCPA Blog’s most recent Corporate Investigations List—a count of companies whose public filings with the Securities and Exchange Commission reveal that they are the subject of an ongoing and unresolved investigation under the Foreign Corrupt Practices Act—fully twenty-six are Latin American. Given that Latin America accounts for only 7 percent of the global economy, the fact that it accounts for 30 percent of current enforcement actions is impressive. Equally remarkable is that Brazil alone accounts for more than one in five of the companies on the list. Of course, enforcement actions by U.S. regulators only target companies traded on the U.S. markets. The longstanding prevalence in Latin America of closed companies and conglomerates controlled by single families means that many regional corporate leaders are not publicly traded, much less traded on U.S. stock exchanges where they would be susceptible to U.S. regulation. Furthermore, it might be argued that much corruption is simply illegal enrichment, and does nothing to fund campaigns. But personal enrichment often comes at the cost of private-regarding policies. More damaging still is that as companies across the region increasingly expand beyond their domestic markets and into neighboring economies, they sometimes carry with them the nefarious practices of political influence-peddling that helped them dominate at home. By way of example, Odebrecht, the once-massive construction firm at the heart of Brazil’s Lava Jato case, has expanded significantly to neighboring countries since the turn of the century. In its baggage train it carried significant campaign contributions, whether to Peruvian candidates with a role in the construction of massive interoceanic highways, or to Panamanian politicians with influence in over-priced public works projects. Recognizing the dangers of corruption to electoral competition, the investigations that have swept the region in recent years have triggered a variety of changes in domestic laws aimed at destabilizing the nexus between politics and corruption. These include a ban on corporate donations in Brazil, a similar ban combined with campaign spending limits in Chile, and this week, after months of heavy civil society prodding, transparency requirements for politicians and the strengthening of anticorruption bodies in Mexico. But as a Transparency International report published earlier this month demonstrates, emerging market multinationals are lagging behind in the push for greater corporate transparency. Publicly listed companies do better than privately held companies, but overall, the results show that less than half of the emerging market multinationals are transparent about their internal anticorruption programs; only 47 percent report transparently on their holdings and subsidiaries in other countries; and a measly 9 percent report on their activities in other countries even though, on average, these multinationals have operations in twenty-six countries each. Latin American multinationals account for about a fifth of the index, and they perform about 10 percent better than the (abysmal) index average. But given that their home countries—Argentina, Brazil, Chile and Mexico—are all democracies, and half of the multinationals in the global sample are from non-democratic countries, perhaps we should expect even better from the multilatinas? Further regulation and red tape may have perverse effects, of course. But increased corporate transparency standards, especially if adopted voluntarily, might prove to be a competitive advantage, especially as the regulatory environment in Latin America is tightening anyway under citizen pressure. Under these new conditions, both multinationals and smaller firms in the region may see improved transparency standards as a way of simultaneously enhancing domestic politics in their home countries and improving their business prospects abroad.

In my piece published this week on Foreignaffairs.com I reflect on Argentina’s and Brazil’s current political and economic situations. I argue that while their current challenges are their own, a potential long-term solution to their problems comes from each other—namely working to build an integrated South American economic hub. You can read the first two paragraphs of the article below: This year has been a rough one for South America’s two largest states. Brazil—once lauded as a rising global power—has fallen deeper into recession and political turmoil. And although Argentina is finally attempting to transform itself into a model of sober pro-market governance after years of Peronist populism, it shares with its northern neighbor a grim set of economic and political indicators: stagnating growth, endemic corruption, and a new government beset by high expectations. As a result, Argentine President Mauricio Macri’s initially high approval ratings have declined since he took office in December. In Brazil, meanwhile, interim President Michel Temer comes close in unpopularity to the disgraced Dilma Rousseff. Despite their undeniable problems, however, there remains in both countries a cause for optimism. Argentina and Brazil are, for now, absorbed in their own domestic dramas, but they have within easy reach the long-term solution to their economic woes: each other. You can read the entire piece as it appeared on Foreignaffairs.com here.

Now You Can Find out What Happens to U.S. Aid In a bipartisan vote, Congress passed legislation to require U.S. agencies—the U.S. Agency for International Development and U.S. State Department among them—to measure the success (or failure) of billions spent on development and economic assistance programs—and share the findings on foreignassistance.gov. Once signed into law the Foreign Aid Transparency and Accountability Act will also make public program budgets by country, showing where and how U.S. money is spent. Notably exempt is security assistance, leaving details about how the United States funds, trains, and equips foreign militaries still opaque. Naming and Shaming in the U.S. Human Trafficking Report The U.S. State Department released its sixteenth annual Trafficking in Persons (TIP) report, ranking 188 countries’ efforts to prevent human trafficking from best (Tier 1) to worst (Tier 3). Myanmar and Uzbekistan joined six other nations downgraded to the U.S. blacklist—in Myanmar’s case for recruiting and using child soldiers, smuggling minority Rohingya migrants, and official complicity in forced labor. Thailand rose from the bottom rung, despite criticisms that labor abuses in its multibillion dollar fishing industry remain unchecked. Last year investigations revealed top U.S. diplomats manipulated TIP rankings for political ends; this year’s calling out of strategic partners may help restore the report’s credibility. UK Bribery Act Turns Five Five years ago the United Kingdom (UK) passed the Bribery Act. It not only makes it illegal for companies to bribe foreign officials (in line with the U.S. Foreign Corrupt Practices Act), it also holds them to task for failing to prevent bribery among subsidiaries and business partners within their supply chains. Others have followed the UK’s lead. Brazil passed its Clean Company Act in 2014, imposing fines of up to 20 percent of revenue for companies that bribe foreign or domestic officials. Ireland has proposed legislation that includes the UK’s rules and adds provisions to force stricter corporate due diligence. The UK Bribery Act’s first half decade only saw two cases resolved: convicting Sweett Group of bribing a UAE official, and settling with Standard Bank for bribery in Tanzania. Last year the Serious Fraud Office took on sixteen new investigations—expect more decisions before the law’s next milestone birthday.

Mercosur is under considerable internal strain. As at other times in the trade bloc’s history, shifting political winds and changing trade priorities have placed the member countries at loggerheads. The five-member organization is in the midst of what is perhaps the most severe of its periodic identity crises, exacerbated by the Left’s waning power in the region, the rise of the Pacific Alliance, and renewed member interest in external trade agreements. The most immediate cause of the current tension is the possibility that Venezuela might be given the next six-month term as rotating chair of the organization as early as next week. Foremost among the concerns this raises is the possibility that Venezuela might get in the way of ongoing talks with the European Union (EU). But also lurking in the background is the possibility that with Venezuela in the chair, it will be harder to invoke Mercosur’s “democratic clause” against the Maduro government, which has descended into seemingly intractable crisis and appears intent on sidelining its opposition in a variety of increasingly autocratic ways, including threats to dissolve the National Assembly. Paraguay has called for barring Venezuela from the chair outright. Uruguay seems intent on upholding the pre-established timetable for rotating the chair, noting that Maduro has not yet acted on his threat against the Assembly. In an emergency mission to Montevideo, a delegation led by Brazilian foreign minister José Serra pushed an intermediary solution, noting that Venezuela has not yet met the terms of Mercosur accession, which it must complete by August. Until it has met the terms of membership, Venezuela would not be eligible for the chair. Argentina has said that it will happily take the chair in the interim. Brazil’s criticism of the Venezuelan regime’s human rights record and calls for a referendum on Maduro were met earlier this week by the full twittering firepower of the Venezuelan foreign minister. Delcy Rodríguez let loose a barrage of criticism of the “insolent” and “amoral” statements of her “de facto” colleague, Brazilian foreign minister José Serrá.  For good measure, she alleged that Brazil has joined the “international right” in its efforts against Venezuela, and called attention to the ongoing “golpe” in Brazil. Caught up in her twitter tantrum, Rodríguez did not make the stronger argument in Venezuela’s favor: namely, that Brazil’s justifications for temporarily suspending Venezuela seem contrived, given that Venezuela has been permitted to chair the organization once before, and Mercosur has been famously tolerant of member violations of its rules. Ultimately, the tension within Mercosur is an expression of deeper political changes, including most especially, the shift away from leftist governments with the arrival of the Cartes administration in Paraguay, Macri in Argentina, and Temer in Brazil. The Cartes government harbors deep resentment of the Maduro administration, not least because Paraguay was suspended from the trade bloc under the democratic clause from 2012 to 2013 after the (admittedly questionable) impeachment of Fernando Lugo. Particularly galling to the Paraguayans is the fact that they have staked a great deal on Mercosur—more than 40 percent of imports and 20 percent of exports are to Paraguay’s non-Venezuelan Mercosur partners—even as the Venezuelan Johnny-come-lately seems intent on using the bloc largely as a platform for its regional political pretensions. Lost in the political scrum is trade. From this perspective, Mercosur continues to be an ambivalent accomplishment. The trade bloc has increased trade among the member countries, but also imposes opportunity costs in terms of foregone trade agreements elsewhere. Meanwhile, although trade today is higher than it was at Mercosur’s inception, it is lower as a percentage of total trade than it was at the peak of intra-Mercosur commerce in the late 1990s. Recognizing this, Argentina and Brazil had already exchanged a number of high-level visits this year before Rousseff’s impeachment, and more recently, Foreign Ministers Serra and Malcorra have reiterated their interest in improving bilateral exchanges and reviving Mercosur. Mercosur, though, has had enormous difficulty in moving forward on outward oriented trade agreements, including a deal with the EU. Prospects for such a deal might be more positive than in years past, given the rise of the pro-trade agenda in Brazil and Argentina. But the fact is that the EU is—to put it mildly—distracted at the moment. Closer to home, too, the Pacific Alliance is exerting an enormous pull on some Mercosur members. Argentina’s Macri will be a guest at the Pacific Alliance’s presidential summit later this month, and Chile in particular seems eager to build bridges to members of Mercosur. The foreign ministers of the four original members of Mercosur will meet on Monday, July 11, to discuss the situation in Venezuela. Pushed by Uruguayan foreign minister Rodolfo Nin Novoa, they seem unlikely to invoke the democratic clause against Maduro until or unless there is a more concrete violation of democratic norms. Whatever happens Monday, however, the newly proactive Mercosur is likely to be back in force by early 2017, when Argentina is scheduled to take the helm, beginning a succession of chairs from the center-right governments of Argentina, Brazil and Paraguay. This has the potential to kickstart the most active eighteen-month window of change in Mercosur since the bloc’s formation in the early 1990s. If it succeeds, Mercosur’s potential may be resurrected.  If it fails, the bloc’s long-term prospects will be increasingly in doubt.

The Amazon rainforest absorbs more greenhouse gases than any other tropical forest. But in Brazil, deforestation has claimed nearly a fifth of its tree cover, which threatens biodiversity and contributes to climate change.

Asmita Parshotam, Cyril Prinsloo, and Elizabeth Sidiropoulos have written a thoughtful analysis of the impact on South Africa should the UK vote to exit the European Union on June 23. Their analysis was published June 21 by the South African Institute of International Affairs (SAIIA). Given the hype about the role of China and the other BRICS (Brazil, Russia, and India) countries, the SAIIA analysis of the role of the EU and the UK in the South African economy is highly useful—and sobering. They make the fundamental point that the economic and financial relationship among the EU, the UK, and South Africa is highly significant. To select only two figures among many that the SAIIA analysts cite: in 2015 twenty-one percent of South Africa’s global exports went to the EU, and EU-South Africa trade accounted for a quarter of South Africa’s global trade. The UK alone accounts for 3.7 percent of South Africa’s global trade. They also describe the importance of EU and UK investment in South Africa. They conclude that Brexit, if it happens, will have significant and negative consequences for South Africa. Brexit, they predict, will likely lead to financial volatility, with the pound losing value. They suggest that spill over from the resulting uncertainty will likely discourage investors from pursuing emerging markets, such as South Africa. That, in turn, would strain the South African economy, already plagued by near-zero rates of growth. They also make the uncomfortable point that though Brexit would directly affect South Africa, there is literally nothing Pretoria can do to affect the outcome.

Michel Temer’s first month as interim president has not been the stuff of dreams. Even though important elements of urgently needed economic reforms have advanced, impeachment politics continue to cast a long shadow, corruption investigations continue to percolate, and Temer’s legitimacy remains under constant assault. As impeachment continues to move forward in the Senate, Dilma Rousseff and her supporters have pulled out all the stops. Actors at Cannes and other cultural events have protested the alleged coup, demonstrators have hit the streets alongside former President Lula, and perhaps looking for a wedge that might drive moderates to her side, Rousseff has suggested that if reinstated, she would call for new elections. Public support for impeachment has fallen slightly, although most Brazilians say they would rather not see Rousseff return and chances are still better than not that she will be convicted by the Senate in August. But Rousseff’s supporters know that their own long-term political fortunes depend on questioning the legitimacy of impeachment, and fence-sitting senators seem to be using the uncertainty surrounding support for impeachment to extract a pound of flesh from the interim president. Temer has built a defensive cabinet, following the time-tested recipe of appointing ministers who faithfully represent the majority legislative coalition. They are complemented by a parallel kitchen cabinet of technocrats in the Finance Ministry, the National Development Bank (BNDES), Banco do Brasil, Treasury, and state-owned enterprises. The bifurcated cabinet may help to ensure Temer’s survival, but it also helps to explain the ambiguous results of the last month: progress on fiscal reforms, such as more realistic fiscal targets and the DRU law (which reallocates tax revenues in favor of the federal government), but also important setbacks, such as a tone deaf congressional push for higher civil service wages. Most damaging, of course, is that Temer’s allies, especially within the PMDB party, are a constant embarrassment: wiretapped conversations between a defendant in the Lava Jato case and party heavyweights Renan Calheiros, José Sarney, and Romero Jucá, suggested an effort to undermine anticorruption efforts and confirmed many Brazilians’ worst suspicions about the Temer coalition. Recognizing his own tenuous support and the likely political confusion of coming months, Temer appears to be governing largely symbolically, announcing a number of high-impact measures that require little legislative support, such as reducing the number of ministries, creating a new concessions program, rebuilding regulatory agencies, and reviewing the rules on Petrobras’ participation in the pre-salt oilfields. The most important major legislative initiative announced by the government is social security reform, but debate over the specifics of the proposal is unlikely before municipal elections in October, given that Temer cannot afford a divisive battle while Congress is still fighting the impeachment battle or distracted by electoral politics. The best news in the short term is that the Temer administration is reportedly planning to back a series of accountability reforms proposed by the Ministério Público prosecutorial service, presumably to help it to recover some modicum of credibility in the anticorruption effort. Multiple corruption investigations continue to destabilize the political world. A plea bargain by former OAS executive Leo Pinheiro included allegations of campaign finance violations by Marina Silva, one of the few prominent politicians as yet untainted by the Lava Jato case. Rumors of a plea bargain by construction magnate Marcelo Odebrecht and the investigation of former President Lula’s involvement in the Petrobras scandal have Brasília abuzz. The Zelotes investigation of tax evasion seems to have moved into a new phase with the indictment of the president of one of Brazil’s largest private banks, Bradesco. The possible removal of Eduardo Cunha from the Chamber of Deputies presidency continues to generate sparks in Congress, and there is (as yet unfounded) speculation that Cunha might try to save his skin through a plea bargain of his own. Meanwhile, the impeachment trial will move into higher relief beginning next week, as the defense presents its case and President Rousseff is scheduled to testify. In sum, the coming weeks and months are likely to remain full of drama and tension, with a distracted political class focused less on governance than survival. In the background, almost as an afterthought, will be efforts to address the multiple economic challenges the country faces: heavily burdened state companies, the threatening fiscal deficit, and the critical situation of Brazil’s state governments.

The past week has brought a number of puzzling new feints and jabs in Brasília’s bloody political cage match: - Most dramatically, reputable news organizations are reporting that President Dilma Rousseff is contemplating resigning from office later this week, despite having spent much of the past year denying that she would ever countenance resignation; - After months of behind the scenes scheming to break with Rousseff and form his own government, Vice President Michel Temer announced that if he becomes president, he will not run for office again in 2018; and - Temer agreed to a laundry list of demands from the Brazilian Social Democratic Party (PSDB) as the price of their support. In the rapidly shifting political landscape of the impeachment drama, these perplexing reports only make sense when seen through the lens of legitimating, or de-legitimating, Rousseff’s removal. All parties are scrambling ahead of what looks like the certainty of a simple majority vote next week that would suspend Rousseff and install Temer as interim president. This week, the Senate special committee will vote on a report on whether or not to proceed to a trial; the Senate floor will then move to a simple majority vote on the trial, with overwhelming chances of approval. This vote would remove Rousseff for 180 days while the trial proceeds. On current trends, if the undecided senators follow the direction of their states and parties in the Chamber of Deputies, there are currently northward of fifty-eight votes for conviction, four more than the two-thirds majority needed. In the context of what looks—today—like almost certain conviction, Rousseff’s gambit appears to be to make it as hard as possible for Temer to govern with any semblance of legitimacy. Threatening to resign, and calling on Temer to resign alongside her, might be one of the few tactics available to Rousseff and capable of winning widespread public support. Whether or not she is serious about resignation, the mere suggestion that new elections would be more legitimate than impeachment has considerable political effect, especially in light of polls showing that three–fifths of Brazilians would support Temer’s removal. Although the chances of approving the necessary constitutional amendment seem low, calling for new elections is a powerful cudgel. Meanwhile, Rousseff is reported to have choreographed her departure from the Planalto Palace and to be contemplating an international tour to protest the impeachment effort, both of which might produce the desired cloud over the Temer administration. For his part, Temer is eager to ensure that the bandwagon effect skillfully constructed in the Chamber does not fall apart during the long Senate trial. The hangover that followed the spectacle of impeachment in the Chamber led to a certain buyers’ remorse: Rousseff was punished, but in the process, Brazilians got a closer look at their unpalatable Congress. The horrible spectacle of April 17’s impeachment vote, and the remarkably lopsided result (367 for, 137 against, 9 absent and abstaining) was shocking, even to those long inured to the opportunism of Brazil’s legislators. The governing coalition, many of whom had provided support to the Workers’ Party for the past thirteen years, suddenly turned its daggers on Rousseff. The spectacle was horrendous, demonstrating the opportunism of the congressional “bibles, bullets, and beef” caucuses, and the remarkable hypocrisy of legislators who are deeply implicated in corruption scandals casting votes against a president who is not thought to be personally implicated in corruption (although she faces allegations of having benefited from her party’s campaign finance violations and may soon be placed under investigation by Prosecutor General Ricardo Janot). As public revulsion with all politicians grows, Temer faces the tough task of keeping the pro-removal coalition intact, while simultaneously building a new administration from the ground up. In tackling these twin challenges, he has had to promise the world, most notably to the PSDB, which had threatened to remain outside the new government. As their price for joining Temer, the PSDB reportedly submitted a long list of demands, ranging from the sensible (a commitment to keep the Lava Jato investigation going), to the unlikely (a commitment to serious tax reform), and the downright fanciful (a commitment to political reform). Why the PSDB would ever expect Temer to fulfill those promises is, of course, moot: the list provides the PSDB with just the veneer of legitimacy they need. Joining the Temer administration is now harder to paint as golpista, and instead is portrayed as a high-minded commitment to the painful and necessary reforms needed to recover from the chaotic Rousseff years. Temer, meanwhile, brings on board an important ally that will help legitimate his very tenuous administration, providing a fig leaf of policy respectability that might otherwise be missing in an administration dominated by the unprincipled Brazilian Democratic Movement Party (PMDB). There will still be considerable drama surrounding the removal of Rousseff, and the daily news is likely to bring continued surprises and calculated misdirection. But the lens of legitimacy may provide the best analytical perspective on the news emerging from Brasília during the remainder of this turbulent year, in a political environment in which legitimacy is a scarce commodity for all of the major actors.

Earlier this week I had the chance to talk with Michael T. Derham, a partner with Novam Portam, about the impeachment of President Dilma Rousseff and Brazil’s possible paths forward. You can listen to our conversation here.

After months of suspense, President Dilma Rousseff’s impeachment looks set to proceed in a floor vote in the Chamber of Deputies on Sunday, April 17. At present, impeachment seems more likely than not: Vice President Michel Temer and his allies have overcome many of the political hurdles to impeachment by skillfully creating a bandwagon effect among legislators, in part by arguing that there is little point in continued support for the outgoing Rousseff and that now is the time to make sweet deals with the incoming Temer administration. This week’s desertions mean that of the seven largest parties in Congress, only one (the PT) still supports the president, while five are in opposition (PMDB, PSDB, PP, PSB, and DEM) and one is still officially undecided (PR). Like a long night of heavy drinking, Sunday’s impeachment vote may feel at the time like a fitting way to put an end to the Rousseff years of economic mismanagement and political turmoil. Many Brazilians may be out demonstrating on Sunday, and celebrating (or drowning their sorrows) late into the evening. But Monday morning will bring a massive hangover, and like the aftermath of many a hard night, the morning after will bring as many new puzzles as it resolves: The Senate: The immediate question is whether the Senate will break the momentum set in motion in the Chamber of Deputies. Senate President Renan Calheiros has pledged support to Rousseff, but simultaneously assured the pro-impeachment forces that he will not get in the way of a Senate trial. Can the hapless Rousseff administration successfully build a more effective defense in the Senate, working with allies like this? They will have little time to mount a defense, as the Senate could vote within fifteen days on whether or not to proceed to trial. If a simple majority agree to proceed, Rousseff would be suspended from office for 180 days, handing her presidential powers of appointment and budgetary allocation over to Temer. Once that happens, it is hard to see how Rousseff holds together her evanescent coalition or builds up a new base of support, no matter how strong her defense in the Senate trial. The Supreme Federal Tribunal (STF): Will the high court, the STF, be asked to intervene? Already, the government is reported to be considering filing suit against procedural irregularities in the impeachment process before Sunday’s vote, and one such motion has been rejected. One of Brazil’s leading constitutional scholars, Oscar Vilhena Vieira, noted that there are a variety of ways in which the STF might intervene even after a vote has taken place. The high court is on a much slower timetable than politicians, and although temporary injunctions could immediately delay the impeachment process, there is also the possibility that judicial uncertainty could linger for some time. Temer: The vice president has played a skillful game, subverting the administration from within in subtle and deeply damaging ways. On Monday, a fourteen-minute long recording was released of Temer speaking to his allies as though impeachment had already occurred. The vice president claimed it was an accidental release, but the recording was a potent signal to wavering deputies that Temer was fully committed to impeachment. Yet Temer himself is hardly guaranteed a peaceful stay in the presidential office: allegations from plea bargaining witnesses have already tarred him with accusations of malfeasance; he has only 16 percent support in a recent poll; and the electoral court (TSE) could still move to remove him for campaign finance violations. If impeachment clears the Senate, Temer will only have two years to govern, but it may be that he spends much of this time under a shadow, not least because his bedfellows in the PMDB—including Eduardo Cunha and Renan Calheiros—are even more deeply implicated in corruption investigations. “A pox on all their houses” seems to be the deepening reply from the streets, and it will require all of Temer’s considerable political talents to overcome his low credibility and questionable legitimacy. Lava Jato: The “Car Wash” investigation is suddenly looking vulnerable, amid questions of whether a PMDB administration might undermine prosecutors. The excesses committed in March by prosecutors and the judge at the center of the case led many to believe that the Lava Jato investigation was closely allied to the pro-impeachment forces. But the supreme irony is that the Temer coalition is populated by a variety of actors—not least Cunha and Calheiros—who would gain enormously if the investigation ended up, as Brazilians say, “in pizza,” going nowhere. There are a variety of ways in which the investigation could be undermined by meddling from the executive branch, and there are rumors of a deal whereby Cunha would resign as president of the Chamber of Deputies in a bid to save him from expulsion from Congress and preserve his privileged standing in the high court. The new government: Assuming Rousseff is impeached on Sunday, what kind of mandate will the new government have, and what vision will an interim (and then, presumably, permanent) President Temer seek to implement? Will Temer seek a long-term legacy as a peacemaking statesman, undertaking painful reforms that might set the country on a new path, or will he seek quick victories that might lead to his election in 2018? Temer has claimed the former, but even if this is the case, the new government will need to overcome great polarization, an angry and mobilized opposition, and an abysmal economic situation, all while meeting the demands placed on it by the broad coalition that seated Temer in the Palácio do Planalto in the first place. The impeachment process—founded on historically unprecedented punishment of fiscal maneuvers that sixteen state governors and Temer himself are also accused of—will give credence to Rousseff supporters’ charges of golpismo, placing a dark cloud over the caretaker government. Many on the Left will be troubled and possibly radicalized by the one-sided nature of the outcome, which has left in place their deeply corrupt one-time allies in the PMDB and PP. The new president will need to deal with pressing fiscal challenges, all while meeting his promises that he would renegotiate state debts, and reward supporters with new roles in the already overstretched administration. In Brazil’s crazy political moment, a much less likely but not entirely implausible scenario is that Rousseff survives Sunday’s vote, perhaps by convincing enough wavering legislators to simply absent themselves from Congress, if they can’t stomach voting in her favor. In that case, there will still be a hangover, but of a different sort, like the difference between drinking cachaça instead of rum. This hangover will include a defenestrated and visibly exhausted president, a dysfunctional coalition, the continued threat of removal via a new impeachment request or an electoral court conviction, and continued macroeconomic malaise. Either way, Monday morning’s hangover is going to be painful.

This is a guest blog post by Dr. Richard Messick, an anticorruption specialist. It is based on a CFR roundtable discussion on March 24 hosted by Matthew M. Taylor, adjunct senior fellow for Latin America Studies. One of the most promising developments in U.S. foreign relations is the all-out war on corruption being waged across Latin America. From “Operation Car Wash” in Brazil to investigations of presidential wrongdoing in Bolivia, El Salvador, Honduras, Guatemala, and Panama, across the region independent, tenacious prosecutors and investigators are out to end the massive theft of state resources that for so long has hobbled political development and throttled economic growth. The United States should be cheering for these corruption warriors, for we have much to gain if they succeed. Less corruption translates into more stable, reliable political allies; it means faster, more equitable growth and that means shared prosperity and less northward migration. Finally, less corruption in government will offer U.S. firms new opportunities. Think what the end of corruption in Brazilian public works would mean for U.S. engineering and construction companies. But given the stakes in Latin America’s corruption war, the United States should be doing more than cheering from the sidelines. It should be doing everything it can—without infringing the sovereignty or sensibilities of Latin American neighbors—to see its corruption warriors succeed. Here are five things to start with: Fund the U.S. Department of Justice’s Office of International Affairs (OIA) budget request. If a Latin American investigator learns an official he or she is investigating has a bank account in the United States, the investigator can ask the OIA to obtain the account’s records to see if corrupt money is being parked there. But the office had at latest count more than 11,000 requests pending and was receiving 3,000 plus new ones each year. Unless the investigator gets lucky and the request finds its way to the top of the pile, he or she will be long retired, and the suspect long dead, before the OIA responds. For years the U.S. Department of Justice (DOJ) has asked Congress, without success, for funds to hire more staff to speed requests. This year it requested $10 million to add 97 positions, 54 attorneys, and 43 paralegals and support staff. Isn’t it time Congress said yes to this modest request? Name a single focal point to help Latin American law enforcement agencies. When looking to the United States for assistance, Latin Americans face a bewildering number of agencies, bureaus, and offices: the Federal Bureau of Investigation (FBI), the Drug Enforcement Agency (DEA), U.S. Immigration and Customs Enforcement (ICE), the U.S. Secret Service, the Financial Crimes Enforcement Network (FinCEN), the 92 U.S. Attorney’s offices, and these are just at the federal level. There are hundreds, if not thousands, at the state and local level. It takes experienced U.S. law enforcement officers years to figure out where to go for information. Why not make it easy for Latin Americans who don’t have years to decipher the complex and bewildering U.S. system? Create one office, staffed with personnel fluent in Spanish and Portuguese from across the federal and state governments who can serve as a “one-stop shop” for Latin American police, prosecutors, and judges needing information from their U.S. counterparts. Create an interagency task force to work with Latin American counterparts to target corrupt Latin American officials. Whenever a corrupt Latin American official uses the proceeds of a bribe to buy an apartment in Miami or open a bank account in Houston or Los Angeles, he or she has violated U.S. antimoney laundering laws. Depending upon whether they traveled in the United States, used U.S. mail services, or U.S. email servers, they may have also committed wire fraud or violated the laws forbidding travel across state lines in furtherance of fraud or corruption. A task force of U.S. personnel drawn from ICE’s Foreign Corruption Investigations Group, DOJ’s Foreign Corrupt Practices Act (FCPA) unit, the U.S. Attorney’s offices in Miami, the FBI’s international corruption squads, DOJ’s kleptocracy unit, and other relevant agencies should be available to work with Latin American counterparts on possible violations of U.S. law committed by corrupt Latin American officials. Greater intelligence sharing and joint investigations in association with Latin American anticorruption agencies and prosecutors would enhance both regional and domestic efforts against corruption and ill-gotten gains. Enact the Incorporation Transparency and Law Enforcement Assistance Act. Introduced by Congresswoman Carolyn Maloney and colleagues in the House of Representatives and Senator Sheldon Whitehouse and colleagues in the Senate, this would end the ability of corrupt officials, as well as drug traffickers and other unsavory individuals, to keep investigators from learning how much money they have and where it came from. Under current law, a corrupt Latin American official can open a bank account in the United States in the name of a Delaware limited liability company. He or she can own the company anonymously, that is, without anyone, in Delaware or elsewhere, knowing his or her identity. If Global Witness’s exposé of U.S. lawyers counseling an investigator posing as the agent of a corrupt minister weren’t enough to persuade lawmakers of the need for the legislation, the April 3 revelations of massive abuses in the use of anonymous shell companies by the International Center for Investigative Journalism (ICIJ) should lay to rest any lingering doubts about how critical this legislation is to the fight against not only corruption but terrorism and organized crime as well. End secrecy in the U.S. real estate market. Thanks to gaps in U.S. antimoney laundering regulations, corrupt officials in Latin America (and elsewhere) can use the proceeds of corruption to secretly buy property in the United States. Requiring real estate agents, title insurance companies, and others involved in the purchase and sale of condominiums, houses, and other U.S. real estate to comply with the antimoney laundering rules will expose attempts by corrupt officials to create a “safe haven” for when they leave office. The U.S. Department of the Treasury took a small, first step in this direction in January when it issued an emergency order (in response to a New York Times’ exposé) requiring title insurance companies in Manhattan and Miami-Dade Country to apply antimoney laundering rules to all real estate purchases over $1 million in cash for the next six months. The rule should be made permanent and extended to all regions. Since 2002 the Treasury Department has given real estate brokers a “temporary” exemption from the antimoney laundering rules while it studies their situation. The time for study is over. The Treasury Department should follow the European Union’s lead and require brokers to comply with the antimoney laundering rules. The burden of ridding Latin America of the corruption that infests so many of its governments remains first and foremost the responsibility of its governments. But the United States has much to gain if they succeed, and there is much it can do to help them. The steps above are a modest beginning; it should move on them expeditiously. This piece also appeared on the Global Anticorruption Blog.

This is a guest blog post by Dr. Richard Messick, an anticorruption specialist. It is based on a talk he gave at a CFR roundtable on March 24 hosted by Matthew M. Taylor, adjunct senior fellow for Latin America Studies. One of the most promising developments in U.S. foreign relations is the all-out war on corruption being waged across Latin America. From “Operation Car Wash” in Brazil to investigations of presidential wrongdoing in Bolivia, El Salvador, Honduras, Guatemala, and Panama, across the region independent, tenacious prosecutors and investigators are out to end the massive theft of state resources that for so long has hobbled political development and throttled economic growth. The United States should be cheering for these corruption warriors, for we have much to gain if they succeed. Less corruption translates into more stable, reliable political allies; it means faster, more equitable growth and that means shared prosperity and less northward migration. Finally, less corruption in government will offer U.S. firms new opportunities. Think what the end of corruption in Brazilian public works would mean for U.S. engineering and construction companies. But given the stakes in Latin America’s corruption war, the United States should be doing more than cheering from the sidelines. It should be doing everything it can—without infringing the sovereignty or sensibilities of Latin American neighbors—to see its corruption warriors succeed. Here are five things to start with: Fund the U.S. Department of Justice’s Office of International Affairs (OIA) budget request. If a Latin American investigator learns an official he or she is investigating has a bank account in the United States, the investigator can ask the OIA to obtain the account’s records to see if corrupt money is being parked there. But the office had at latest count more than 11,000 requests pending and was receiving 3,000 plus new ones each year. Unless the investigator gets lucky and the request finds its way to the top of the pile, he or she will be long retired, and the suspect long dead, before the OIA responds. For years the U.S. Department of Justice (DOJ) has asked Congress, without success, for funds to hire more staff to speed requests. This year it has requested $10 millionto add 97 positions, 54 attorneys, and 43 paralegals and support staff. Isn’t it time Congress said yes to this modest request? Name a single focal point to help Latin American law enforcement agencies. When looking to the United States for assistance, Latin Americans face a bewildering number of agencies, bureaus, and offices: the Federal Bureau of Investigation (FBI), the Drug Enforcement Agency (DEA), U.S. Immigration and Customs Enforcement (ICE), the U.S. Secret Service, the Financial Crimes Enforcement Network (FinCEN), the 92 U.S. Attorney’s offices, and these are just at the federal level. There are hundreds, if not thousands, at the state and local level. It takes experienced U.S. law enforcement officers years to figure out where to go for information. Why not make it easy for Latin Americans who don’t have years to decipher the complex and bewildering U.S. system? Create one office, staffed with personnel fluent in Spanish and Portuguese from across the federal and state governments who can serve as a “one-stop shop” for Latin American police, prosecutors, and judges needing information from their U.S. counterparts. Create an interagency task force to work with Latin American counterparts to target corrupt Latin American officials. Whenever a corrupt Latin American official uses the proceeds of a bribe to buy an apartment in Miami or open a bank account in Houston or Los Angeles, he or she has violated U.S. antimoney laundering laws. Depending upon whether they traveled in the United States, used U.S. mail services, or U.S. email servers, they may have also committed wire fraud or violated the laws forbidding travel across state lines in furtherance of fraud or corruption. A task force of U.S. personnel drawn from ICE’s Foreign Corruption Investigations Group, DOJ’s Foreign Corrupt Practices Act (FCPA) unit, the U.S. Attorney’s offices in Miami, the FBI’s international corruption squads, DOJ’s kleptocracy unit, and other relevant agencies should be available to work with Latin American counterparts on possible violations of U.S. law committed by corrupt Latin American officials. Greater intelligence sharing and joint investigations in association with Latin American anticorruption agencies and prosecutors would enhance both regional and domestic efforts against corruption and ill-gotten gains. Enact the Incorporation Transparency and Law Enforcement Assistance Act. Introduced by Congresswoman Carolyn Maloney and colleagues in the House of Representatives and Senator Sheldon Whitehouse and colleagues in the Senate, this would end the ability of corrupt officials, as well as drug traffickers and other unsavory individuals, to keep investigators from learning how much money they have and where it came from. Under current law, a corrupt Latin American official can open a bank account in the United States in the name of a Delaware limited liability company. He or she can own the company anonymously, that is, without anyone, in Delaware or elsewhere, knowing his or her identity. If Global Witness’ expose of U.S. lawyers counseling an investigator posing as the agent of a corrupt minister weren’t enough to persuade lawmakers of the need for the legislation, the April 3 revelations of massive abuses in the use of anonymous shell companies by the International Center for Investigative Journalism (ICIJ) should lay to rest any lingering doubts about how critical this legislation is to the fight against not only corruption but terrorism and organized crime as well. End secrecy in the U.S. real estate market. Thanks to gaps in U.S. antimoney laundering regulations, corrupt officials in Latin America (and elsewhere) can use the proceeds of corruption to secretly buy property in the United States. Requiring real estate agents, title insurance companies, and others involved in the purchase and sale of condominiums, houses, and other U.S. real estate to comply with the antimoney laundering rules will expose attempts by corrupt officials to create a “safe haven” for when they leave office. The U.S. Department of the Treasury took a small, first step in this direction in January when it issued an emergency order (in response to a New York Times’ expose) requiring title insurance companies in Manhattan and Miami-Dade Country to apply antimoney laundering rules to all real estate purchases over $1 million in cash for the next six months. The rule should be made permanent and extended to all regions. Since 2002 the Treasury Department has given real estate brokers a “temporary” exemption from the antimoney laundering rules while it studies their situation. The time for study is over. The Treasury Department should follow the European Union’s lead and require brokers to comply with the antimoney laundering rules. The burden of ridding Latin America of the corruption that infests so many of its governments remains first and foremost the responsibility of its governments. But the United States has much to gain if they succeed, and there is much it can do to help them. The steps above are a modest beginning; it should move on them expeditiously. This piece also appeared on the Global Anticorruption Blog.