Brazil

The Brazilian Federal Revenue Secretariat (SRF) has some good news to cheer: a big haul of fines and taxes from assets held offshore by Brazilians. The deadline for filing under Brazil’s equivalent of the Offshore Voluntary Disclosure Program ends October 31, but news reports suggest that more than US$12.6 billion in foreign bank accounts held by more than 25,000 Brazilians have already been disclosed, leading to fines and taxes of nearly US$4 billion on money ferreted away in accounts that had previously been inaccessible to tax officials. More than a third of that money has been declared in the last week alone, suggesting that by the end of the month, the absolute volume of fines and taxes may be near the amounts collected under a sister program in the United States, whereby 45,000 taxpayers contributed US$6.5 billion to the U.S. Treasury. The voluntary disclosure program is an important part of a broader push to improve government control over Brazilians’ assets abroad. Brazil in recent years has signed a number of agreements governing the bilateral exchange of banking information, and just this month came news that the Swiss high court had upheld efforts to share banking information on more than 1,000 Swiss bank accounts believed to be held by Brazilian politicians and former Petrobras executives. In the past two decades, Brazilian regulators have also closed various glaring loopholes in domestic regulations covering foreign exchange transactions. The SRF has gained personnel and seen its budget increased, enabling it to push for and enforce tougher laws, often in cooperation with the Ministério Público, Brazil’s quasi-autonomous prosecutorial service. Together, these improvements seem to be bearing fruit. Not coincidentally, the massive Car Wash operation began as a money laundering investigation, and revenue agents have played a significant role in the operation. The recent Panama Papers leaks, listing more than 1,300 offshore accounts held by 400 Brazilians, will add fuel to this effort. The speed with which the voluntary disclosure program has come down the pike in Brazil has been impressive. The U.S. Congress approved the Foreign Account Tax Compliance Act (FATCA) in 2010, and the U.S. government launched its program in July 2014. Prodded along by the global implementation of FATCA and associated agreements on the automatic exchange of financial information, the Brazilian Congress approved its Repatriation Law in December 2015 (in the midst of the political crisis that would eventually lead to President Dilma Rousseff’s impeachment), regulations were finalized by March 2016, and now the program is nearing completion. Although they may seem small as a share of the US$3 trillion economy, the taxes and fines collected under the program are extremely significant. Global Financial Integrity estimates that each year between 2010 and 2012, on average Brazilians illicitly transferred more than $33 billion to accounts abroad. While the accounts disclosed under the repatriation program may not always be reflective of corruption or tax evasion, the fungibility of money and the multiple ways it can find its way from illicit to licit channels suggest that it would be ingenuous to assume the assets were all aboveboard. More important, by bringing even ostensibly licit funds into tax compliance, it will be increasingly difficult for major launderers or the corrupt to hide their ill-gotten gains in the murky backwaters of international finance. One reason for the apparent speed and success of the program is the prospect of heavy penalties that will hit Brazilians who fail to register. Under the program, participants agree to a 15 percent tax rate and a one-time 15 percent fine on previously undeclared assets. But in November, the tax rate will rise to 27.5 percent and the fine to as much as 225 percent, along with the increasingly credible and frightening prospect of criminal prosecution. Further, bilateral agreements on bank information sharing suggest the dragnet is closing, and it will be much harder to hide funds in future. SRF officials have made a concerted effort to drum home the costs of non-adherence to the program, noting that as of January 1, 2017, they will have in place agreements with 103 countries for automatic tax revenue information sharing, as well as bilateral agreements on investigation with 34 countries. Another recent report detailed the SRF’s analysis of nearly 1,000 high net-worth Brazilians with bank accounts in the United States, and authorities’ suspicions that nearly two-thirds of these were evading Brazilian taxes. While the admirable recent gains in Brazilian anticorruption efforts should be credited entirely to Brazilian authorities and their supporters in civil society, their recent successes will be helped along immensely by FATCA and the attendant effort to share financial data across borders. As one leading Brazilian tax official boasted, “the world is beginning to have no boundaries for the [SRF].” No longer will investigators lose track of the trail at the water’s edge; indeed, the information made available under the program should help to invigorate the increasingly bold efforts to curb massive corruption at the intersection of Brazilian politics and business.

This week’s arrest of Eduardo Cunha—the former president of Brazil’s Chamber of Deputies, a leading member of President Michel Temer’s PMDB party, and a principal architect of Dilma Rousseff’s impeachment—is a major turning point for the massive Car Wash corruption investigation that has mesmerized Brazil for much of the past two years. Cunha’s arrest and imprisonment offers an important and overdue corrective to the narrative that the investigation is a political witch hunt aimed at President Lula and his Workers’ Party (PT). The arrest is also in many ways a rebuke to Brazil’s high court, the Supreme Federal Tribunal (STF), which failed to move against Cunha while he had special standing in the STF by virtue of being an elected federal official. Calls to reduce the practical impunity of elected officials in the timid and slow high court may well be strengthened by the increasing evidence of a two-track justice system that privileges the powerful. Finally, the arrest will have huge political aftershocks in Brasília, since Cunha will be under heavy pressure to reach a plea bargain that would allow him to reduce his jail time. While such deals typically take months to negotiate, even the prospect of a deal is likely to drive many of Cunha’s former party colleagues and allies to distraction.

In my piece published in the November/December 2016 issue of Foreign Affairs, I lay out the economic and political characteristics of populism, analyze why it is receding in Latin America today, and describe what a next wave might look like. I also argue that Latin America’s historical experience with populism provides some bracing warnings to other countries now flirting with such politics. You can read the first three paragraphs of the article below: On the morning of October 17, 1945, thousands of protesters in Buenos Aires marched on Argentina’s main executive building, the Casa Rosada, to demand the return of Vice President Juan Perón, who had been forced to resign a week earlier. The day was hot, and many of the men took off their jackets and even their shirts. This earned them the mocking title of los descamisados—“the shirtless.” Perón’s supporters promptly reclaimed the insult and turned it into a badge of honor. When Perón ran for president in the 1946 election as an unabashed populist, he toured the country in a train he named El Descamisado after his followers. The descamisados, and those like them, were integral to the populism that dominated Latin American politics from the 1930s until recently. Starting with Brazilian President Getúlio Vargas, who first assumed power in 1930, and leading all the way up to Bolivian President Evo Morales, who entered office in 2006, Latin American leaders have repeatedly harnessed the power of the once excluded masses by railing against the establishment and promising a more prosperous future for their followers. Today, however, even as populists are surging throughout the rest of the world, such voices have fallen conspicuously silent in Latin America. The region’s grandiose strongmen, with their cults of personality, have largely faded away. Recent elections have ushered in middle-of-the-road leaders, including one former investment banker, promising fiscal conservatism, free trade, and legal due process. In a striking role reversal, it is now Latin America that is watching, aghast, as populists elsewhere threaten to disrupt the world’s more mature economies. You can read the entire piece here.

Last month, I had the pleasure of joining Jim Zirin on “Conversations in the Digital Age” to discuss the U.S.-Mexico relationship, the presidential impeachment in Brazil, Colombia’s peace deal, Argentina’s return to global markets, and the turmoil in Venezuela. You can watch the interview here.

Robert Muggah is the research director of the Igarapé Institute, an independent think tank based in Rio de Janeiro. Nathan B. Thompson is a researcher at Igarapé. When Brazil attends the Group of 20 Summit in Hangzhou next week, cybersecurity will be on the top of everyone’s mind. This includes President Obama who received a letter from U.S. senators this week urging him raise the issue with his Chinese hosts. A spate of high profile cyberattacks against U.S. government agencies, UK phone retailers and South Korean credit card companies are a dark reminder of the real dangers of security breaches and data theft. Cyber criminals are far ahead of international and domestic law enforcement. And the costs of cybercrime to the global economy are enormous, estimated to reach $2.1 trillion a year by 2019. Brazil also has reason to be nervous. The country is at the epicenter of a global cybercrime wave. It ranks second in the world for online banking fraud and financial malware. And the problem appears to be worsening. The number and intensity of cyberattacks has risen significantly over the past few years. A 2012 study estimated the annual costs of cybercrime at R$16 billion (US$4.9 billion). An electronic banking payment scheme netted hackers over R$8 billion (US$2 billion) alone over a two-year period. There is a ready supply of cybercrime tools and skills on the dark web. One of the reasons Brazilians are so vulnerable is because the country was an early adopter of online banking. The latest data indicate that more than 54 percent of all banking transactions are made using internet-connected devices. Brazil’s online migration also spawned a generation of cyber criminals with a demonstrated ability to wreak digital havoc. In 2015, more than half of the cyberattacks reported to Brazilian authorities were of Brazilian origin, though it is an issue seldomly discussed in local media. Brazil has taken a number of steps to fight the problem. The Ministry of Justice and the Federal Police have ramped-up the investigation and prosecution of online crimes such as child pornography. Brazil’s experience with mega-events has steadily expanded the role of the armed forces, with the Ministry of Defense’s cyber defense center (CDCiber) gaining more responsibilities. Some civil liberties advocates fear that the pendulum may have swung too far in favor of a securitization of cyberspace. An open question is whether Brazil’s approach to addressing cybercrime is the right one. The massive outlay of digital security and surveillance infrastructure for the 2014 World Cup and 2016 Olympic Games is a case in point. If these platforms are left running indefinitely without adequate oversight by civilian authorities, there is real potential for abuse. Justice Minister Alexandre de Moraes has said explicitly that Brazil intends to maintain the surveillance infrastructure now in place, though he has offered few details about checks and balances to guarantee that civil liberties are protected. There are also signs that Brazil’s Congress is ratcheting up its surveillance of cyberspace. As a result of a congressional commission on cybercrime (CPICIBER), there are a number of bills that purport to increase penalties for cyber criminality, but may in fact curb basic digital freedoms. For example, one bill proposes that social media content that impugns someone’s honor must be removed within 48 hours. CPICIBER’s legislative proposals were widely condemned and several digital rights groups issued their own set of recommendations and guidance in addition to sending an open letter to Brazil’s Congress—efforts which resulted in some modest modifications to the commission’s proposals. Brazil should consider taking a closer look at other G20 countries for effective ways to address cybercrime. Germany, for example, recently enacted legislation requiring financial institutions to report when they are a victim of a data breach or other cyber-attack, imposing penalties for non-compliance. The European Parliament recently issued a similar directive, which EU countries must now implement into domestic legislation. The Brazilian government should consider adopting similar reporting mechanisms. Brazil could also consider joining the other 49 countries that have signed and ratified the Budapest Convention, a framework that facilitates international cooperation on fighting cybercrime while protecting human rights and due process. While Brazil has complained about not being involved in its original drafting, it is the only internationally-binding instrument to address cybercrime. At a minimum, the government needs to require greater transparency of service providers and financial institutions to ensure a more data-driven approach to cybersecurity. Brazil has good reason to work with G20 partners to prevent cybercrime. After all, the majority of its citizens have been victimized by digital criminals operating abroad and, for the most part, at home. But the answer is not more intrusive surveillance. Rather, the focus must be on strengthening federal policing capabilities, developing sound legislation and improving Brazilians’ digital hygiene. If Brazil continues on its present course, there is a real danger that the proposed cure will be worse than the disease.

After nearly nine months, Brazil’s impeachment drama is over. The process ended on a curiously subdued note: the Senate’s questioning of Dilma Rousseff on Monday was a staid affair, and Tuesday’s speeches were calculatedly calm and measured. By the time the Senate began to vote today, Rousseff’s removal was a foregone conclusion. But the civilized, even boring, proceedings obscured an important objective of this week’s debates: shaping the historical narrative that will guide each side’s supporters over Michel Temer administration’s next twenty-eight months in office. On the Senate floor, Rousseff and her defenders stuck tenaciously and defiantly to script: the fiscal pretext for impeachment was weak and no previous president had been held responsible for the same errors; the economic crisis was not her doing but the result of international circumstances she could not control; and she herself never personally benefitted from the corruption that took place during her presidency. Rousseff was impressive, showing all of the qualities that led President Lula to choose her as his successor: attention to detail, intense message discipline, and an unwillingness to cede any ground. Most important to the Workers’ Party (PT) narrative, she returned over and over to the theme that when they lost at the polls in 2014, “sectors of the economic and political elite” began conspiring against her. By her account, the impeachment battle had its origins in Rousseff’s principled refusal to bargain with the former Chamber of Deputies President Eduardo Cunha, who is deeply enmeshed in his own bribery scandal but has yet to be removed by Congress. Rousseff was supported from the wings by twenty former ministers, her predecessor and mentor Lula, a number of PT bigwigs, and the starpower of crooner Chico Buarque. The opposition, meanwhile, hammered home the depth of the economic, political, and moral crises Brazil faces. They honed in on the narrow text of the impeachment petition—premised on arcane minutia about unauthorized spending and improper loans to the government by state banks—but also sought to show that the transgressions for which she could have been impeached were much broader. They repeatedly reminded Rousseff of the bait-and-switch between the lofty promises made during her 2014 campaign and the austere policies that were actually implemented during her second term, made grand statements about the usurpation of legislative functions by her administration, and noted that almost all of the costs of her fiscal maneuvers were borne by taxpayers. They repeated the now well-trod line that if Rousseff was not complacent with corruption she must be incompetent, and noted that while Rousseff was not personally enriched by corruption, her presidential campaign was financed by ill-gotten means. Most important to their long-time narrative about the legitimacy of impeachment, they noted that all three branches of government were represented at the Senate trial, and that by her very presence, Rousseff was acknowledging the legitimacy of the impeachment process. What sort of golpe is this, they asked, in which the defendant has the right to self-defense? They were supported from the wings by a handful of youthful leaders from the street protest movement. Whatever the arguments, what best explains the impeachment vote is exhaustion. It has been a turbulent three years since the first street protests erupted in July 2013, and many Brazilians simply want the political crisis to go away. In a poll published by Istoé magazine over the weekend, nearly two-thirds of Brazilians said that if they were senators, they would vote to see Rousseff go. That doesn’t mean that Temer is beloved: when asked who should govern Brazil, more than a third (35 percent) of those polled spontaneously responded that they would choose neither Temer nor Dilma. There is also a solid core of opposition, with 30 percent opining against Dilma’s impeachment. But by and large, Dilma had lost much of the public support she had when elected two years ago, and the Petrobras scandal appears to have greatly diminished her mentor Lula, whose ratings continue to decline as police and prosecutors close in on his family’s questionable dealings. What comes next for Brazil? This blog has repeatedly noted the importance of legitimacy to Brazil’s impeachment process. The PT narrative of golpismo by neoliberal forces on the right was artfully deployed by Rousseff and is likely to be a core message of the PT in coming years. This drumbeat will keep Temer and his coalition on the defensive, while turning attention away from the Rousseff administration’s own failures and the PT’s involvement in the corruption scandal. Temer has been playing a complicated game since he became interim president in May. On the one hand, he has been trying to keep the rowdy impeachment coalition in check, promising whatever he could offer to wavering supporters. On the other, he and Finance Minister Henrique Meirelles have been trying to convince investors that the economic team has a coherent plan for recovery that will come together when the political stars align. These dueling priorities were especially evident in the renegotiation of state debts, where investors’ cautious support for an emergency renegotiation lapsed into disappointment as Temer made repeated concessions to state governors in exchange for political support. Temer’s Janus-faced approach may also have reached a natural limit: the PSDB and the DEM parties in late August threatened to withhold support if Temer moved forward on planned wage increases for the judicial branch, which might have earned him short-term political support from some sectors, but would have cascading effects throughout the civil service and a brutal impact on the rapidly deteriorating fiscal results. Now that he is confirmed in the presidency, Temer will be under pressure to commit to the fiscal reforms that were impossible while he was a temporary stand-in. The challenge is significant, in at least three regards. First, the left’s criticism of the new government’s “neoliberalism” will limit what Temer can realistically achieve on the fiscal front. Temer seems to be aiming for a constitutional cap on spending that will promise hard choices about spending in the future while providing his administration some credibility gains in the present. But even this middle of the road solution will be politically difficult, requiring changes to constitutionally guaranteed health and education budgets. The second major reform would be to social security, reducing special privileges for some professions and raising the minimum retirement age, in an effort to cut one of the largest areas of government expenditure and expand on reforms undertaken by Presidents Fernando Henrique Cardoso and Lula. So far, the details of these reform proposals are nebulous, but they are likely to become more concrete by November, and the opposition will pillory Temer for even the slightest proposed change in social spending. The second major challenge is that the timetable for reform is remarkably short. All political oxygen between now and the end of October will be sucked up by the 2016 municipal elections, and then again during much of 2018 by the presidential election. These two contests will be the most wide-open elections of the post-1985 democratic era, in light of new restrictions on corporate contributions, the effects of the corruption scandal, the weakening of the two most important parties in the Brazilian party system (the PT and the PSDB), and the widespread “throw the bums out” sentiment expressed by voters. The field for the presidential race will begin to form by late 2017. As a consequence, the reform calendar is essentially restricted to fourteen months between November 2016 and late 2017. Considering that many less controversial constitutional reforms have taken much longer, and that so many different political actors will be angling for advantage as they look ahead to 2018, Temer will have a tough slog. The third major constraint is the ongoing Lava Jato investigation, and political scandals that keep popping up around it. It is hard to avoid the conclusion that Temer’s coalition is held together at its core by a pragmatic and ideologically malleable center—“Centrão”—that is unsympathetic to the Lava Jato investigation and the increasing power of prosecutors and judges. I wrote recently about recent moves to dilute accountability reforms in Brazil, with support from actors across the political spectrum. These pressures seem likely to build, if only because so many different political forces are under threat. Temer has already been forced by public pressure to dismiss three ministers caught up in various scandals, he himself has been mentioned by witnesses in the Lava Jato investigations, and he is still the subject of an electoral court case investigating the financing of the 2014 Rousseff-Temer ticket. Meanwhile, disgraced former Chamber President Eduardo Cunha has not gone away, and the mid-September vote on his removal will be a bellwether of how well legislators have understood the lessons of voter anger. Concurrently, the progress of a plea bargain by Marcelo Odebrecht, scion of the construction fortune, has already led to allegations of illegal donations to candidates across the political spectrum, from the PT through Temer’s PMDB to the PSDB. It is symptomatic that despite the low-legitimacy moment, Temer has not dared to suggest a political reform that might change some of the perverse incentives that have led to the campaign finance abuses that fueled the Petrobras scandal. There is little prospect that Lava Jato or any of the many other parallel investigations will go away any time soon. The upshot is that the prospects for constitutional reform under Temer are limited. As is so often the case in Brazil, much change will therefore have to be incremental and will take place within the government bureaucracy, rather than through Congress. The shifts underway at Petrobras and the Brazilian Development Bank (BNDES) are good illustrations of where things may be headed, with reprioritization of strategic objectives, asset sales, and general belt-tightening taking place far from the legislative melee. Meanwhile, Temer will be engaged in a mission to build his statesman credentials, including a trip to the G20 meeting in China today, followed by a big speech on Brazil’s independence day, September 7, and then the UN General Assembly. All along the way, expect him to be trailed by challenges to his legitimacy, in the form of celebrity protests, catcalls, and street demonstrations. A new political battle has just begun, to define Brazil’s trajectory after thirteen years of PT rule.

Harvard’s inimitable Matthew Stephenson this week published a thought-provoking blog post comparing anticorruption efforts in Asia and Latin America. Crudely summarizing Stephenson’s argument, a few years ago many looked to Asia as the gold standard in anticorruption efforts, in part because of the success of independent and effective anticorruption agencies (ACAs) in the region. But recent news of political meddling with Hong Kong’s ACA, brazen kleptocracy in Malaysia’s state development fund, and efforts to water down reform in Indonesia all suggest that the pendulum is swinging in a less positive direction. By contrast, Stephenson is optimistic about the important gains made in recent years in Latin America, including by Guatemala’s International Commission Against Impunity (CICIG), Brazil’s Car Wash investigation, elections in Peru and Argentina that highlighted voter frustration with corruption, and Mexico’s “3 out of 3” reforms. As Stephenson was careful to note, it is dangerous to generalize across regions. The on-the-ground details in each country get in the way of blanket statements about how regional anticorruption efforts are playing out. I agree, and I would go further. An additional caveat that the anticorruption community should keep in mind—even while celebrating successes—is that the effectiveness of anticorruption efforts is only really evident over the long haul. This is in large part because by their very nature, anticorruption reforms tend to generate significant pushback. Anticorruption reforms are never really complete: even independent and well-functioning institutions can decay over time, under pressure from the powerful interests that benefit from, and are empowered by, corruption. Incipient anticorruption reforms are even more vulnerable to regression. Latin America has indeed been making enormous strides forward in recent years, under a remarkable set of homegrown anticorruption campaigners, but resistance appears to be building against those who would reform the system. In recent years, a cautiously optimistic story could be told about Brazil, in light of the incremental anticorruption gains of the past generation. But recent developments suggest that these gains are under threat. Clientelistic parties and opponents of reform in both the Rousseff and Temer administrations have introduced proposals—both via decree and through legislation—that would weaken prosecutors and judges and considerably undermine the transparency of court cases, institute a tax amnesty law for repatriation of foreign holdings, restrict corporate leniency agreements, and limit plea bargaining. Although some of these proposals are framed as a seemingly reasonable effort to block the “abuse of authority,” they would have a chilling effect on the nascent—and still very uncertain—efforts to tackle corruption in Brazilian politics. Equally important, a set of necessary anticorruption reforms pushed forward by prosecutors, and placed on the legislative agenda with the support of 2 million citizens, has been stymied by congressional foot dragging. Acting president Michel Temer, who has now been mentioned twice in the Car Wash investigation, has adopted what is at best an ambiguous attitude toward anticorruption efforts, appointing a cabinet that is staffed by a number of unsavory characters, and failing to exert even an ounce of energy in support of reform. In Guatemala, the UN-backed CICIG is in danger of becoming a victim of its own success. The easy criticism is that due to the presence of an international body like CICIG, Guatemalan institutions have not been under pressure to reform themselves. This is too facile, if only because there was never any sign that Guatemala’s institutions would be able to reform on their own, and CICIG’s presence seems to have empowered Guatemala’s prosecutors. The remarkable former attorney general, Claudia Paz y Paz, moved against some of the most powerful figures in Guatemalan history, and the prosecutorial service has gained new staff, prestige, and resources. Yet the genocide case against former president Efraín Ríos Montt was overturned by the high court, and there are fears that the court might be similarly timid in addressing corruption charges against former President Pérez Molina and his vice president. Meanwhile, President Jimmy Morales has been slow to build on anticorruption successes, and in fact, the early days of his administration have been marked by a surprising willingness to compromise with questionable elites. One of the few barriers to regression has been the mobilization of the Guatemalan public, which has encouraged the appointment of a few reformers in the Morales administration, and which will be essential to ensuring the success of a planned judicial reform package to be drafted later this year. In Mexico, the “3 out of 3” reforms were a huge deal, not least because for months they seemed to be destined for the trash bin, after Institutional Revolutionary Party (PRI) legislators delayed their consideration and then attempted to sink them with a poison pill. As my colleague Shannon O’Neil pointed out, voter concern with corruption was one of the driving forces behind the PRI’s historic loss in the June gubernatorial elections, and the effort to move forward on the reforms may have been the PRI’s attempt to get out ahead of the corruption issue before the 2018 presidential elections. Yet just this week, news has emerged of the Mexican first lady’s luxurious vacation digs in Key Biscayne, which it now turns out are owned by a company that will be bidding for Mexico’s port business. This after another contractor sold the first lady her $7 million Mexico City mansion in a controversial transaction two years ago. Old habits die hard, even though public asset disclosure requirements in “3 out of 3” were aimed at curbing exactly this type of abuse. There is no reason to be a sourpuss. Latin Americans should be justifiably proud of the remarkable gains of recent years, and Stephenson is right to point out their relative success compared to the current backsliding in Asia. But the common thread running through the recent Brazilian, Guatemalan, and Mexican country experiences is the importance of citizen engagement: without public pressure, politicians tend to revert to old practices. Before he became one of the most famous judges of all time, Sérgio Moro wrote an academic paper on the Mani Pulite investigations of corruption in Italy, which noted that “judicial action against corruption is only effective with democratic support.” He concluded this after observing that when public attention turned away from the corruption investigations in Italy, politicians did all they could to make prosecutors’ lives more difficult: they strengthened evidentiary protections, decriminalized accounting fraud, reintroduced parliamentary immunity, and reduced statutes of limitations in corruption cases. It is probably unrealistic to expect Latin American publics to remain engaged on anticorruption: at some point, there may just be too much bad news, or the news may be too destabilizing to everyday governance, or the corruption effort will be seen as a partisan crusade, or the news that there is corruption in high places will no longer galvanize a weary public. Efforts to eradicate corruption will always be a game of inches, and the politicians who would like a return to the old status quo in Latin America have only just begun to fight.

Harvard’s inimitable Matthew Stephenson this week published a thought-provoking blog post comparing anticorruption efforts in Asia and Latin America. Crudely summarizing Stephenson’s argument, a few years ago many looked to Asia as the gold standard in anticorruption efforts, in part because of the success of independent and effective anticorruption agencies (ACAs) in the region. But recent news of political meddling with Hong Kong’s ACA, brazen kleptocracy in Malaysia’s state development fund, and efforts to water down reform in Indonesia all suggest that the pendulum is swinging in a less positive direction. By contrast, Stephenson is optimistic about the important gains made in recent years in Latin America, including by Guatemala’s International Commission Against Impunity (CICIG), Brazil’s Car Wash investigation, elections in Peru and Argentina that highlighted voter frustration with corruption, and Mexico’s “3 out of 3” reforms. As Stephenson was careful to note, it is dangerous to generalize across regions. The on-the-ground details in each country get in the way of blanket statements about how regional anticorruption efforts are playing out. I agree, and I would go further. An additional caveat that the anticorruption community should keep in mind—even while celebrating successes—is that the effectiveness of anticorruption efforts is only really evident over the long haul. This is in large part because by their very nature, anticorruption reforms tend to generate significant pushback. Anticorruption reforms are never really complete: even independent and well-functioning institutions can decay over time, under pressure from the powerful interests that benefit from, and are empowered by, corruption. Incipient anticorruption reforms are even more vulnerable to regression. Latin America has indeed been making enormous strides forward in recent years, under a remarkable set of homegrown anticorruption campaigners, but resistance appears to be building against those who would reform the system. In recent years, a cautiously optimistic story could be told about Brazil, in light of the incremental anticorruption gains of the past generation. But recent developments suggest that these gains are under threat. Clientelistic parties and opponents of reform in both the Rousseff and Temer administrations have introduced proposals—both via decree and through legislation—that would weaken prosecutors and judges and considerably undermine the transparency of court cases, institute a tax amnesty law for repatriation of foreign holdings, restrict corporate leniency agreements, and limit plea bargaining. Although some of these proposals are framed as a seemingly reasonable effort to block the “abuse of authority,” they would have a chilling effect on the nascent—and still very uncertain—efforts to tackle corruption in Brazilian politics. Equally important, a set of necessary anticorruption reforms pushed forward by prosecutors, and placed on the legislative agenda with the support of 2 million citizens, has been stymied by congressional foot dragging. Acting president Michel Temer, who has now been mentioned twice in the Car Wash investigation, has adopted what is at best an ambiguous attitude toward anticorruption efforts, appointing a cabinet that is staffed by a number of unsavory characters, and failing to exert even an ounce of energy in support of reform. In Guatemala, the UN-backed CICIG is in danger of becoming a victim of its own success. The easy criticism is that due to the presence of an international body like CICIG, Guatemalan institutions have not been under pressure to reform themselves. This is too facile, if only because there was never any sign that Guatemala’s institutions would be able to reform on their own, and CICIG’s presence seems to have empowered Guatemala’s prosecutors. The remarkable former attorney general, Claudia Paz y Paz, moved against some of the most powerful figures in Guatemalan history, and the prosecutorial service has gained new staff, prestige, and resources. Yet the genocide case against former president Efraín Ríos Montt was overturned by the high court, and there are fears that the court might be similarly timid in addressing corruption charges against former President Pérez Molina and his vice president. Meanwhile, President Jimmy Morales has been slow to build on anticorruption successes, and in fact, the early days of his administration have been marked by a surprising willingness to compromise with questionable elites. One of the few barriers to regression has been the mobilization of the Guatemalan public, which has encouraged the appointment of a few reformers in the Morales administration, and which will be essential to ensuring the success of a planned judicial reform package to be drafted later this year. In Mexico, the “3 out of 3” reforms were a huge deal, not least because for months they seemed to be destined for the trash bin, after Institutional Revolutionary Party (PRI) legislators delayed their consideration and then attempted to sink them with a poison pill. As my colleague Shannon O’Neil pointed out, voter concern with corruption was one of the driving forces behind the PRI’s historic loss in the June gubernatorial elections, and the effort to move forward on the reforms may have been the PRI’s attempt to get out ahead of the corruption issue before the 2018 presidential elections. Yet just this week, news has emerged of the Mexican first lady’s luxurious vacation digs in Key Biscayne, which it now turns out are owned by a company that will be bidding for Mexico’s port business. This after another contractor sold the first lady her $7 million Mexico City mansion in a controversial transaction two years ago. Old habits die hard, even though public asset disclosure requirements in “3 out of 3” were aimed at curbing exactly this type of abuse. There is no reason to be a sourpuss. Latin Americans should be justifiably proud of the remarkable gains of recent years, and Stephenson is right to point out their relative success compared to the current backsliding in Asia. But the common thread running through the recent Brazilian, Guatemalan, and Mexican country experiences is the importance of citizen engagement: without public pressure, politicians tend to revert to old practices. Before he became one of the most famous judges of all time, Sérgio Moro wrote an academic paper on the Mani Pulite investigations of corruption in Italy, which noted that “judicial action against corruption is only effective with democratic support.” He concluded this after observing that when public attention turned away from the corruption investigations in Italy, politicians did all they could to make prosecutors’ lives more difficult: they strengthened evidentiary protections, decriminalized accounting fraud, reintroduced parliamentary immunity, and reduced statutes of limitations in corruption cases. It is probably unrealistic to expect Latin American publics to remain engaged on anticorruption: at some point, there may just be too much bad news, or the news may be too destabilizing to everyday governance, or the corruption effort will be seen as a partisan crusade, or the news that there is corruption in high places will no longer galvanize a weary public. Efforts to eradicate corruption will always be a game of inches, and the politicians who would like a return to the old status quo in Latin America have only just begun to fight.

The coming month will be a stressful one for Brazilians. The Olympic opening ceremony on August 5 may have two rival presidents in attendance, killer mosquitoes, pesky media, and now, the potential for terrorism. Most Brazilians had long hoped the games would be a chaotic but happy mess, like the 2014 World Cup, and few anticipated an embarrassment. But sentiment has shifted with the arrest of a dozen alleged homegrown extremists. Terrorism can be added to the long litany of potential problems that have led Rio de Janeiro Mayor Eduardo Paes to note that “contingencies are always possible,” and that the Olympics have been a “lost opportunity” for Brazil. With the Australians refusing to move into their “uninhabitable” Olympic quarters, male U.S. golfers avoiding Rio de Janeiro on Zika concerns, and athletes complaining about astounding pollution, the games are already a net public relations loss. The only winners so far seem to be the state of Rio de Janeiro, which received a last minute, R$2.9 billion emergency fund from the federal government that is enabling it to pay down overdue civil servant salaries, and the federal military personnel in the Força Nacional, whose living allowances were more than doubled when they threatened to walk away from running security for the Games. In Brasília, meanwhile, the political games will also be getting underway. August will start a day early, with demonstrations—both in favor and against the impeachment of Dilma Rousseff—planned nationwide for Sunday, July 31. Rousseff’s defense in the Special Committee on Impeachment should wrap up by the end of this week, and the Committee will likely vote during the first week of August on whether or not to proceed to trial. There is little doubt that the Committee will move to a trial, although the legitimacy of impeachment has been vociferously challenged, including by one federal prosecutor, Ivan Marx, who undermined the fiscal basis for impeachment by arguing that there were no grounds for criminal prosecution. The Senate trial, however, won’t get underway until the last week of August, which will keep Brasília on tenterhooks all month. Prosecutor Marx’s claims about the absence of criminal responsibility, and the brouhaha over Glenn Greenwald’s harsh criticism of the Folha de S. Paulo newspaper for its misleading reports on polling about the possibility of holding new elections, have seriously dented the legitimacy of pro-impeachment forces. Uncertainty will be exacerbated by politicians’ longstanding tradition of selling their support dearly, which means that Senators may play up their ambivalence about impeachment until the last minute in the hopes of convincing the interim Michel Temer administration to be generous with budget allocations, key appointments, and state debt negotiations. Street demonstrations are likely again during the third week of August, with all of the uncertainty about potential violence and strange behaviors that popular demonstrations elicit. A vote against Rousseff still seems much more likely than not, but August will play cruelly with the faint of heart. August also sets the stage for the last two years of the presidential term. Minor policy changes have been slowly wending their way through Congress in the first two months of interim President Temer’s administration, including legislation establishing Central Bank autonomy and facilitating labor outsourcing. But the major reforms that Temer has suggested, and that markets have been clamoring for—including pension and labor reform—won’t move forward until impeachment is finalized (assuming, of course, that Rousseff loses in the Senate). Even the end of the impeachment drive won’t bring major legislative movement, though, as legislators’ attention will have to turn almost immediately to the nationwide municipal elections. Free TV advertising by politicians begins August 26, and then there will be five weeks of chaotic campaigning before the first round of elections on October 2. The second round of elections, in major cities, won’t be until October 30, meaning that for all intents and purposes, the legislative calendar and major reform initiatives will be on hold until November. But does this mean that Brazil is in danger of becoming the world’s largest failed state, as one blogger recently noted in the Financial Times? Pshaw. Brazil is facing a remarkable set of challenges, undoubtedly. But it has also weathered the storms of recent years far better than could be expected from many of its emerging market peers. August will be tumultuous, and the remainder of the presidential term will be difficult, no matter which politicians survive the next month. But Brazilians have been through dark times before in the past thirty years since redemocratization, and Brazilian democracy has always emerged, resilient and improved, on the other side. The much more important long-term question is how this experience will affect Brazil’s developmentalist economic policies and its coalitional political system, which have both been shaken to their core, but remain deeply embedded. That is a subject for a future post. In the meantime, August will give us plenty to think about.

Here is a quick round-up of this week’s technology headlines and related stories you may have missed: 1. Authoritarian leaders tend to dislike the internet, unless it helps them. The failed coup in Turkey is a prime example of the complicated relationship authoritarian leaders have toward the internet. Turkish President Recep Tayyip Erdoğan has been known to chastise Twitter, tried to block internet access in 2013 during the Gezi park protests, admitted to being “increasingly against the internet every day,” and called social media "the worst menace to society." However, had it not been for the internet, it would have been much more difficult for Erdogan to rally his supporters against the coup using FaceTime on CNN Turk. Tweets from official government accounts repeated that message, mobilizing civilians to march through Istanbul and Ankara. Zeynep Tufekci at the New York Times and information security researcher The Grugq explore this contradiction further, and what it means for human rights, the notion of cyber power, and future coup plotters. 2. French government wags finger at Microsoft over Windows 10. The Commission Nationale de l’Informatique et des Libertés (CNIL), France’s data protection authority, put Microsoft on notice for collecting too much information about customers’ software and habits via its Windows 10 operating system. Software makers have always collected usage and diagnostic data to improve their products, but CNIL believes Windows 10 goes too far. For example, Windows tells Microsoft what applications a user has downloaded, doesn’t tell users about cookies being left on their machines, and the software allegedly transfers data to the United States using the invalidated Safe Harbor framework. CNIL has given Microsoft three months to fix these issues. In response, Microsoft issued a statement noting it would work with CNIL to address its concerns and amend its privacy policy to reflect that it will transfer data according to the new Privacy Shield framework, which came into effect earlier this month. 3. U.S. government proposes legislative amendments to facilitate foreign access to data held by U.S. tech companies. In February 2016, the Washington Post reported that the United States and the United Kingdom were working on an agreement to streamline the process by which UK law enforcement gains access to data about UK persons stored by tech companies--Google, Facebook, Twitter and the like--in the United States. Such a deal would require legislative changes in the United States, and late last week, the Department of Justice submitted a legislative proposal to the Senate to do just that. In a nutshell, it would allow the Attorney General to enter into executive agreements enabling other countries to go directly to a U.S. service provider to obtain content-related data about one of their nationals without seeking a warrant from a U.S. court. Lawfare’s David Kris seems pretty upbeat about the proposal, whereas Just Security’s Jennifer Granick points out a few flaws. Congress had acted quickly in the past with respect to possible data sharing arrangements with allies (e.g. the swift passage of the Judicial Redress Act to support the Privacy Shield negotiations), so it’s not completely unreasonable to think that it might do so again. 4. The GOP endorses hacking back. The Republican party adopted its platform this week, which noted that “users have a self-defense right to deal with hackers as they see fit,” effectively endorsing the notion of "hacking back." Many in the cybersecurity community are opposed to such initiatives, as it would worsen the already woeful state of online security, make it even harder for law enforcement to attribute cyber activity, and is illegal. Businesses, on the other hand, argue that they need to defend themselves and strike back at adversaries to create a deterrent effect. 5. WhatsApp temporarily blocked in Brazil, again. WhatsApp encountered more trouble in Brazil this week. A judge blocked the messaging service on Tuesday for failing to cooperate in a criminal investigation, only for the Federal Supreme Court to overturn the measure hours later. This is the third time that WhatsApp has been temporarily banned in Brazil since December. Facebook, WhatsApp’s owner, is surely unamused in contrast to Telegram, a competitor, which has seen its usage spike in the country.