Brazilian Sports Minister quits in corruption probe

Becoming the fifth cabinet minister to resign in recent months, Brazil's Sports Minister Orlando Silva has quit his post amid a row over corruption which is threatening to derail President Dilma Rousseff.

Silva resigned on 26th October after persistent accusations that he helped to siphon money off a charitable fund to promote sport for deprived children, using the embezzled money for himself and to prop up the Communist Party of Brazil, part of the ruling coalition. He has been accused of stealing up to US$23 million.

He has strongly denied the allegations and has called his principal accuser, a police officer, a delinquent. In resigning, Silva said that “I decided to leave the government so that I can defend my honour”. Although no hard evidence was laid against him, analysts say that the pressure mounting on him – including a recently opened inquiry by the Supreme Court - made it inevitable that he would stand down.

Silva was the only Communist in Rousseff's Cabinet. It is widely expected that she will allow the Communist Party to nominate his successor, despite the party's apparent involvement in many of the recent graft scandals. Rousseff's willingness to let the Communists retain control of the ministry suggests that she is not keen to engage in a bruising political fight and risk her coalition unravelling.

To date she has been unaffected by the scandals, many of which stem from appointments made under her predecessor Luiz Inacio Lula da Silva, but analysts say there are limits to the amount of resignations that can occur before she starts to look weak.

The role of Sports Minister will be critical in the upcoming years, as the country prepares to host the 2014 World Cup. The amount of money and contracts involved makes it a potentially lucrative post for a corrupt official, and Rousseff is likely to insist on a candidate with impeccable integrity.

Sources: BBC, Reuters, AFP

For more news and expert analysis about Brazil, please see Brazil Focus.

Public pressure mounting over corruption in Brazil

Across Brazil on 7th September, the country's Independence Day, thousands demonstrated against corruption in the government, which organisers called a “pandemic which threatens the credibility of institutions and the entire democratic system”.

The demonstrations come in the midst of an anti-corruption drive by President Dilma Rousseff. Since she took office in January, four ministers have resigned under pressure over corruption; several others have also been accused of graft, while dozens of lower-ranking officials have been fired or arrested.

Rousseff's campaign has begun to spin out of her control. What began as a series of low-key internal investigations to root out graft in government agencies was picked up by the Brazilian press, and has since snowballed into a nationwide campaign against what is perceived to be a widespread culture of corruption.

The drive is now threatening Rousseff's political position, as well as sparking a growing civic campaign which could leave her vulnerable before the end of her first year in office. Media reports suggest that the effects of the purge are creating speculation that Rousseff's predecessor, Luiz Inacio Lula da Silva, could return in 2014 to replace her again as president.

Since June, Agriculture Minister Wagner Rossi, Chief of Staff Antonio Palocci, Transportation Minister Alfredo Nascimento, and Defence Minister Nelson Jobim have left their posts. The president has been criticised for allowing Tourism Minister Pedro Novais to remain, despite the arrest of many of his senior aides for a scheme to embezzle ministry funds.

The cycle of accusations and counter-accusations – many made anonymously through the media - is threatening the cohesion of Rousseff's governing coalition, with some viewing it as a fratricidal campaign of personal score-settling. Many now believe that Rousseff's Worker's Party will struggle to keep the coalition intact.

The Independence Day marches represent a new phase in the anti-corruption campaign, which has previously been largely confined to the political class. It suggests that the public is no longer prepared to tolerate the patronage-based cliques which have dominated Brazilian politics for years.

The protests place Rousseff in a difficult position. Although many of the demonstrators expressed support for the president's campaign, others were angry at the entire political system – suggesting that she must maintain the momentum or face becoming a target of public anger for not going far enough.

Sources: Financial Times, BBC, UPI, Christian Science Monitor

For more news and expert analysis about Brazil, please see Brazil Focus.

Brazil: Fissures in the ruling coalition

A watershed vote on the Forest Code on 25th May in the Chamber of Deputies revealed both the internal divisions of Workers' Party (PT) and the unity of Brazilian Democratic Movement (PMDB). The result frightened the Workers' Party, which now has grounds to fear a possible alliance of PMDB with PR and PP.

Together, they amount to 179 votes, more than enough to deter any PT aspirations to succeed Marco Maia (PT-RS) as president of the Cham­ber of Deputies. PMDB covets the job and will almost certainly get it. This election will take place in 2013, and will be strategic with a view to the presidential ballot in 2014.

PT has been counting on a coalition with PDT, PCdoB and PSB, but these parties have given indications of pursuing their own goals. It remains to be seen whether President Dilma Rousseff, with or without Lula's help, will be able to bring her contentious allies into line.

For more news and expert analysis about Brazil, please see Brazil Focus.

© 2011 Menas Associates

Petrobras' domestic debt has reached R$117.9 billion

The domestic debt of Petrobras has reached R$117.9 billion, 40 per cent of it (R$46 billion) owed to official banks: BNDES, Bank of Brazil, and Caixa Econômica Federal, the national sav¬ings bank. In practice, this is as if the Treasury made loans directly to Petrobras. In any event, it shows how dependent the company is on the government's favours.

In addition to these loans, mostly by BNDES (R$36.3 billion), BNDESPar holds R$18.7 billion in Petrobras shares. It also participated in the 2010 capitalisation of Petrobras with R$24.75 billion.

All told, BNDES exposure to the company amounts to about R$80 billion. The finance director of Petrobras, Almir Barbassa, admitted on 29th March that the company will be unable to implement between 10 and 15 per cent of the US$55 billion budgeted for investments this year. Barbassa did note that this is routine.

Petrobras will need more money to finance its new projects, notably in the pre-salt sphere. The company itself mentions US$17 billion by 2014, but market analysts expect plenty more: Crédit Suisse, for instance, projects medium-term requirements of US$25 billion.

While the company's net profit in 2010 was a record US$35 billion, it was disappointing for Crédit Suisse, which expected 11 per cent more. The company's finances bear watching.

For more news and expert analysis about Brazil, please see Brazil Focus.

© 2011 Menas Associates

Russia ready to do business with Brazil

Russia's Energy Ministry has declared its interest in the Brazilian energy sector. A senior energy ministry official, Stanislav Dorzhinkevich, said that, “the Russian government is prepared to provide multifaceted support for the expansion of co-operation between Russian and Brazilian companies”.

Brazilian and Russian officials met to discuss prospective business during a gas conference in Rio de Janeiro. The Russian delegation included officials from Gazprom, Zarubezhneft, Power Machines and the Russian Energy Ministry, while the Brazilian delegation was represented by officials from the Brazilian National Agency of Petroleum and Petrobras.

Co-operation in oil production is likely to involve deep offshore oil fields, and these, “practical steps for co-operation were considered,” during the meeting, said the Russian energy ministry.

“It is not clear what advantages Russia offers for oil production. It is much more geo-strategic. Russia lends its pre-eminence and reputation to Brazil and allows it to say that it is diversifying on its own terms and own rights,” said Senior Energy Analyst at IHS Energy in Washington Andrew Neff.

Source: The Moscow Times

For more news and expert analysis about Brazil, please see Brazil Focus.