Corruption in Brazil

Corruption in Brazil exists on all levels of society from the top echelons of political power (as seen in the Mensalão Scandal and the Operation Car Wash and the Petrobras scandals) to the smallest municipalities. The Operation Car Wash shows central government members using the prerogatives of their public office for rent-seeking activities, ranging from political support to siphoning funds from state-owned corporation for personal gain. Specifically, mensalão typically referred to the practice of transferring taxpayer funds as monthly allowances to members of congress from other political parties in consideration for their support and votes in congress. Politicians used the state-owned and state-run oil company Petrobras to raise hundreds of millions of reais for political campaigns and personal enrichment. Corruption in Brazil is nothing new, although the scale and systematic implementation of political corruption over the last decade has been unprecedented.

All types of corruption exist. Clientilism, cronyism and nepotism are widespread in Brazil, and many critics even mention how some of the members of Brazilian Supreme Court are seen openly mingling with politicians. Bribery (called propina or suborno in Portuguese) is also rife in the police force and throughout the Brazilian bureaucracy. But one of the most common types of corruption in Brazil is embezzlement of public funds through overbilling, called superfaturamento in Portuguese (literally "super invoicing"). This technique allows individuals to make financial gains, and also finance political campaigns (as seen in the Petrobras scandal) and is closely linked to public contracts with private enterprises. Construction is a prime example, for example in building roads, sewage, and public buildings. It's estimated that a mind-boggling 30% of all Brazilian public funds are embezzled this way each year. Petrobras president Aldemir Bendine in 2015 estimated the companies losses to corruption scandals at $2 billion US. The company's stock nosedived, although it later begaan to recover.

The scale of corruption in Brazil is immense, but largely under-reported in the media and historically not investigated, prosecuted or punished, so it's difficult to estimate just how large the problem is. The Car Wash (Lava Jato) investigation may be changing this trend. Corruption in Brazil increases the already enormous Brazilian shadow economy which some sources estimate at 16.1% of the gross domestic product, a number that probably needs to be adjusted up considerably if corruption as such is included as part of the shadow economy.

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