Country loses up to 2,3% of GDP per year

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012


Corruption practices in Brazil subtract from the economy an amount that goes from R $ 51,4 billion, in a reasonable scenario, to R $ 84,5 billion, in the worst of situations. It means a deviation between 1,38% and 2,3% of the Gross Domestic Product (GDP). In the world ranking of “perceived corruption”, an indicator established by the NGO Transparency International with 180 countries, Brazil occupies the 73rd position, behind nations like Puerto Rico (39th), South Korea (43rd), Kuwait (54th) and Malaysia , who is in 60th place. The score, which ranges from 0 to 10 - with 0 indicating the worst level - was 2,7 in 1995 for Brazil and is now 3,8, below the 2011 global average of 4,05.

The Corruption Perception Index (ICP), released since 1995 by the NGO, is a subjective indicator, formed by the opinion of entrepreneurs and institutions. Even so, the level of perceived corruption in Brazil is consistent with the relationship observed with GDP per capita and the country's Human Development Index (HDI), values ​​based on strictly quantitative data. The cost of corruption can be understood as the amount of resources that are no longer applied in the country - whether in productive activities, health, education, technology, etc. - because it is diverted towards the payment of corrupt practices.

The index serves as a reference for institutions such as the Federation of Industries of the State of São Paulo (Fiesp). “Considering the less corrupt scenario, of R $ 51,4 billion or 1,38% of GDP, the deviation corresponds to 7,2% of the amount that Brazil invests in machinery, equipment, civil construction and infrastructure. And 26% of what you spend on education and 88% of what you invest in research and development ”, says José Ricardo Roriz Coelho, head director of Fiesp's Competitiveness and Technology Department.

Calculations made by another methodology, by the professor at the Getúlio Vargas Foundation (FGV), estimate the total amount of “dubious use” in R $ 18 billion in 2011. “The funds involve both what can be suspected and can be simply incompetence, because the Comptroller General of the Union (CGU) - from where the data are extracted - investigates whether the municipality's resource was well used; and it is sometimes misused not for bad faith, but for incompetence. It is worth remembering that in Brazil the incompetence is really great and there is no way to separate one thing from the other “, says Marcos Fernandes G. da Silva, professor and researcher at FGV.

Silva is the author of the books "Ethics and Economics", "Political Economy of Corruption in Brazil" and "Economic Formation of Brazil: A Contemporary Reinterpretation". In the books, he uses “several studies that have been updated on the same methodology”. “It is an economic engineering exercise where I try to calculate the opportunity cost of the money diverted, that is, what could be done in terms of investments in public policies, for example, with the resource that was initially diverted.”

Marcos Fernandes da Silva, professor at FGV, adds that when calculating the opportunity cost of “stolen” money, it is necessary to take into account the value that this money would have in the future. "If it were properly invested in education, in capital accumulation, it would generate returns for individuals and for society."

Public campaign funding divides opinions

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012


Is public financing of election campaigns a decisive step in the fight against corruption? The theme is controversial. All, however, agree on one point: the urgent need to make the process more transparent, in order to strengthen democracy and make it more representative. The key issue is to make it clear “who finances whom”, which is essential for voters to be able to know the links between candidates and companies. And to be able to assess how the politician positions himself when choosing between the public interest and those who paid for the campaign's expenses.

“Economic power is of fundamental importance in the financing of increasingly costly political campaigns. Even to value representative democracy, it would be interesting to advance the public financing model ”, says the president of the Ethos Institute, Jorge Abrahão. “You can't have the illusion that public funding will end corruption, even because it won't make people more honest,” says the professor at the Law Faculty of the Getúlio Vargas Foundation in Rio de Janeiro (FGV-Rio), Pedro Abramovay. "There is no evidence that the form of financing increases the chances of fighting corruption", explains the president of the Brazilian Association of Political Science and professor in the Department of Political Science at the Federal University of Minas Gerais, Leonardo Avritzer.

Public funding for campaigns has advanced in several countries since the second half of the 2010th century, as shown in the work “Corporate responsibility in the electoral process” carried out in 59 by the Ethos Institute and Transparency International. But if it was present in 2003% of democratic countries in 1995, as found by the NGO Idea International, in none of them were the expenses of the elections paid for exclusively with state resources. In Brazil, this financing has become more significant since XNUMX with the creation of the Party Fund.

It is impossible to know how much the fund actually represents in the total revenue of the parties because a significant part of the donations is still made "under the hood". “It is not possible to underestimate the economic power of large companies. They win bids, over-bill prices through additives and finance campaigns with funds from Caixa 2 ”, comments Avritzer. "In this context, public funding can increase transparency and decrease corruption." But who guarantees that companies will not continue to support their candidates? “Purely public financing does not solve the problem and can be even worse. Some candidates will continue to receive funds from companies even less transparently than they are now, ”says Tiago Bottino, professor of criminal law at FGV-Rio University of Law.

However, it is impossible to ignore the fact that private financing privileges politicians with access to the resources of the business world. “Some candidates spend a considerable part of the warrants raising funds to finance the campaigns. Some do it lawfully, others do it illegally, which opens up a huge loophole for corruption, ”explains Abramovay. In this context, public resources can make the dispute for votes more equal, in these times when electoral expenses rise to the stratosphere.

In 2008, the 11 candidates for the City of São Paulo declared to the Electoral Court that they would spend R $ 96,1 million. This year, the 12 candidates expect to spend R $ 341,5 million, 255% more.

For specialists, more important than the source of funds for electoral financing is the transparency of the process, the establishment of clear rules and the inspection to guarantee compliance. And, also, the setting of tougher penalties for those who deviate from the route, such as the ineligibility of those who are convicted by the Electoral Justice for a certain period of time. In these elections, some electoral judges are demanding candidates to adopt the principles of the Transparency Law.

Deviations make use of loopholes in the legal framework

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012


Most cases of corruption around the world involve complex legal and financial corporate structures to hide the proceeds of illegal activities. This is one of the conclusions of the “Puppet Master” report, released at the end of last year by the Stolen Assets Recovery Initiative (StAR), an association created by the World Bank and the United Nations Office on Drugs and Crime (UNODC). The document, which was made from the review of 150 cases in the database called “Grand Corruption”, with values ​​close to US $ 50 billion. Recommends that governments should take firm measures to improve the transparency of financial transactions in order to reduce the loopholes for this type of crime.

The study examines the links between large-scale corruption of public officials and the concealment of stolen goods through shell companies, foundations and funds. According to information provided by the StAR group to Valor, through the World Bank, the cases analyzed pointed out that the most common forms of corruption were bribery, bribery and the use of false consultancy contracts, as well as significant levels of embezzlement. According to the StAR group, the cases shared a number of common characteristics. The vast majority of companies have been misused to hide the money trail.

According to StAR, the most common instruments used in banking and corporate systems as a facade to hide illegal transactions are the use of nominal shareholders, the use of privileges between lawyers and clients (professional secrecy of the lawyer), in addition to flaws in the mechanisms of laundering controls of money from trust funds, service providers or banks, especially in cases where high amounts are involved.

An estimate by the Global Financial Integrity entity points out that between US $ 20 billion and US $ 40 billion are stolen in developing countries annually in cases of corruption.

But there are specific references to some countries, as in the case in which Brazilian researchers from StAR cite legal privilege as an important issue in the issue of corruption in the country. “In Brazil, even when the investigator is able to find the service provider company that was used as an instrument of corruption, it was often sold to a law firm, which uses the legal privilege of not being able to disclose the name of the person who bought the company, ”points out StAR.

Five Brazilians are cited by the “Puppet Master”: the former mayor of São Paulo, Paulo Maluf; bankers Edemar Cid Ferreira and Daniel Dantas; Dantas's sister, Veronica; and Rodrigo Silveirinha, former undersecretary of Tax Administration in Rio de Janeiro.

Revenue Increases Enclosure to Major Offenders

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012


The inspection of the Federal Revenue broke a record in 2011 when identifying R $ 109,3 billion in amounts withheld. The amount exceeds by 21,25% the total number of assessments in 2010. According to data from the Revenue, in 26,35% of the closed inspections, in theory, the practice of crimes against the tax order or against Social Security was identified. For these cases, Tax Representations for Penal Purposes were formalized, which will be forwarded to the Federal Public Ministry. Last year, the Revenue retained 569.671 statements in the fine mesh, down from 700 in 2010.

To increase the siege against tax evasion, the agency has increased the value of fines, which reach 150% of the total tax to be charged when fraud is characterized by the taxpayer, in addition to creating information systems on medical services, card credit, real estate activities. It also has advanced electronic systems, as is the case of the Public Digital Bookkeeping System (Sped), a tool that allows companies' online accounting to be followed. The intention is not to increase the number of notices, but to select the biggest offenders.

“With Sped, we gain agility as we have information in hand in a shorter time and in a more effective way of dealing with it”, says Caio Cândido, undersecretary of Revenue Inspection. “We have a database that allows us to scrutinize the taxpayer's life. Sped also offers quality information due to the various filters that are made. ”

“Today, the Tax Authorities are so equipped with tools that the taxpayer who tries to circumvent the Federal Revenue has a validity period: within two months, the Tax Authority already fines this taxpayer”, says Sebastião Luiz Gonçalves, coordinator of the 2nd State Inspection Chamber from Sao Paulo.

The numbers prove the thesis of Gonçalves, who is also a member of the Regional Accounting Council of the State of São Paulo (CRC / SP). According to the Revenue data, the industrial sector led the notices in the corporate segment, with R $ 30,9 billion. Among individuals, company owners and managers were the most fined, totaling R $ 1,6 billion, according to IRS data.

The government is committed to improving control tools to prevent fraud. In addition to Sped, Gonçalves cites controls such as the Declaration of Information on Real Estate Activities (Dimob), Declaration of Credit Card Operations (Decred) and the Declaration of Medical and Health Services (Dmed). “It was very common for taxpayers to spend R $ 1 thousand and to enter R $ 10 thousand in the Income Tax return on health expenses. Today, the service provider reports everything to the IRS. ”

For Caio Cândido, undersecretary of Revenue Inspection, if on the one hand the tax authorities gain in quality and agility, on the other hand there is an increase in work. “We had a change in the way of supervising with the adoption of Sped”, he informs, referring to the system to which companies are gradually being forced to migrate. “With the crossing of information, there was a great addition to the work of the source. Before, bookkeeping was in books, on papers within the company. Today, the auditor is able to audit data sent electronically ”, he explains.

For scholars, the good example should start from the top floor

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012


For four scholars heard by Valor, the stereotype of the Brazilian rascal and conniving with small illegalities has no historical or atavistic support. Despite divergent lines of thought, they agreed on one point: the example of good conduct should come from the top floor.

For the anthropologist Roberto DaMatta, the Brazilian's behavior is explained by the composition of society. "The problem is that even today Brazil lives in an imperial model, an aristocratic and hierarchical society, in which a few people have privileges that do not belong to others". It is, he says, a model inherited from Portuguese civilization and which did not disappear with the Proclamation of the Republic, the separation of the Church from the State and the creation of the animal game in Rio de Janeiro. “In the Portuguese system, religious were judged by Canon Law and the nobles and ministers had privileged forums”. For DaMatta, the most evident signs of this model are the paternalism of the public service and the privileges of certain sectors of the Judiciary. "Our biggest problem is equality, civilizing public space and taking good care of everyone's money."

Sociologist Chico de Oliveira attributes corruption to the very essence of the capitalist system. “Great corruption does not occur within the State, it occurs in the relationship between the State and the market. It turns out that contemporary economic thinking absorbed the corruption practiced by the private sector and transformed it into competitiveness ”. Oliveira does not spare the unions, which tend to corrupt themselves as they deviate from their original functions and expand their powers to other areas of the economy.

For historian Marco Antonio Villa, corruption became more present in Brazil after the Proclamation of the Republic, with “peaks” during the Estado Novo (30s), but until the mid-80s it was not a phenomenon of endemic proportions like today. The historian believes that measures against corruption should have been taken when the country was re-democratized after the end of the military regime, which was not possible due to the illness of President-elect Tancredo Neves and the inauguration of the then vice president, José Sarney, representative of the more conservative forces. Villa does not agree with the thesis of a Portuguese colonial heritage. "It is wanting to imput the problem that is ours to the other". He criticizes what he considers a lack of politicization of society. (GM)

Teacher recommends single standard for accountability

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012
Unlike countries like Mexico and Italy, where corruption is closely linked to criminal groups that seek to maintain their position based on illicit acts, in Brazil it is very much centered on the public sphere and its use for private purposes. With a recent democratic history, which began in the late 1980s, the country is making good progress on the subject. The opinion is of professor Rita de Cássia Biason, coordinator of the Group of Studies and Research on Corruption at Unesp, who also believes that corruption cases are not growing in the country, but that this impression stems from their greater visibility in the media.
"We have made good strides in fighting corruption and we could do more with some small acts", says the professor. At the end of the semester, she did a work with her students to analyze how the courts of accounts of States and municipalities are accountable to the population. What was found was that each one accounts in a different way and some of them do not publish them on the website, giving visibility to the result. “A single standard could be defined that could be used by all states' courts of accounts”, says Rita de Cássia, who stresses that perhaps the existence of the Public Transparency Law, in force since May, may increase the requirement for rendering public accounts from various spheres of government.
Member of a study group on corruption of the Organization for Economic Cooperation and Development (OECD), the professor says that, while developed countries are concerned with corruption, mainly concerning companies that seek to circumvent bidding rules, in Brazil the picture is reversed and is more present in the public sphere. "State companies and federal, state and municipal governments increasingly need instruments to combat unethical practices," he says.
In his view, corruption has not grown in Brazil in recent years. The impression, very present in society, would reflect four factors that make the subject more visible, he says. First, since 1989, with direct elections for all elective positions, Brazil is entering a democratic period in which leaders gain greater visibility, while the press plays the role of inspecting power. Second, with the end of censorship, the media has a more investigative role, seeking cases of great repercussion. Third, the internet makes it easy to cross and search for data. Finally, regulation of the public sphere is increasingly discussed. “Brazil lived a long time without democracy and, when we entered it, we entered a phase of innocence, we thought that everything would be blue, forgetting that in the end democracy is management of uncertainties, that the actors have different roles.”


Penal code falls short of society's wishes

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012
Outdated, the Brazilian Penal Code does not meet the wishes of society, nor does it allow the punishment of organized crime in the country in an exemplary manner. According to jurist Walter Fanganiello Maierovitch, professor of criminal law and European Union consultant on the subject, if there are no changes in the body of the law, there will never be in Brazil an initiative like Operation Clean Hands, in the 90s in Italy, which culminated in the investigation of more than 6 people, including businessmen, civil servants and parliamentarians, including former prime ministers Giulio Andreotti and Bettino Craxi, who had their political careers ended after proof of involvement in Italian mafia activities.
In Maierovitch's view, the action of organized crime in Brazil reached a degree of sophistication similar to that observed in Italy. He cites the strong indications pointed out in the relations between the bicheiro Carlinhos Cachoeira, the ex-senator Demóstenes Torres and the construction company Delta.
"It has reached a stage where there are suspicions of money laundering of gambling with fraudulent bids from contractors," he says. According to the Penal Code, says the lawyer, situations like this can only be framed through the formation of “gangs or gangs”, according to article 288. And, in the overwhelming majority of the time, as the defendants are primary, lawyers get habeas corpus to respond in freedom. “The preventive detention of Carlinhos Cachoeira is an exception in the Brazilian system,” he says.
The lawyer suggests an amendment to expand the concept of "gang and gang" to "special criminal associations", as was done in Italy in the late 80s, at the initiative of a deputy from the Socialist Party. “In Brazil, the presumption of innocence prevails, which is a correct principle, but there are situations in which pre-trial detention is necessary for investigations to reach all links in the criminal chain. With technological tools, the top of an organization can operate outside Brazil and corrupt internally ”. In the Italian legal field, “special criminal associations” are understood as those that have corrupting power, such as territory control and social control, with infiltration in the State, to the point of interfering in the electoral process. Another case remembered is that of former Fluminense deputy Álvaro Lins, with proven involvement with Rio de Janeiro's militias, who respond to the process in freedom due to his good record.
The lawyer defends that the classification of organized crime follows what was agreed in the Palermo Convention, held in 2000 and ratified by Brazil in 2008. According to the document, even money changers can be cited in the formation of organized crime. Maierovitch goes further and supports the inclusion of religious entities that use space purchased during TV hours to practice actions classified as “true fraud”. Among other urgent changes, the lawyer advocates the end of the privileged forum for authorities and the adoption of more technical criteria for the appointment of ministers to the Supreme Federal Court (STF), who would have five-year terms, without the right to reelection.

Corrupt companies are free from punishment

Valor Econômico - Special Section - Fighting Corruption - 17/08/2012
The employee of a company may even be caught giving a box to a public official to release a permit, pretending not to have seen that the work does not correspond to the approved plan or defrauding a bid. Hence the company is punished for bribery goes a long way because tasting maracutaia is practically impossible. At most, in the most serious cases, it is considered untrue and is prohibited from providing new services to the Government. The loss is paid by the taxpayer.

Impunity is on its way to an end. Bill 6.826/2010, known as the Anticorruption Law, drafted by the Executive Branch, is slowly passing through the Chamber of Deputies. “We are moving towards an agreement and the PL will probably be approved after the October elections”, comments deputy Carlos Zarattini (PT-SP), PL's rapporteur.

The rapporteur's hope is to approve the PL in the Special Committee so that it can proceed directly to the Senate. But there is always a risk that 10% of deputies will present a request asking for the bill to be considered by the plenary of the Chamber, further delaying the work. The delay is not just due to the bureaucracy of legislative procedures. “The powerful corporate lobby works to mischaracterize and delay the approval of the PL”, comments Zarattini. The lobby's biggest target is strict responsibility, considered the essence of the project. The legal instrument allows punishing the company that benefited from a harmful act, regardless of whether the action is proven. The company will be held responsible if it has obtained any benefit. "Strict liability is non-negotiable," he says.

Until now, the punishment of those involved in cases of bribery or corruption is practically unfeasible due to the lack of specific legislation for legal entities - be they companies, class entities, or non-governmental organizations. The relations between the private sector and the public administration are governed by Law 8.666 / 93, of Bidding. Companies that fail to comply with the provisions may be warned, fined and considered unfair. "Disqualification is contested in the courts because it is difficult to prove the involvement of companies," explains Zarattini. "When employees are caught trying to bribe public officials, they claim that employees acted on their own."

With the approval of PL 6.826 / 2010, Brazil will leave a delicate position for not complying with international treaties. This is the case of the 1997 Convention on Combating the Corruption of Foreign Public Officials in International Business Transactions of the Organization for Economic Cooperation and Development (OECD). Brazil, Argentina and Ireland are the only of the 34 signatory countries that have not created specific legislation for punish corrupt companies.

"Another issue that the country is not addressing with due attention is the illicit enrichment of public officials, although it is a signatory to a United Nations (UN) convention on the issue" comments Josmar Varillo, from Amarribo Brasil. The latest news from Bill 5.686 / 2005, authored by the Executive, was a request by deputy Amauri Teixeira (PT-BA) to include it on the voting agenda of the Chamber of Deputies in September last year.