The generalization of grand corruption in Brazil is a recent phenomenon, the fruit of some institutional relaxation starting in the 1990s. Grand corruption occurs in the context of large government-controlled companies and public work projects, tender processes, privatization auctions and the like, while petty corruption involves common citizens, who pay bribes to obtain documents, schedule consultations with the public health system, enroll children in school, etc. This latter type remains relatively uncommon in Brazil, which has the lowest index in Latin America. Among the main examples of institutional relaxation are the possibility of re-election to executive positions; corporate financing of election campaigns; suspension of the barrier clause for political parties (there are now 34 registered parties in Brazil); the progressive expansion of the privileged-forum rule (whereby higher courts have original jurisdiction over criminal cases involving certain public officials accused of crimes, now applying to some 60 thousand appointed positions and elective offices); and the suspension between 2009 and 2016 of the possibility of enforcing prison sentences after confirmation at the second instance. Some of these situations have been reversed or attenuated.
Starting in 2014, the investigations of operation Lava Jato (Operation Car Wash) and other similar probes uncovered the existence of systemic corruption in Brazil, with ramifications in some dozen other countries in Latin American as well as in Africa, lubricating the project of the PT (Workers’ Party) to spread its influence in the region between 2003 and 2016. The aim of Lava Jato is to investigate corruption and money laundering involving contracts between Petrobras and its largest suppliers of goods and services. The company’s balance sheet for 2014 disclosed losses from corruption amounting to US$ 2 billion, and in 2018 it paid US$ 3 billion to settle a class action brought by investors in New York, plus a fine of US$ 843 million to the US Department of Justice (DOJ).
The epicenter of grand corruption in Brazil was populated, on the private side, by large companies, including the country’s biggest construction firms, and on the public side by government-controlled companies and their executives, civil servants of the three branches, and political parties, with money launderers acting as intermediaries in the corrupt transactions.
For example, large construction companies organized in a cartel paid kickbacks of 1% to 3% to top executives of Petrobras and other public agents on contract with the company. Odebrecht, the biggest such firm in the country at the time, headed by Marcelo Odebrecht, the grandson of its founder, stood out in the dissemination of corruption in Brazil and abroad. That leadership derived from its sophisticated management of corruption. In 2006, the company created the Department of Structured Transactions exclusively to assure secrecy and efficiency in the payment of bribes. Instead of being paid only in cash, they were deposited in offshore accounts, using an off-book system and concealed via a high-security communication network so as not to leave tracks. That innovation enabled the company to increase its participation in the market for public works in Brazil and in other countries (see Campos, Engel, Fischer and Galetovic “Renegotiations and Corruption in Infrastructure: The Odebrecht Case”, November 2019).
Sentenced to 19 years in prison for passive corruption, money laundering and criminal conspiracy, Marcelo Odebrecht served 30 months in a federal prison. Together with 77 executives and ex-executives of the company, in December 2016 he reached a plea bargain with the Federal Prosecution Service. In return for leniency, they revealed the names of 415 politicians of 26 parties, including nearly one-third of the senators and cabinet ministers at the time, and almost half of the governors in Brazil. Their influence extrapolated the country’s borders, coinciding with the objectives of Lula and the PT of expanding their influence outside the country.
For having used American banks in the illicit transactions, Odebrecht was also indicted in the United States and ended signing a plea agreement and paying a fine of US$ 2.6 billion, the biggest ever in this type of deal in the US. In the agreement, Odebrecht admitted he had paid US$ 788 million in bribes and kickbacks between 2001 and 2016, associated with over 100 projects in 12 countries, which increased is profits by US$ 3.3 billion, according to the DOJ estimates (Table 1). Odebrecht also entered into similar plea bargains with the authorities in the Dominican Republic, Panama, Guatemala, Colombia Ecuador and Peru.
Table 1 – Amounts of bribes paid and undue benefits received by Odebrecht
SOURCE: “Odebrecht Plea Agreement”, in DOJ (pp.B-16 to B-22)
All told, almost a dozen former presidents of Latin American countries along with various other politicians were involved in the bribes paid by Odebrecht and other Brazilian construction companies, and have served or are serving prison sentences: two ex-presidents of El Salvador (Mauricio Funes and Francisco Flores); one of Panama (Ricardo Martinelli); four of Peru (Ollanta Humala, Alexandro Toledo, Pedro Pablo Kuczynski and Alan García, who committed suicide before the police arrived); and one of Brazil (Lula).
While the Brazilian construction companies spread the corruption throughout Latin America, operation Lava Jato spread the investigations, which are still ongoing in at least 12 countries, based on information shared through international legal cooperation agreements with 61 countries, which elicited 497 requests for information from 39 countries, with the standouts in Latin America being Peru (191), Argentina (34), Panama (27) and Colombia (21).
The correction of economic policy bearings and containment of grand corruption have put Brazil back on the path to economic growth, albeit slow. There are important challenges ahead, such as approval of tax and administrative reforms, among others, in pursuit of fiscal consolidation. In parallel, Brazil’s Central Bank, acting with (de facto) independence, has been competently managing the inflation-targeting regime and has been able to cut the basic interest rate to record low levels, stimulating economic growth.
The permanent reduction of corruption depends on changes in the institutional setting that allowed its growth. Much has already been done, but there is still much to do. The support of the Brazilian people and their peers in the majority of other Latin American countries who suffered from the corruption is reason for optimism: “corruption in the government” is mentioned as a major problem by 85% of the people interviewed in surveys conducted in the region, with above-average readings in Peru (96%), Colombia (94%), and Brazil, Mexico and Panama (90%). The main challenge common to the majority of countries that suffer from high corruption continues to be the approval of political reforms that guarantee greater transparency in spending and management of political parties, and better representation of the will of voters.
It is also necessary to recall that the private sector paid a high price for the corrupt practices, with several companies filing for bankruptcy or drastically downsizing. But the investigations have produced benefits. Modern compliance rules now are part of the daily routine of companies. In 2016 a law was enacted to increase the standard of governance of Brazilian public-sector companies, requiring the hiring of qualified people and professionalization of the boards of directors, among other measures. The current government has also been endeavoring to make the rules on tenders for public works more transparent and to open the market more to foreign companies, which is fundamental to prevent attempts to form cartels. The process of building integrity in a country is long, the cost of corruption is huge and the support of the population is essential. Brazil is starting the new decade in a better situation than it entered the last one.
 Global Corruption Barometer - Latin America & The Caribbean, Transparency International, 2019.
 For details, see Moro, SF “Sobre a operação Lava Jato”, and Dalagnoll & Pozzobon “Ações e reações no esforço contra a corrupção no Brasil”, in Corrupção: Lava Jato e Mãos Limpas, organized by Pinotti, MC, Portfolio Penguin, 2019.
 Other similar investigations under way are: Zelotes, investigating lost revenues of R$ 20 billion in cases examined by the CARF, the body that judges tax disputes in the administrative sphere; Greenfield, investigating losses of R$ 8 billion due to mismanagement of pension funds of state-controlled companies; Cui Bono, investigating diversion of R$ 3 billion from Caixa Econômica Federal; Radioatividade, investigating kickbacks of R$ 3 billion from contracts with Eletronuclear; among others.
 Petrobras is a state-controlled company operating in the exploration, refining, transportation, petrochemicals, oil product distribution, natural gas, electricity, chemical-gas and biofuel segments.
 There is a high correlation between poverty and corruption around the world, and theory suggests that corruption is an important obstacle to a sustainable economic development. See Pinotti, M.C. “Lava Jato, Mani Pulite and the role of institutions” in Brazil: Boom, Bust and the Role of Recovery. Editors Spilinbergo and Srinivasan – IMF, 2018
 See footnote 1.