How Brazil is viewed regarding the economy and corruption

The OECD (Organisation for Economic Co-operation and Development) is an important international organization. In presenting its 2018 report on Brazil, the OECD acknowledged progress in the pace of the economy, which has emerged from a recession in recent years. However, the OECD recommended that Brazil improve the efficiency of public spending, drawing attention to the fact that “a large and growing share of social benefits is paid to households that are not poor, reducing the impact on inequality and poverty.” This warning reveals the chronic problem of the inefficiency of the public machinery in Brazil.

Misgovernment, the lack of control over state-owned companies, the lack of transparency, and the bottleneck of gross errors or gross negligence in public management are major sources of wasted resources in this country. Perhaps the lack of meritocracy in the civil service also explains the absence of incentives for productivity in many sectors.

The report did point out, it is true, the excellent work that has been carried out by oversight institutions, such as the Public Prosecution Service and the Judiciary, although we know that they are not the only ones underpinning this authentic transformation in the country’s customs through Operation “Car Wash.”

One aspect that drew the OECD’s attention: “Governability required much inefficient spending, without systematic audits, and reduced the effectiveness of the public sector,” which was crucial in preventing reforms necessary to the country.

Another relevant point of the OECD diagnosis concerned the business environment in Brazil, with high-risk scenarios, weak competition, and high administrative, tax and capital costs. These difficulties, added to endemic inefficiency, provide a fertile environment for corruption. For that very reason, one of the recommendations is to improve governance and reduce corruption, in order to increase economic development.

The Report noted that Operation Car Wash was crucial in revealing corruption and bribery practices. “The evidence emerged mainly in the context of public procurement, including by state-owned companies, of subsidized credit and of tax incentives for specific companies and sectors. Infrastructure concessions are also vulnerable to collusion among bidders and to corruption, as estimates suggest that corporate campaign donations significantly increased the probability of those companies winning public contracts.”

It should be noted that the mere elimination of electoral donations by legal entities should not eliminate the problem of potential conflicts of interest, and may even aggravate them, in my view, by stimulating other formulas of spurious participation.

The problem of overlapping competences of the multiple oversight institutions is also diagnosed by the OECD, a subject on which deeper reflection is needed. The organization is concerned with the protection of whistleblowers, but the very rationality of the punitive system and its credibility must also be stressed. It is necessary to improve the mechanisms of prevention and repression.

The scope of this OECD Report was far broader, but here I sought to circumscribe one relevant point: the connection between an economic agenda and the reduction of the country’s levels of corruption and improbity. This is because, despite the scarcity of scientific studies, it is well known that corrupt and inefficient practices affect fundamental rights on a large scale and the very essence of contemporary democracies, making unworkable public policies that would be intended to safeguard the right to health, to the environment, to life, to the eradication of poverty, to security and so many others.

Fábio Medina Osório is a lawyer and former AGU minister