Brazil is Burning

Amid international opprobrium and economic uncertainty, an anti-corruption probe is under fire.

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Brazil’s government has come under harsh international scrutiny in the past few weeks for failing to prevent or manage severe fires in the Amazon. The economy is also under pressure. Even as a badly-needed pension reform bill works its way through the legislature, investors are wary. Since July, the real (BRL) has fallen 5 percent against the dollar (USD), and the stock market has performed worse than other emerging markets. Now, Predata signals reveal how uncertainty about the future of governance reform and the future of Brazil’s corruption investigation could further undermine foreign investors’ confidence in Brazil. 

Amid the clamor over the Amazon, Operation Car Wash, the sprawling, five-year-old corruption probe, is in peril. The investigation into endemic graft has resulted in more than 100 convictions, over $10 billion in fines, and landed some of the country’s most powerful politicians and businesspersons behind bars. But last week, for the first time, the Supreme Court annulled a corruption conviction by the judge who oversaw the probe, now Justice Minister Sergio Moro. At the same time, the legislature recently passed a bill that would impose criminal penalties on judges and prosecutors who, among other things, initiated investigations without proof a crime was committed. Indeed, Moro and the Car Wash task force have been under fire since June, after the leak of text messages showing improprieties in their handling of the case. 

Public support has so far shielded the probe from attempts to derail it, but Predata signals now show popular interest may be waning. First, a signal that captures online attention to the investigators and judges leading the case was muted last week. In the past, this signal has risen when the public perceives the investigation is under threat.

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Online attention to the Car Wash case overall is also muted.

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What’s more, the upticks in both these signals over the past few days appear to be driven not by interest in Car Wash, but almost entirely by the appointment of a new prosecutor general, whose predecessor’s two-year term is up. Online interest in the office of the prosecutor general likely has more to do with concerns about the Amazon: Bolsonaro reportedly selected the new appointee because they see eye-to-eye on the environment (among its responsibilities, the prosecutor general oversees environmental protection litigation). 

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Ultimately, the dismantling of the Car Wash probe would stymie anti-corruption efforts and bode ill for governance reform. And that could further reduce confidence in Brazil’s economic outlook.