PUBLIC PETITION
To whom it may concern,
In regard to the global mandatory financial stability, the present petition is addressed to propose a surveillance among Brazilian economic governance, which has been moving toward a dangerous risk-based approach in its interconnectedness financial relations. Also, as a global player, Brazil has been acting against the the global regulatory framework for capital and liquidity and bringing about inherent vulnerabilities and systemic risks to the international monetary system. For this proposition, two main issues are suggested to be appraised:
1) MONEY LAUNDERRING ACTIVITIES: US$1 trillion
Corruption and its connection to accountability
Due to a large spread of corrupt behavior across all branches of government, from 2004 to 2014, an estimated US$1 trillion dollars – in a $2.2 trillion economy - have been washed in off shores all around the globe, i.e. SBM Offshore NV (SBMO) on Brazil's state-run oil company, Petrobras, in a bribery scheme linked to top politicians to secure offshore contracts, for instance. Moreover, Brazilian Bank system looks like a bribery delivery system, since a great amount of bribe in cash has been delivered. As a collateral damage, corruption distorts the criteria by which public policies are chosen and thereby undermines the efficiency, efficacy, and public-regardingness of those policies. And public accountability lacks of liability.
2) THREAT ON WORLD BASE CURRENCY: The BRAVICS
BRAVICS’ Alliance (Brazil, Russia, Argentina, Venezuela, China, India and South Africa) versus the United SAKE (United States, United Kingdom, European Union). Behind the call for a global alternative to the U.S. dollar's role as the international reserve currency, it carries deliberate actions - BRICS Bank (The New Development Bank) currency devaluation, overspending, under-saving, running current-account deficits on the part of BRAVICS governments -, in order to disrupt the world monetary order. Points of risk: interest rate; public data; foreign exchange; financial transaction blacklist; bank’s management; and black market money.
The first issue: CORRUPTION
According to AML Consulting Ltd research, from 2004 to 2014, the Brazilian government has conducted a dysfunctional public politics which allowed US$1 trillion dollars in fearful corruption aimed to organized crime, raging from wide scandal involving the state-controlled oil giant, Petrobras, to accounting irregularities related to loan sales and to social programs at CAIXA, a state-controlled savings bank responsible for lottery units, the FGTS (Severance Indemnity Fund), PIS (Social Integration Program), the Unemployment Insurance and social programs, such as Bolsa Familia, and play a role in promoting urban development sectors such as housing, sanitation, infrastructure and services.
That estimated amount of money delivered to corruption is due not only to the large presence of Brazilian government in all economic sectors, but also to the lack of liability in public expenditures and accountability. Petrobras, Transpetro, Eletrobras, BNDES (a state-owned development bank), Banco do Brasil, CAIXA and hundred more institutions have been subject of corruption scheme through access to government contracts, stock market valuation and preferential finance allocation of loans and funding from state-owned banks. They all now subject of persecution under Brazil’s Clean Company Act, which went into effect in early 2014, and makes corporations as well as individuals liable for an employee’s corrupt action.
In fact, a great amount of data have been compiled by federal bars (13ª Criminal Bar – lawsuit procedure nº 5073745.13.2014.404.7000 -, State of Parana), as Brazilian prosecutors have charged executives from six of the country's largest construction firms in connection with that corruption scandal at Petrobras. According to court documents, this case also shows the risk of allocating state capital via BNDES and CAIXA to groups with complex shareholdings and potential shareholder conflict. Starting in 2004 and continuing until 2014, this scheme has violated Brazilian anti corruption law by processing thousands of transactions to fraud public contracts. Meanwhile, all these deals were supervised by Dilma Rousseff, current President of Brazil, who was previously Minister of Energy, 2003-2005, and the Chief of Staff of the President Lula da Silva from 2005 to 2010, and also presided over the Petrobras board of directors during the alleged graft operation.
Yet, the bribery scheme extends beyond Petrobras. Investigators in that federal lawsuit seized a document from Alberto Youssef, a black market dealer, who has confessed to money laundering that lists 747 infrastructure projects carried out by 170 companies. So called Big Manager, President Dilma Roussef has also supported the BNDES allocation of irregular public resources to Telemar Norte Leste (telecom), Vale do Rio Doce (mining), Suzano (paper & energy), Brasil Telecom, Neoenergia (electricity), CPFL Energia (electricity), VBC Energia (electricity), CSN (steel), Klabin (paper), Aracruz (cellulose), Sadia (food and agribusiness), CPFL Geração (electricity). Also, CAIXA and BNDES have had the largest loan exposure to debt-laden EBX Group. In order of comparison, the value of irregular loans disbursed by BNDES in that period was more than ten times the total amount provided by the World Bank. After 2009, the government pursued an aggressive expansion of the bank’s operations and thus directly transferred Treasury capital to BNDES through long-term loans paid by the bank at low interest rates, between TJLP and TJLP+2.5%. In 2009 and 2010, such direct transfers reached $180 billion reais (around US$ 100 billion). In one hand, the effect of this widespread corruption lead by Brazilian central government has carried out a parallel amount of money laundering operations through black market dealers. On the other hand, by overinflating the cost of capital expenditure projects and acquisitions by hundreds of billions of dollars, as a global player, Brazil put into check inherent vulnerabilities and systemic risks to the international monetary system.
The second issue: MONETARY DISRUPTION
In addition to corruption and its connection to accountability which conceal the public accounts, the Brazilian government act against the the global regulatory framework for capital and liquidity, since its monetary policy and financial system credit operations also lack of accuracy. It is a kind of fiscal maneuvering that replicates the inaccurate external accounts and put into risk all foreign transactions. The balance of payments, for instance, hides the real situation of gross and net debit and external debt position. The stock of international reserves, the amount of swap contracts with term of 252 days, the total advance of revenues on export contracts for financing the production of respective goods to be exported, the capital loans and export financing with BNDES resources, the operations with derivatives, the future payments of trade bills and other receivables and so on pose a serious embarrassment to the national accountability which cannot be taken as a reliable procedure.
For instance, desperate measures are taken by Brazilian government to register a surplus on the balance of payments. In 2013, for example, floating oil platforms contracted by Petrobras were registered as export items and they helped the government post a trade surplus, even though there were no units (P-55, P-61 and P-62) moved abroad. Looking at the clock, the company started operations at P-55 just an hour and a half before the end of the year and sent P-62 offshore unfinished. P-61 also departed shipyards on Dec.31 en route to Campos Basin Papa Terra. In its turn, Both P-55 and FPSO Cidade de Paraty at the Lula Nordeste field have suffered equipment delays. By the way, the units cost more than $1 billion each to build. Those floating oil platforms have never been exported, but according to the company accountability, they were imported by a subsidiary in Netherland where SBM Offshore NV (SBMO) bribed Brazilian officials to get contracts with state-controlled company. Further, apart from the SBM probe, Brazilian federal police, Congress and the country’s audit court are doing separate investigations into Petrobras’s involvement in this multibillion-dollar money-laundering and bribery. And they are focusing also on overinflating the cost of capital expenditure projects and acquisitions by hundreds of millions of dollars.
In this terms, Brazil threats the international currency base, as the artificial or inaccurate accountability weakens the global trade and financial transactions through its police toward interest rate, foreign exchange, bank’s management, and black market money activities related to criminal organizations, in violation of the Foreign Corrupt Practices Act and the Brazil’s Clean Company Act, anti-corruption statutes that make it illegal to bribe foreign officials to win or retain business.
It also seems that the current Brazilian government has claimed for banning the U.S. dollar as the international reserve currency along with the euro. It is a kind of battle between the BRAVICS’ Alliance (Brazil, Russia, Argentina, Venezuela, China, India and South Africa) versus the United SAKE (United States, United Kingdom, European Union). For instance, behind the call for a global alternative to the U.S. dollar's role as the international reserve currency, it carries deliberate actions – i.e. the creation of BRICS Bank (The New Development Bank), in order to disrupt the world monetary order. Russia and China set aside measures to improve the BRAVICS strategy to undermine the SAKE.
Reacting to the fact that US President Barack Obama has signed into law a new Russian sanctions bill, and the EU has imposed an embargo of foods and a ban on investment in Crimea, the strategically important peninsula Russia annexed from Ukraine earlier this year, Russia contrattacked. From one side, Brazilian beef exports to Russia have soared in response to the embargo of foods imported from US, EU, Canada and Australia. Just aside, Argentina and Russia had reached agreement to double Argentine food exports. By granting twelve seafood companies licences to supply canned and frozen fish, Russia extended trade deals with South Africa. From another side, a Chinese embargo on some Brazilian beef plants has also been lifted. Venezuela has also made a deal with China in order to pay its US$40 billion in oil. Again opposing the U.S. and European nations, the two giant, China and Russia, got along to sweep various embargos between them, since they have paved the way to free the BRAVICS trade in their own currency. To this purpose, the BRICS Bank and state-owned banks in Brazil, Russia, Argentina, Venezuela, China, India and South Africa respectively, post a selection of firms to receive loans in their own currency.
Those moves impose a review on making financial stability assessments. It is also a matter of assuring the IMF and World Bank surveillance, designed as a crafted to be in compliance with anti- corruption protocol established by the Organization for Economic Co-operation.
SURVEILLANCE PROPOSED
Poor disclosure
Even though this petition presents highlights topics in order to suggest a surveillance among Brazilian governance, due to the related risks to international stability on global trade or alliance with people suspected of running an international money laundering ring, a great variety of information are available mainly in Brazilian Federal court as well as in US Department of Justice, since legal procedures have been taken by those instance of justice. Finally, this proposition is offered in the share interest in making consultation as effective as possible.
Sincerely,
Hermano Almeida Leitão
Lawyer & Auditor
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Hermano Leitão, author of the book Brasil, nação sem caráter.
