Fraud and corruption revelations forces top level resignations

President Lula’s government is undergoing its deepest political crisis since coming to power in January 2003. An avalanche of accusations of fraud and corruption has led to the resignation of several leading PT (Workers’ Party, the party of President Lula) members, including a minister José Dirceu (Lula’s chief-of-staff – a kind of informal prime minister) and José Genoino, the PT’s former president.

The crisis is still growing, with new cases and more details on old ones, and is becoming the most severe since Collor de Melor was forced to resign as president in 1992, after mass protests against corruption.

The fact that Lula as a person is still popular and not affected by the corruption charges, and that the government has the support of the leadership of CUT (Brazilian trade union federation linked to the PT), MST (Landless rural workers’ movement) and UNE (National Union of Student), means that the crisis, so far, has not lead to mass protests, as in other Latin American countries.

"The PT’s option for representative democracy has functioned as a drain for social tensions. It has helped Brazil avoid going through scenes that we have seen recently in Argentina, Venezuela, Peru, Ecuador, Bolivia", wrote Kennedy Alencar, a political columnist of Folha de São Paulo, one of Brazil’s main daily papers.

The crisis of 1992, and today’s crisis, have a common figure – the MP Roberto Jefferson. Jefferson became known as Collor’s defender, his "shock troop". He later became party leader for the conservative PTB. In May, this year, he was accused for being responsible for bribing scandal in the Brazilian Post.

The latest crisis came to light, after an official was filmed accepting a bribe of 3,000 reais ($1,300, a relatively insignificant sum, as we will see) while saying that he had Jefferson’s support for awarding contracts to private firms in exchange for kickbacks. Roberto Jefferson has been a faithful ally of the PT government and Lula described him as a person to whom he was prepared to give a blank cheque. When Jefferson found himself under attack, he retaliated by saying he knew of a big scheme whereby bribes were allegedly used by the PT leadership to buy votes from MPs, giving them a "monthly allowance" of 30,000 reais ($13,000).

Graphic description

Roberto Jefferson’s evidence in the media, and in parliamentary commissions, has provided a graphic description of how rotten the political system is in Brazil, and how the PT leadership is deeply involved. What makes him more dangerous for many, is the fact that he has had connections with and insight in the highest level of the governing party for a long time and because he admits his part in the corruption. When he said in parliament "you are exactly the same as me" and "everybody here knows how this works" the other MPs got very nervous!

Jefferson has always supported the sitting president, since he became an MP in 1982. When asked how he could support Lula’s government, he calmly stated: "I supported the neo-liberal policies of Cardoso (the previous president, and a leader of the PSDB [Partido da Social Democracia Brasileira - Party of Brazilian Social Democracy]). Now I support the neo-liberal policies of Palocci (current finance minister, PT). I haven’t changed. The PT has changed."

Jefferson accused Marcos Valério Fernandez de Souza, a businessman owning several PR-firms, who has big contracts with the government and state enterprises, of being responsible for distributing the bribes to MPs of the PL and PP (Liberal Party and Progressive Party, respectively - two right wing parties that are allies of the PT). Marcos Valério’s former secretary witnessed him regularly meeting high-ranking politicians and how he carried big sums of money in suitcases to these meetings. It has been proved how huge amounts of cash were withdrawn from the accounts of Marcos Valérios’ firms and that since 1999, 500 million reais ($210 million), with unclear origins, have been deposited in the same accounts.

Roberto Jefferson accused José Dirceu, Lula’s chief of staff, of being the main person responsible for the corruption and he was forced to resign. But the crisis continued to deepen. In one week, four of the top leadership of the PT were forced to go: first, the party General Secretary Silvio Pereira, then party Treasurer, Delúbio Soares, and at the end of the week, the party President, José Geonoino and the Secretary of Communication. The reason for this was because it was proved that Marcos Valério, had business links with the PT leadership, rather than just being a personal friend of Delúbio Soares. Marcos Valério was guarantor for two loans, totalling 5,4 million reais ($2,3 million), given to the PT in 2003. The loan was signed by Delúbio Soares and José Genoino (who said that he didn’t read the contract and didn’t know Marcos Valério). Marcus Valério even paid part of the loan when the PT was late with an instalment.

Delúbio Soares later gave evidence that Marcos Valério had several times helped the PT make contact with different companies, and that Valério was also present when different PT leaders met representatives of those companies.

The nail in the coffin for José Genoino, who tried to cling to his post to the last minute, was when his brother’s (an MP in the state parliament in Brazil’s north east) assistant was caught in an airport with 200,000 reais in a briefcase – and a further $100,000 in his underpants!

This is not the first time that the PT leadership and government has been hit by corruption scandals. José Dirceu was weakened for a period when in 2004 it became known that an assistant of his, Waldomiro Diniz, was taking bribes from a crime boss. The government did all that was possible to stop a Parliamentary Commission of Inquiry (CPI) being set up to investigate the case. But now that is in the pipeline because of the current crises.

Another scandal was when the head of the Central Bank, Henrique Meirelles, was accused of being involved in money laundering and fraud. Lula saved him by giving him the status of minister, so he couldn’t be charged by any other state institution apart from the Supreme Court. However even this was not enough to save him since a case against this individual is now being heard in the Supreme Court.

It was also revealed earlier this year that one of the ministers in the government, Jucá (of the right-wing PMDB - Partido do Movimento Democrático Brasileiro - Party of the Brazilian Democratic Movement), made loans using fictitious estates as security. He has been sacked as a minister as a result.

System’s stability threatened

So while the crisis is deepening, old cases are coming back. It is still unclear if the government will manage to survive the crisis. Lula is reshuffling the government and the PT-leadership are also bringing in new names. The right-wing opposition of the PSDB and it ally the PFL (Partido da Frente Liberal – Party of the Liberal Front) have no interest in bringing down Lula. Too deep a crisis and too many disclosures will hit them as well and threaten the stability of the system. They are also deeply involved in corruption. Just a few days ago, a PFL MP was caught at an airport with seven cases with 10 million reais ($4,2 million)! He claimed that money belong to the Universal Church, of which he is president. He has now being expelled from the party.

But the crisis has its own life. What will de decisive will be if a continued crisis sparks of mass protests. P-SOL, the new socialist party in which Socialismo Revolucionário (CWI in Brazil) is taking part, is arguing that the struggles for higher wages, against cuts and against the neoliberal reforms must be linked to the struggle against corruption. Federal civil servants have been on strike for weeks against the ridiculous wage offer of 0.1 per cent from the government. It not hard to show that there is much more money than that circulating – in bribes. Recently, at the congress of the UNE (Students Union), P-SOL raised the slogan "there is no money for education – but there is for the ‘monthly allowances’".

It’s not only about corruption – the whole political and economical system is rotten. Capitalism is driven by the hunt for profits and the neoliberal policies increase the opportunities for corruption, with public money going to private companies.

The really big theft or "monthly allowances" is the vast sums paid to the bank as interest for the public debt. Since September the Central bank has increased the basic interest rates from 16 to 19.75 per cent. Brazil has the highest interest rates in the world and Brazilian banks are more profitable than US banks now. The payment on interest rates for the public debt has increased 25 per cent this year and is calculated to reach 150 billion reais ($64 billion) equivalent to 7.5 per cent of the GDP.

The political parties in Brazil traditionally are no more than fronts for different careerists running for elections. Since 2003, there have been 205 cases of MPs changing parties (some have done it several times), out of the 513 deputies of the lower house of the congress. PT-allies like PL, PTB (Partido Trabalhista Brasileiro - Brazilian Labour Party) and PP have grown significantly in congress by this "movement" closer to power.

“Legal” bribery

There is a "legal" way of bribing MPs that the Lula government is not afraid of using. In the federal budget there is money allocated for special projects. That money is used in the run-up to important votes in Parliament. MPs can use this money in projects in their constituencies, and in that way increase their chances of being re-elected. For example, when the government was trying to stop a parliamentary commission of inquiry on the scandal in the Post Office, 1 billion reais ($425 million) of funds were released – although it didn’t help this time.

Roberto Jefferson has also exposed what is known as "2nd cashbox". He stated that 90 per cent of the expenses for the election campaigns of MPs are not accounted for. They come from the "2nd cashbox" – secret funding from companies that give them this money in return for the possibility of getting public contracts after elections. "The only party that doesn’t have any ‘2nd cashbox’ is P-SOL", he says. He has given an example of how a power company pays 3 million reais each month to the PT. A few days ago there were new accusations against the PT leadership – allegations were made that they were receiving money from the Industrial Federation in Rio de Janeiro in exchange for tax exemptions.

Jefferson has also revealed how the PT-leadership promised a cash contribution to his party PTB, of 20 million reais. Only 4 million has actually been paid to the party.

The PT, a party that was built out of the mass struggle of workers against the military dictatorship and for social justice, was for a long time different from other corrupt parties on the Brazilian political scene. But without a programme or strategy to bring down the corrupt capitalist system, the party leaders adopted the methods of rule of other politicians which included corruption. The PT is no longer a party with an active base, it’s a party of MP:s, councillors, mayors, governors and their assistants. The project is not social change – but power. That’s the legacy of the right-wing shift since late 1980s that took a qualitative step forward with the victory of Lula in 2002.

This crisis comes in a period were the Lula government has been weakened electorally. The PT lost important cities in the elections last year and suffered a big blow when they didn’t succeed in getting their candidate elected as the new speaker of the lower house. Instead the conservative Severino Cavalcanti of the PP was elected. The government has had big difficulties in having their proposals accepted in the congress. It had to withdraw a tax package and the big neoliberal reform packages like the trade union reform have stalled.

The leadership of CUT, MST and UNE claims incredibly that the crisis is a result of a "white coup", with the support of Bush. They link demands against the corruption and for a change in the economic policies with the defence of the government. But while they sow illusions that there is now a possibility of a left turn by the government, the opposite is taking place. Lula is bringing in more ministers of the right-wing PMDB and the position of Palocci (the finance minister) has been strengthened. Neoliberal policies are continuing and one of Lula’s priorities is to try and get the project of PPP (public-private partnership – the same method of privatisation Blair has implemented) going.

In the whole corruption scandal Lula’s authority has been spared – as well as Palocci’s.

This crisis is not a struggle of "right" against a "left". It’s a struggle of amongst those who want to get the most cream out of the corrupt system. The federal government alone has 21 000 politically appointed positions, in ministries, administrations, authorities, public enterprises etc. Ton different degrees all these positions offer possibilities of kickbacks.

So far Lula has not lost support because of the crisis. Public opinion makes a clear differentiation between the government and Lula. Seventy per cent are convinced that there is corruption within the government – amongst the PT-voters it’s 65 per cent. Forty eight per cent of the PT-voters believes that the "monthly allowance" bribes actually have been paid. But the latest polls still show a small increase in support for Lula, who makes daily speeches against corruption. His approval ratings have increased from 57.4 per cent in May to 59.9 per cent in July.

Lula is still the main candidate for the president election next year, even for the capitalist class. In the polls Lula would win on the first round against all possible candidates, unless Serra (mayor of São Paulo) were the candidate for the PSDB – but even then Lula according to opinion polls would win easily on the second round.

Weaken Lula

The strategy from PSDB and PFL has not been to try and topple Lula, but to weaken his position so that he can be challenged next year. PSDB is now proposing to Lula that they could guarantee support to the government, and to its neo-liberal projects, if he gives agrees not to stand as President next year. If the crisis deepens further, an agreement between the PT and PSDB can become the only way of avoiding a collapse of the government. But it’s hard for the ruling class of Brazil to find a more appropriate figure than Lula right now. "You do not create a PT or a Lula overnight. When will a new party develop that can function as an efficient social cushion?", writes Kennedy Alencar.

But for the working class, the peasants and the poor masses of Brazil, what is needed is not a social "cushion" but a party that can lead the struggle against this rotten system. P-SOL has the possibility of becoming a focal point for all those sectors that want to build a fighting, class-based, internationalist and socialist party. The crisis in the PT will lead to new splits and new groups joining the P-SOL. This year will be decisive for the new party. By intervening in the struggle with a fighting alternative and preparing a candidacy for the elections next year this will clearly show that the party is not about winning seats at all cost, but about making a political challenge to the system with a socialist alternative and strengthen the struggle against capitalism. Under these conditions the party can quickly grown into a significant force.

Socialismo Revolucionário (CWI in Brazil) raises demands that all cases of corruption must be investigated and the guilty must be punished. P-SOL has a representative, the senator Heloísa Helena, in the parliamentary commission of inquiry into to the Post Office scandal and she has argued that the Commissions that have had their investigations suspended must be restarted. However, we know the limitations of parliamentary commissions made up of right-wing opposition and government allies. Therefore we argue for the setting up of a Popular Commission of Inquiry involving trade unions, social movements, democratic entities and personalities, as wall as MPs linked to workers’ movement. We also stand for democratic workers control over public companies and authorities, and for a public audit of all contracts and accounts. The companies that have been privatised must be brought back into public ownership and all companies and banks involved in corruption schemes must be nationalised. The workers movement must struggle against the neoliberal reforms of the Lula government, like the university, trade union and labour rights ‘reform’. The counter reforms like those on the state pensions system, which was voted on in the parliament the basis of bribes, must be cancelled.

The real solution to the crises lies in the struggle for a socialist alternative, against the corrupt capitalist system.

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