Petrobas and Brazil's Economy

In 2014, Brazil’s GDP was valued at 2.4 trillion dollars (World Bank 2019). However, only one year later, in 2015, Brazil’s GDP would drastically fall to 1.8 trillion dollars (World Bank 2019). Two years later, in 2017, Brazil’s GDP would rise to 2 trillion dollars (World Back 2019). Brazil’s GDP would only decline from that point on, a trend that is still occurring today. 

What caused this significant drop in GDP? Was it caused by a change in leadership or was it a drop in the amount of natural resources? Was the corruption that existed in the country to blame?

I am leaning towards the latter of the three potential reasons for one main reason. If you look closely at the GDP values of Brazil over the years, you can see that Brazil’s GDP was steadily increasing. It was only in 2014 that the GDP began to fall; it just so happens that, also in 2014, a federal investigation coined Operation Car Wash began. 

Operation Car Wash, which initially started as a simple money laundering investigation into the majority state run oil company Petrobas, would blow the cover on the corruption happening within the government (Sotero 2018). Investigators on the Operation Car Wash task force found that millions of dollars were given illegally to both politicians and to the officials who owned Petrobas (Sotero 2018). They were able to generate this massive amount of money by adding inflation to the cost of a contract with Petrobas (Sotero 2018). The co-conspirators would then take up to 3% of the total contract value for themselves (Sotero 2018). In the end, Operation Car Wash investigators would recover $803 million from the 278 people charged (Brito and Slattery 2021). 

Image Source: International Anticorruption Media 

But that is not the end of the story because, in February of this year, Brazil shut down Operation Car Wash, the country’s only anti-corruption squad (Brito and Slattery 2021). The reasoning is that many people from both sides of the political aisle were growing uneasy with the corruption investigations (Brito and Slattery 2021). I think that there is more to the story than the government is letting on.  

The question remains on what will happen to Brazil’s economy now. Will Brazil’s GDP reverse course from its downward spiral now that Petrobas (hopefully) is on the right track? Will the Brazilian government revert back to their old ways of corruption with another company, thereby continuing the downward spiral? We will have to watch to find out. 

 

 

References:

 “Brazil: Operation Car Wash Widens to Include US & Greek Firms.” International Anticorruption Media, August 24 2017. http://anticorr.media/en/vlasti-brazilii-operaciya-avtomojka-ne-poshhadit-zarubezhnye-kompanii/

Brito, Ricardo and Slattery, Gram. 2021. “After Seven Years, Brazil Shuts Down Car Wash Anti-Corruption Squad.” US News, February 3. https://www.usnews.com/news/world/articles/2021-02-03/after-seven-years-brazil-shuts-down-car-wash-anti-corruption-squad

Martins, Luciano. 2021. “Brazil.” Encyclopedia Britannica. https://www.britannica.com/place/Brazil/Settlement-patterns

Sotero, Paulo. 2018. “Petrobras Scandal.” Encyclopedia Britannica. https://www.britannica.com/event/Petrobras-scandal

World Bank. 2019. “GDP (current US$)- Brazil.” https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=BR