The Soft Power Of Brazil’s ‘Car Wash’ Corruption Probe

In matters of corruption, many institutions are rolling up their sleeves and getting to work.

The movement to fight corruption in Brazil can be a model for both emerging and mature economies

A few of months ago, journalist Charlie Rose – who we can definitely count among the world’s most well-informed individuals – engaged with a group of Brazilians at a social gathering in New York. The host of what’s probably the best TV talk show in the US wanted to know: “When will your country return to growth? When is Brazil going to rise again?”

Seven years ago Rose welcomed to his show the archetype of the universally hailed Brazil-mania: Eike Batista. The global elite regarded the business magnate as emblematic of the country’s booming economy. When the cover of “The Economist” depicted the Christ the Redeemer statue blasting off Rio’s Corcovado mountain bound for the constellation of world superpowers, it might as well have included Eike Batista as copilot.

Batista, as so many other prominent names of Brazil’s once untouchable business and political elites, was arrested under corruption charges arising from Lava Jato (Car Wash, Brazil’s – and perhaps the world’s – largest investigation into corruption ever) . And Brazil, in academic circles and the business world at large, has seen its status as an “emerging country” sharply brought into question.

There are many ways to measure Brazil’s decline. It has been the worst performing of the G20 countries for three years running. There is no Brazilian growth model with guaranteed social inclusion capable of guiding other developing nations.

The combination of economic populism, a revived import substitution policy, tax exemptions and colossal public spending has sparked a catastrophe from which other countries wish to keep their distance. One possible exception is the US under Donald Trump. Trumponomics is indeed a close cousin to Brazil’s “new economic matrix” (an emphasis on local content, grooming corporate champions and micromanaging the economy) implemented during the administration of impeached president Dilma Rousseff.

Because of its public-safety shortcomings, Brazil has been unable to garner legitimacy to pursue greater collective-security ambitions. At 50,000 deaths per year, homicide victims in Brazil currently outnumber the casualties of conflicts in Africa and the Middle East combined. The horror of Brazilian prisons and the alarming levels of violence in urban centers like Rio de Janeiro preclude the country from a coveted permanent seat on the UN Security Council despite tireless diplomatic lobbying.

Obviously, programs of technical cooperation with Latin America and Africa allow Brazil to wield diplomatic influence. However it is the country’s relative economic clout, not the success of its public policies, that continues to underpin the world’s desire to strengthen partnerships with Brazil. Even initiatives like Bolsa Família (“Family Allowance”, a poverty alleviation cash transfer program), which was once a model deemed worthy of export to low-income countries, have seen their viability and attractiveness limited by the context of a stagnant economy.

In recent months, many have claimed of late that the worst is now behind us. This is probably true. In macroeconomic terms, the country is no longer in decline. Inflation has dropped. Petrobras, the Brazilian Development Bank (BNDES) and Eletrobras are now considered well-managed. Certain structural reforms have made headway. And the country has shed the ideology of third-worldism when practicing diplomacy.

It is also true that sound monetary and fiscal policy and the improved governance of state-run companies have helped shore up Brazil’s credibility since Michel Temer took office as president following Rousseff’s impeachment. By the same token, espousing a foreign policy that does not view the North-South divide by the same reasoning as the domestic discourse of “us-versus-them” means the pursuit of diplomatic partnerships are now less guided by a populist, third-worldish Weltanschauung.

But all of this is the least one could expect. Good governance and pragmatic diplomacy are pre-conditions, not laudable distinguishing characteristics of those who want to thrive in a 21st context of global affairs.

It is as if economic underperformance, systemic corruption and disenchantment with party-based politics blot out the success stories. From this perspective, Brazil offers little of which to be proud and much to be ashamed of.

It follows that, in the field of international relations, the country has supposedly exhausted its stores of “soft power”. The man who coined this term, Joseph Nye, a political scientist at Harvard, defines soft power as “the ability of a country to influence and persuade others without the use of force or coercion (hard power).”

Nye identifies not only the ability of culture and language to foster soft power, but also a country’s values, institutions and the manner by which it seeks to resolve international or domestic issues.

If that is true, then in the midst of what could be seen as the “global eclipse of Brazil,” the country is actually casting its soft power as an unintended consequence of the Lava Jato corruption probe.

Recent debates at universities around the world make it clear that the overwhelming majority of academics, opinion leaders and economic decision makers understand the Lava Jato corruption probe to be more than merely a source of pride for Brazilians. It is an important tool for the country to leverage its ability to compete on the world stage.

One of the first notable academics to express this view was Harvard economist Dani Rodrik. About a year and a half ago, Rodrik asserted that economic players and international public opinion were underestimating Brazil. And he went on to commend how prosecutors and judges are combating corruption within the framework of the law, exercising political maturity and acting above party influences. This will all result in enhanced compliance practices and improved relations with investors that will yield major mid-term bonuses for those who place their bets on Brazil.

If this is indeed the case, then Brazil is not destined – as stressed by Sergio Moro, the judge leading the probe, during a talk at Columbia University earlier this year – to indefinitely succumb to the role of a defenseless victim of corruption. Nor should this vice be understood as some sort of “tropical disease.”

To the contrary, the movement to combat corruption in Brazil can be a model for paradigmatic change in the political economy not only of emerging countries, but even in more mature economies. At this stage many in other Latin American nations, for example, have voiced their wish that something similar to Car Wash would also revolutionize the way of doing business in their countries.

Of course Car Wash can also make a few mistakes here and there given the scale of the investigation and its multiple fronts. But the damage that the probe causes pales in comparison to the ills it cures.

The success of the Lava Jato probe may not satisfactorily answer Charlie Rose’s question about when Brazil will rise again. The country requires not just deft management and non-systemic corruption levels, but also a solid strategy to be competitive in today’s turbulent world.

Nevertheless Brazil has demonstrated that, at least in matters of corruption, many institutions – backed by the majority of the population – are rolling up their sleeves and getting to work.

This is inspiring and ultimately influences other countries. This is leading by example, the very essence of soft power.