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The Cable

In Brazil, a Corruption Case Begins as Economy Still Struggles

Is the trial against Brazil's former president a balm for or distraction from the country's current economic woes?


There is good news and bad news in Brazil.

The good news is that, on Tuesday, Reuters reported that central bank data showed the country’s account deficit decreased to $3.34 billion in October from September. Also in October, Brazil attracted $8.4 billion in foreign direct investment.

The bad news is that this is cold comfort. On Monday, Brazil’s finance ministry lowered the country’s gross domestic product projection from 1.6 percent to 1.0 percent, a sign that Brazil’s economy will be slow to recover from a major recession.

But that’s just the bad news in the background. In the foreground, there’s the corruption trial against former Brazilian President Luiz Inacio Lula da Silva, or Lula.

Trial testimony began on Monday. Silva has been charged with corruption and money laundering, and has been accused of taking political bribes from OAS, a construction company.

Prosecutors allege that a beachfront condominium, officially owned and renovated by OAS, actually belongs to Silva. OAS is embroiled in a wider investigation into Petrobras, the state-owned oil company, which allegedly overpriced contracts to pay for bribes. (The brains behind this entire operation is believed to be a Spanish-Brazilian lawyer arrested in Madrid on Tuesday.)

Silva maintains that the case is politically motivated, that the property is not his, and that he had no knowledge of any of these corrupt dealings. He has characterized the case as a “witch-hunt.”

There are two ways in which one could read the timing of the trial and economic announcement. The first is that growth slowed in part because corruption hurt certain key sectors, and that Silva was too busy being corrupt to strengthen the economy, or, at the very least, asleep at the proverbial wheel. Under this school of thought, this trial represents part of a concerted effort to move forward economically and ethically.

The second way of looking at today’s news is that the current government is hoping that the past will distract Brazilians from the bleak projections for their future.

Photo credit: NELSON ALMEIDA/AFP/Getty Images

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