The English-speaking press does not yet seem to be running with the story of the President of Petrobras somewhat suspiciously divesting herself of part of her fortune before a forthcoming judgement on her part of the Pasadena oil scandal (essentially where Petrobras paid US$1.2bn for a refinery worth less than US$50m, a deal also signed off by the Chairwoman of Petrobras at the time, none other than the current President of Brazil).
Potential investors in Brazil should be paying attention, because this quagmire of excrement clearly illustrates the problem facing anyone who wants to do business here. And let’s be quite clear – the case is not an exception, but the rule. So let me point out the three main lessons for potential investors.
Lesson one is that provided they have enough money or friends, no-one in Brazil is responsible for anything they do. Period. The ex-Chairwoman of Petrobras is able to deny that she was in any way responsible for a deal which defrauded Brazil of US$1.15bn. Note that she cannot deny she signed it off as a “responsible officer of the company” – just that she was, as a responsible officer of the company, in fact not responsible for it at all. Instead, she blames her then-colleague Nestor Cervero (also under investigation, but incredibly still a Financial Director of Petrobras, even after throwing away US$1.15bn of its money in an (allegedly) fraudulent deal). So you need to ask yourself the question – if the board of directors of a company are not responsible for the actions of the company, who is? And even if you can identify them, do you really want to deal with them?
Lesson two is that even in the unlikely event that you can pin responsibility on someone, you will never bring them to any sort of justice. Most Brazilians will just walk away and laugh at you. Take a look at just about any busted business here and you will quickly see that those responsible – even where they are prosecuted – are generally going about their normal lives without a care in the world, while those they defrauded may well have lost everything. Why? Because the legal system is not only slower than a small continent, but so full of holes it is designed to encourage bribery and pervert justice – and anyway, if there seems to be any danger of an unfavourable pronouncement, friendly politicians can interfere in the process with impunity.
Lesson three (as if one and two were not enough). Brazil is so corrupt, and the systems so dysfunctional, that the only way to make a profit at all is to lie, steal and cheat like everyone else. Anyone who tells you they have a successful honest business in Brazil is seriously myopic or a fabulist. Even international businesses have to play the game to establish themselves here (covered by employing a third party agent to pay the local public servants the right bribes to get the paperwork – and critically, the tax incentives – through), even if they manage to subsequently avoid any skulduggery.
And lest you may think that gringo-run global businesses are whiter than white once they are established here, look more closely. If you compare similar products from the same company across countries you will usually find that products in BRICS countries are comparatively poorer quality, older, higher priced and sell at a higher margin. Try asking the companies why, and – guess what – they will tell you it is not their responsibility. Ethics? Schmethics…