Ueslei Marcelino / Reuters A demonstrator holds an inflatable doll of Brazil's former president Luiz Inacio Lula da Silva during a protest calling for the impeachment of President Dilma Rousseff in Brasilia, Brazil, December 13, 2015.

Brazil's Foreign Policy Failures

The End of the Country's Regional Ambitions

When Brazilian President Dilma Rousseff traveled to Cuba in 2012 to announce the biggest foreign investment in the island since Fidel Castro’s 1959 revolution, a man in his mid-forties stood discreetly at her side. Marcelo Odebrecht, the head of Odebrecht­—the biggest construction company in Latin America, which was founded by his grandfather—had scored an almost $1 billion contract financed by a Brazilian public bank to modernize the Port of Mariel. In explaining the initiative after flying from Havana to Haiti with Rousseff, where his firm was also expanding investments, he summarized: “We act in alignment with Brazilian foreign policy.”

Fast-forward to January 2016. Odebrecht has been behind bars since June, accused of paying fortunes in kickbacks to politicians in exchange for contracts with Brazil’s national oil company, Petrobras. A number of his competitors and associates were also arrested because of their connection to the scandal.

For her part, Rousseff is fighting an impeachment process indirectly linked to the Petrobras scandal, and an ever-increasing number of her allies (including Vice President Michel Temer) are either siding with the opposition or are in jail. The speaker of the congress, who gave up a fragile alliance with the government to push for Rousseff’s impeachment, is fighting to avoid prison after prosecutors found two accounts under his name in Switzerland that had been allegedly fed with oil money. Likewise, the former leader of the government in the Senate was jailed for trying to block investigations. Meanwhile, the Brazilian economy shrank by 3.5 percent in 2015 and is expected to contract at least 2.5 percent in 2016, performing worse than Russia under Western sanctions.

And so, the days when business and government could work hand-in-hand on a strong regional policy seem long gone. Men like Odebrecht are no longer striking advantageous deals with the Cubans, backed by heavily subsidized and opaque credit from Brazilian public banks. In this sense, the Petrobras scandal has already deeply transformed Brazil’s global outreach.

Brazil's prosecutor Deltan Martinazzo Dallagnol shows the bribery system of a business during a news conference in Curitiba December 11, 2014.

Brazil's prosecutor Deltan Martinazzo Dallagnol shows the bribery system of a business during a news conference in Curitiba, December 11, 2014.

Yet the most tangible damage of the turmoil to rent and electricity and internet bills. According to the local media, the Brazilian government is studying “selective defaults” on financial commitments to international and regional organizations, including the United Nations and the Organization of American States (OAS). At the United Nations, Brazil’s debt—roughly $225 million in 2015—is second only to that of the United States (totaling $3 billion according to some sources, although the United States is also the organization’s largest contributor by far). In terms of its debt to the OAS, last January, after Brazil agreed to make a payment—of just one dollar—some Caribbean countries tried to push forward some form of punishment. Even after paying an additional $3.4 million since, Brazil still owes the organization $15.29 million.

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