JBS and Impunity

Prior to yesterday, the giant Brazilian construction company Odebrecht was synonymous with massive corruption in Brazil. As a result of years of investigations known as “Operation Car Wash,” or “Lava Jato”, the company has had to pay a US$ 2.5 billion in fines and its CEO has been in jail since 2015

But there is a new corruption king in town: J&F and its subsidiary JBS. The billionaire brothers Joesley and Wesley Batista, who head these companies, secretly recorded President Michel Temer apparently condoning, if not requesting, the payment of hush money to jailed former political ally Eduardo Cunha. The brothers have received full immunity in exchange for their information against Temer and others, including Senator Aécio Neves (presumably, other politicians will be implicated in testimony that is still sealed). They will be allowed to continue running their company, which will have to pay a fine of R$ 225 million for all of the illegal activities they have admitted to engaging in over the past few years.

This is, of course, peanuts for any multi-billion dollar multinational conglomerate like J&F. But it is especially egregious given that JBS received some R$ 8.1 billion in largesse from the Brazilian government over the past decade, in the form of subsidized loans from the Brazilian Development Bank. To add insult to injury, the company will also be allowed to move their headquarters abroad, getting to avoid paying the relatively high Brazilian corporate tax rate. This is all after admitting to prosecutors that they have committed egregious crimes for years, crimes that have rocked the nation and demolished all sense of economic or political stability for the foreseeable future. Crimes that have left the federal and state governments broke.

At the very least, they should return the billions in subsidies and other largesse that they received, and cover the losses to the government that these loans caused. At the very least, they should pay a fine on top of that for all the bribery and corruption that they supported and enabled for so many years – everything from illegally funding campaigns to paying off health inspectors to sign off on expired or rotten meat. At the very least they should be prevented from moving their company abroad, so they can continue contributing to the Brazilian economy and tax base. At the very least, they should personally face some sort of legal consequence – albeit an attenuated one given their testimony. Not even house arrest? Not even community service? Come on.

The lack of punishment has left them emboldened: Despite all of the heat that has come down on the company recently, they couldn’t resist committing one more crime. Just yesterday, the company’s financial branch used insider information (that the recordings would be leaked) to speculate on the currency markets, buying large amounts of dollars and then watching the value shoot up as the allegations went public and the Brazilian Real collapsed. Not only are they tearing down the Brazilian republic – they are profiting from the chaos they created.

This represents a shift in the entrenched impunity that has defined the corrupt political landscape of Brazil. It used to be that politicians got off scot-free and while business people were punished (see Marcelo Odebrecht). The Batistas have managed to turn that upside down: they basically cause the republic to fall, while facing no consequences of their own. In a country that has been plagued by false rhetoric of a “coup”, finally, we see a real one. They have taken down the government. But instead of taking over, they have decided that this country is not even worth conquering. The Batistas are simply burning everything down and then retreating to the comforts of their Fifth Avenue apartment in Manhattan.

Still, there is hope that they will face some consequences, if not in Brazil than elsewhere. Perhaps the news coming out of Brazil will spur investigations in other countries where the company operates. The Batista brothers may have underestimated how corruption and insider trading is dealt with abroad. They may yet get a rude awakening from regulatory authorities around the world. We can only hope.