Brazil Speeds Leniency for Corrupt Firms to Save Jobs

Brazilian President Dilma Rousseff issued a decree on Friday aimed at speeding up a process allowing construction companies involved in a major corruption scandal to regain the right to receive government money, a move she says will protect jobs.

 

The decree, also known as a "provisional measure," clarifies the rules by which companies blacklisted for their role in the scandal can negotiate so called leniency accords.

 

The accords will allow the firms to get off the blacklist, a move Rousseff and the companies consider essential to stave off bankruptcy and keep work on essential infrastructure projects moving as the economy shrinks.

 

More than 30 of the country's top construction and engineering companies, including Odebrecht SA, Queiroz Galvão, OAS, and Galvão Engenharia SA are on a government blacklist for involvement in price-fixing, bribery and political kickbacks at oil company Petrobras and other state-run firms.

 

The scandal has paralyzed Petroleo Brasileiro SA, Brazil's largest company, which cut off payments to the blacklisted companies. That in turn left hundreds of suppliers on the verge of bankruptcy and led to tens of thousands of layoffs.

 

"The main objective of this measure is to reduce uncertainty and preserve jobs. Its aims to speed up leniency agreements to unblock the economy," Rousseff said at the decree-signing.

 

Rousseff vowed to fight corruption and make sure the forgiven companies repair the damage done to Brazilian society by repaying graft money. But she also said her government had to avoid causing greater damage to Brazil's stalled economy.

 

Senior presidential sources told Reuters on Thursday that she also hopes the decree will please the politically powerful construction industry at a time when she faces impeachment and rising attacks on her management of the economy.

 

Latin America's largest economy is set to shrink more than 3.0 percent this year and in what is expected to be the worst recession since the 1930s. Unemployment jumped from a record low of 4.3 percent in December 2014 to 7.5 percent in November as companies laid off hundreds of thousands of workers. Economists estimate the jobless rate could reach 10 percent next year.

 

Rousseff decided to issue the decree because legislation permitting the leniency accords is stalled in Congress, which has been paralyzed by debates over her proposed impeachment and the arrest of prominent political figures in the corruption investigation.

 

On Monday, Congress is due to go into recess until mid-February. Under Brazilian law, Rousseff's decree takes effect immediately. Congress now has 60 days to accept the measure or reject it.

 

The decree is designed to end a dispute between Rousseff's executive branch agencies negotiating the leniency accords and prosecutors who are concerned the deals could circumvent efforts to impose criminal and civil punishments on corrupt companies and executives in the courts.

 

When signed, the leniency accords restore the rights of corrupt companies to bid for government contracts in exchange for an admission of guilt, providing evidence of wrongdoing, the return of stolen assets and payment of fines.

 

They do not expunge criminal prosecutions against companies or their officials.


(Reporting by Lisandra Paraguassu; Writing by Jeb Blount; Editing by Robert Birsel and Clive McKeef)