Brazil's Rousseff rides anti-graft wave - for now

RIO DE JANEIRO Mon Nov 7, 2011 3:30pm GMT

Brazil's President Dilma Rousseff attends the swearing-in ceremony for the new Sports Minister Aldo Rebelo at Planalto Palace in Brasilia October 31, 2011. REUTERS/Ueslei Marcelino

Brazil's President Dilma Rousseff attends the swearing-in ceremony for the new Sports Minister Aldo Rebelo at Planalto Palace in Brasilia October 31, 2011.

Credit: Reuters/Ueslei Marcelino

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RIO DE JANEIRO (Reuters) - It lacks the fervor of the Arab Spring but the resignation of six ministers from Brazil's government, the approval of transparency laws and the emergence of an angry middle class show that Latin America's giant is stumbling towards cleaner government.

That should eventually make Brazil, which loses up to 2.3 percent of its annual economic output to corruption, more efficient in its public spending and a better place to do business.

In the short term, however, the effects are less predictable as centre-left President Dilma Rousseff tries to harness public anger without provoking a rebellion in her old-school ruling coalition that could further delay crucial economic reforms.

In a year when Brazilians' anger at endemic political corruption finally boiled over, Rousseff has appeared to stand on the right side of history, gaining from the impression that she has dealt firmly with errant ministers.

The perception that she is not tolerating business as usual in the capital Brasilia has lifted her approval ratings -- and in some unexpected places. An opinion poll in September showed a remarkable geographic shift, with her highest rating of 57 percent coming in Brazil's wealthier southern states -- traditionally a weak region for her leftist Workers' Party.

Thousands of protesters took to the streets in Brasilia and other major cities in September, angered by the corruption exposed by the scandals that have shaken Rousseff's cabinet and at times threatened to spin out of her control.

"Just as in Chile, the Wall Street protests, and the so-called Arab Spring, social movements are realizing that there are ways of effecting change that don't involve political parties or unions," said Pedro Taques, a senator with the centre-left PDT party who advocates tougher anti-graft laws.

It is doubtful how much Rousseff has been actively driving the putsch, which first claimed the scalp of her influential chief of staff Antonio Palocci in June and last month accounted for Sports Minister Orlando Silva after accusations that he took delivery of bags of cash in the ministry's garage.

Most of the dirt against ministers has emerged first in Brazil's fiercely competitive newspapers and magazines, sometimes fuelled by leaks from coalition members upset at budget cuts announced by Rousseff at the start of the year.

Rousseff, while renowned as a no-nonsense technocrat, is part of a Workers' Party that has a long history of graft.

Critics say corruption worsened under her popular predecessor Luiz Inacio Lula da Silva, who presided over a period of strong economic growth and took a more relaxed stance on ministerial spending in his latter years in office.

Claudio Weber Abramo, the president of corruption watchdog Transparency Brazil, said Rousseff's government had clearly stepped up the battle against corruption compared to Lula.

He noted her decision last month to suspend for 30 days federal government payments to non-governmental groups, or NGOs, which have starred in several of this year's scandals as recipients of public funds subsequently distributed as kickbacks. Such groups perform a wide range of functions, such as training workers, with the help of public funds.

"The government is taking a more vigorous approach in relation to its allies in ministries ... It is saying to them: 'We are watching you more closely'," Abramo said.

DEEP ROOTS

Anti-graft groups are hailing several recent laws that have set the stage for cleaner politics, although Brazil still has a long way to go to curb the culture of impunity and the patronage-based party system at the heart of corruption.

Congress also passed a freedom of information act last month. Heralded as one of the world's most far-reaching, it forces authorities to publish information on spending and to respond to citizen requests for information.

Last year, it approved the "Ficha Limpa" (Clean Record) law that disqualifies politicians with criminal records from running for office -- a pressing issue in a country where a fifth of congressmen are facing criminal cases in the Supreme Court. The law was a direct result of "people power" after about 1.5 million Brazilians signed a petition backing it.

Yet many of the causes of corruption -- such as expensive election campaigns that put heavy fund-raising pressures on parties -- remain to be tackled. The scandal that toppled sports minister Silva, for example, revolved around an alleged scheme in which his ministry distributed public funds to his own Communist Party.

Along with heavy bureaucracy, corruption is a major contributor to the so-called "Brazil cost" that jacks up the price of doing business in Latin America's largest economy.

Sao Paulo business group FIESP estimates that at least 50.8 billion reais (19 billion pounds), or about 1.4 percent of total economic output in 2010, is diverted from state coffers each year. It says the figure may be as high as 84.5 billion reais, or 2.3 percent of gross domestic product.

Abramo says that shady ties with NGOs remain rampant at the state and municipal level of government and are mostly unreported. Corruption is deeply ingrained in everyday life -- starting with the little dodges or "jeitinhos" that ordinary Brazilians use to avoid onerous rules.

"Society must understand that corruption costs everyone. It kills people in (underfunded) hospitals and robs a generation of Brazilians in poor-quality schools," said Taques, a former public prosecutor from the farming state of Mato Grosso.

While Rousseff appears to be riding the anti-corruption wave for now, it could quickly turn against her.

Her need to maintain working relations with her prickly 16-party coalition to pass an overhaul of the tax system and the oil sector among other reforms means that her "spring cleaning", as it has been dubbed by media, will likely stop short of tackling the deep roots of political graft.

That suggests the boost to Rousseff's popularity -- a vital gauge of her ability to muster enough congressional support to pass structural reforms -- may fade as Brazil's slowing economy looms larger in voters' minds in the coming months.

A sign of the constraints facing Rousseff was her choice last month to replace Silva, the sports minister, with another member of his Communist Party despite the party's alleged involvement in the kickback scheme.

"Dilma has a very clear limit on how far she can take this fight against corruption. She needs the votes of the governing base and we have a political system that is broken," said Sylvio Costa, the founder of the Congresso em Foco (Congress in Focus) website that tracks the legislature.

(Editing by Kieran Murray)

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