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Things Fall Apart
Brazil’s Corruption Probe Nabs Former President

Brazilian officials have detained the country’s former president, Luiz Inacio Lula da Silva, as part of their investigation into alleged corruption at the state oil company Petrobras. The BBC:

Lula, who left office in 2011, has denied allegations of corruption. The long-running inquiry, known as Operation Car Wash, is probing accusations of corruption and money laundering at Petrobras. Dozens of executives and politicians have been arrested or are under investigation on suspicion of overcharging contracts with Petrobras and using part of the money to pay for bribes and electoral campaigns. Police said they had evidence that Lula, 70, received illicit benefits from the kickback scheme. Lula’s institute said in a statement the “violence” against the former president was “arbitrary, illegal and unjustifiable”, as he had been co-operating with the investigations.

Brazil’s current president, Dilma Rousseff, is already under investigation for corruption and has been staving off impeachment for the past several months. And while the political system has been roiled by these scandals, Brazil’s economy has been in free fall—GDP contracted by 3.8 percent last year and is expected to see a shrink by a similar amount in 2016.

The more bad news that comes out of Brazil, the clearer it becomes that the country still hasn’t hit bottom. The ripple effects of the fall of Latin America’s largest economy will be felt across South America for years to come.

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  • Blackbeard

    If Brazil can actually put someone like Lula in jail then that will be an important sign of democratic maturity. I wouldn’t hold my breath.

    • Angel Martin

      could be. But if it is just political scapegoating of an unpopular former leader it is just more of the same.

  • Pait

    As it turns out, markets think it was good news: stocks and the Brazilian real are up, country risk premiums down.

    • Kevin

      Dead cat bounce?
      I suspect Brazil’s political situation has a lot further to fall, perhaps in tandem with its economy.
      We’ll see.

      • Pait

        Are you shorting Brazil assets to profit from an educated guess? Or is it just a blog-quality suspicion?

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