Thursday, June 9, 2011


After reading an INTERESTING POST ( titled C for corruption ) on fellow German expat blogger in Sao Paulo, Neven, from "Brazil Country of the Present?", I decided to comment and my comment turned out a little long and made me think about the main differences between corruption in the US versus corruption in Brazil.

Below is the post text, and my comment:

Saturday, May 28, 2011

C is for Corruption

Let us hope he showered
 Transparency International publishes an annual corruption perceptions index, where "the degree to which corruption is perceived to exist among public officials and politicians" ( is measured. A non-corrupt country gets a 10, a corrupt country gets 1. In 2010, ranked first in the list is Denmark with a 9.3. Last on the list is Somalia with 1.1. Brazil is 69th, between Romania and Bulgaria, at a 3.7... improved from 4.0 since 2002.

A lot has changed, especially in the private sector, with more multinationals coming into the country, bringing higher compliance standards in and with Brazilian companies also adapting, often because of compliance codes, but also because of better fiscal controls, such as with the electronic centralized invoicing system nfe: nota fiscal eletronica.

In politics, corruption still is a major issue, such in the Escândalo do Mensalão no Distrito Federal, where the then governor of Brasília José Roberto Arruda was accused of (and subsequently arrested for) siphoning off on significant sums of governmental funds to companies and political companions. What made this case spectacular is that Arruda filmed several of these money hand-overs (as depicted above) - but it is not singular.

But also in the private sector, corruption is still a problem. Having been in Brazil for a few years now and never having lost contact between the early 90s and now, when I was out of the country, I have several accounts of corruption cases which have not made it into the media (yet), which I will post in the next few weeks.

But let us start with a juicy one - to protect those involved, I have anonymized each case:

The Paper Company

A major paper company wanted to install a new factory in one of the poorest states in the Northeast of Brazil. Because the company wanted to have the local political buy-in, they decided to meet with the governor to discuss the licensing and subsequent construction - for this, the president of the company flew in. In the first meeting, the governor clearly stated that no license would be emited unless an upfront payment would be made. This upfront payment was to be a deposit into a personal account of the governor and the value was a significant 6-digit value. Infuriated, the paper company president left the governor's palace and instructed to shutdown all non-crucial activity in the state immediately. The new factory will be built a few kilometers down the road... in the state next door.



Ray and Gil said...
Neven, I totally agree with you, Brazil has improved a lot regarding corruption, it still has a good way to go. I found your perception interesting, you are under the impression that more foreigner companies would bring more "strict" or "higher" standards regarding compliance, I feel the exact opposite. I have worked in banking and compliance with the financial services industry for 19 years now and always noticed much higher compliance standards in Brazilian companies, for the exact reason of the culture of corruption in Brazil, companies are much more regulated and have always had higher standards of compliance in general. When the events of September the 11th forced a wave of radical changes in the American financial services world, ( hence the Patriot Act ), Brazilian banks and financial services companies had absolutely nothing or very little changes to make, because they already had very tight checks and balances in place. My experience is that "corruption" is a very relative term, principally when you are talking about Brazil and the US. Many practices that are considered "corruption" in Brazil are perfectly legal and common place in the US. Lobbying for example, is practically illegal in Brazil, with very feel exceptions, but it is common place in the US. Powerful industries in the US that have money to PAY politicians to vote in favor of their businesses, do so, and it is perfectly legal. K street in Washington DC is a LOBBY firms Mecca, it is where the American Congress is defined. In Brazil, it is a scandal for a company to give money to a certain politician to "force" him to vote in favor of a certain project that benefits that company directly, in the US, it is perfectly legal, it still doesn't mean it is moral or even ethical, but it is done all the time and it is not considered corruption. Long story short, in the US, if something is illegal, they pass a law to make it legal, end of story, no longer considered corruption. American politicians still approve huge salary increases for themselves, they still have a shamefully fancy health care benefits, and so forth and so on...we could frankly write a book about it. The good news is that Brazil is improving, most people get mad when they see political corruption scandals on TV, I get glad, because it means they are getting caught. When you don't hear anything on the media, it only means they are getting away with it. ;) Ray


Danielle said...

Hi Ray! Thanks for sharing all of your opinions. I agree that both countries have corruption problems. However, as an American living in Brazil, I often feel like the corruption seen in the government, the lack of respect for laws or for effects on other people, trickles down to almost all positions on society. It's not only certain sectors and certain jobs that are corrupt. In Brazil, you feel it in almost every type of business you go to.

The average citizen here is much more likely to screw over his fellow citizen, even in a simpler, low-paying job, than the average American citizen.

I just don't get the sense of community here that I get in the US: Brazil often feels like it's every man for himself, at any cost.

Of course there are nice people, and people tend to be nicer to their families and old friends, but there's definitely this idea that you always have to "ficar esperto" with any new people you meet. It's depressing.

Can we say that dishonesty and taking advantage of people are the same as corruption? I think they're the same base logic of "Screw you: I'm gonna do what's good for me!".

Ray and Gil said...


I have to agree with you that if you compare both societies side by side, the US is much more strict on following laws and regulations and Brazil is much more relaxed.
Regarding your perception that the average citizen in Brazil is more likely to screw over his fellow citizen, I have a different impression and I will explain why.
I also had the feeling that "everyone" was out to get me when I moved here in 1998.
In Brazil a "Clausula Leonina" is against the law and in the US is part of daily life. "Clausula Leonina" is a legal term for those small letters at the bottom of a contract or at the back or at the end of a 80 pages contract, in the US it is simply called a "disclaimer".
They also say the disclaimers very quickly at the end of a radio or TV promotion or sale, they say it so fast you can hardly understand it.
So, when I arrived here, I was under the impression that I didn't have to worry about "clausulas leoninas" in contracts, and that got me in a lot of trouble.
I also felt like any company out there was out to get me. Cell phone companies that had tricky little details, my first AT&T Cell phone bill in 1998 was U$790,00, because the sales person at the AT&T store told me the contract I was signing had free long distance, but he failed to inform me that I would still pay for "ROAMING" fees!!!!!
I was told I needed a credit card to build my credit in the US, so when a company called me offering a "credit card", they failed to tell me that with their specific credit card, I had to make a deposit of U$250.00 which I could only use to purchase products from THEIR catalog, needless to say, everything in their catalog was SUPER EXPENSIVE and I got screwed.
I have had experience with contractors, plumbers, electricians both in Brazil and in the US and I will tell this category is EXACTLY THE SAME, they tell you they will show up at 9am and they might be on time and they might be late, they give you a budget and when the job is done tell you it is actually more money than originally thought, if they screw up on a job, good luck getting them back to make it right by you, same in both countries.

The cable guy who tells you he will show up between 9am and 6pm, THE SAME in BRAZIL and in the US, and I have had experience with it in both countries when they don't even show up and don't bother to call you and let you know.

To be continued


Ray and Gil said...

Cont. from last comment:

I have many other similar stories that made me feel like everyone was out to get me when I moved here, but it was nothing but my lack of experience with life in the US and the "traps" we need to avoid.

Not today, today I feel completely comfortable in the US, I know how to defend myself and I no longer feel like everyone is out to get me.
On the other hand, I remember feeling like a tourist the last time I went to Rio and the "WHITE" taxi company at the Airport told me to avoid the "YELLOW" taxis in Rio because they were not trustworthy, I got nervous.
I remember having the very feeling you described, this time, in my own country, the feeling that everyone was out to get me.
American Airlines had lost all of our luggage and we had expensive electronics in our luggage that we were going to need for our presentation with the clients in Rio. I thought for sure, the delivery guys would try to still the valuables before they got to me with the luggage.
Until I met my brother for dinner that night and he realized how "jacked up" I was about every one trying to get me and gave me a reality check. He said I was behaving like a fresh off the boat "gringo"!!!! :)
He reminded me that we had used the yellow cab in Rio for years and never had a problem. He also reminded me that Airlines had lost my luggage before and they delivered it with no problems what so ever.
Thanks to my brother's wake up call, I was finally able to relax and enjoy the rest of my trip. The delivery guys did bring my luggage with ALL the valuable electronics intact, we used the yellow taxi all over the city and had the same good experience as we always had in the past.
Maybe I am wrong, but this has been my perception, as we feel more comfortable with our surroundings, we tend to learn how to filter the exaggerated "drama" from the reality and we can relax a bit and enjoy our time in the new country.
Keep one thing in mind, Brazilians are DRAMATIC, people tend to over complain and over react to certain events, in my experience and that gives a perception that the situation is worse than the reality.


Danielle said...

Those are very good points, Ray. I guess it's just a question of what we're used to looking out for or paying attention to, and what we assume people will be honest about.

I have never had a problem in a Brazilian taxi-- most of the drivers are so amused that I speak decent Portuguese with a funny accent that I think they decide they like me too much to rip me off. Haha.

Ray and Gil said...

Dear Danielle,

You look and sound too smart, I don't think any Brazilian crook would even dare to mess with you! ;)