Brazil’s democracy crumbling?

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In Brazil, some have a feeling that democracy is crumbling apart. But most are optimistic and see a robust judicial institution working to clean the house. On Wednesday, July 12, former Brazilian President Luiz Inácio Lula da Silva was convicted on corruption charges and sentenced to almost ten years in prison. He is the favored candidate in the 2018 presidential election and has denied any wrongdoing. He is expected to appeal the sentence, which says he received bribes —notably a beach house– from construction company Odebrecht in exchange for securing contracts with Brazil’s state-controlled oil producer Petrobras.

On that Wednesday’s trading, shares of Petrobras (PBR) were up more than 5% from 3% for much of the day.  Of course, other factors were weighing too: the international Brent price of crude went up 0.8%, and Brazil’s securities industry watchdog reversed a preliminary decision ordering Petrobras to restate financial results to include the impact of currency hedges.

So far the so-called “Lava Jato” (car wash) process has revealed and punished widespread corruption and ended a long-standing practice in Brazil of impunity for white-collar criminals. Next in line could be current President Michael Tremer. Congress has already begun debating whether to allow his prosecution for allegedly benefiting from a bribe of $150,000. Far from crumbling, democracy in Brazil is getting better.

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