Global Policy Forum

By Mario Osava

The possibility of implicating leading politicians and businessmen in numerous crimes has turned a Joint Parliamentary Inquiry Commission (CPMI) into a time bomb that could go off at any moment.

The commission was formed to investigate allegations of huge sums of hard currency illegally sent overseas between 1998 and 2002. The amount involved could be as much as 30 billion dollars. If the commission succeeds in proving the illegality of these financial transactions, the taxes owed by the perpetrators "would be enough to finance the energy and transportation infrastructure" that Brazil needs to ensure economic growth in the coming years, IPS was told by commission member Senator Flavio Arns.

The information gathered so far has allowed the Federal Revenue Office, Brazil's taxation authority, to impose fines of five billion reals (1.7 billion dollars), said Senator Arns, of the leftist ruling Workers Party (PT). If the inquiry digs deep enough, it will spark "a major scandal, because there are a lot of important politicians and businessmen involved," according to a money changer who spoke to IPS on the condition of anonymity. "The improper use of mechanisms for sending hard currency overseas was extremely widespread," he added.

But the joint commission, made up of 17 senators and 17 deputies, is running into difficulties. One of them is the accusation levelled by Senator Tasso Jereissati of the opposition Brazilian Social Democratic Party (PSDB) against PT Deputy José Mentor, the commission spokesman. Jereissati claims that Mentor has used information gathered by the CPMI for private investigations, which could in turn be used for political "blackmail". The accusation and leaks of information to the press are threatening to paralyse the commission's work.

The storm erupted when authorities in the United States sent the commission a report detailing 534,000 transactions carried out between 1997 and 2003 at the MTB Bank of New York. The transactions, all involving Brazilian nationals, represented a sum of 17 billion dollars. The list of individuals identified as having sent money overseas includes well-known politicians like Paulo Maluf, the former mayor of Sao Paulo who is currently campaigning to regain this post in the Oct. 3 elections. Also on the list, according to the local newspaper O Estado de Sao Paulo, are major Brazilian business figures and members of Jereissati's family.

The surname Jereissati appears in 15 transactions carried out by six individuals, involving close to half a million dollars in total. The senator acknowledged that they are "distant relatives" of his. He also declared that everyone is in danger of being blackmailed if the information gathered by the commission is used improperly. Mentor denied the accusation that he is compiling information for his own use, and stated that he has not leaked any information to the press.

Two brothers of Development, Industry and Trade Minister Luis Fernando Furlán are also on the list, having sent or received U.S. dollars. Former Brazilian Central Bank president Arminio Fraga appears personally, sending 68,000 dollars from the United States to relatives in Brazil. The problem is that most of these transactions were handled by illegal money changers known in Brazil as "doleiros", apparently as a way of keeping the remittances a secret and evading taxes.

This is a new facet added to the irregularities being investigated by the commission, which was initially focusing on so-called CC-5 accounts. These were created by the Central Bank in the 1980s to attract foreign investment, by making it easier for companies to remit profits to their headquarters overseas. These accounts are relatively controlled, since they require the identification of individuals sending more than 10,000 dollars. But in 1996, the Central Bank authorised five banks in Foz de Iguazú, on the Paraguayan border, to handle the transfer of larger amounts without identifying the senders.

Uncovering illegal transactions is easy, IPS was told by Claudio Weber Abramo, the executive secretary of Transparency Brazil, an organisation devoted to fighting corruption. By simply cross-checking information with the Federal Revenue Office, it can be determined if the sender has the income and assets to justify the amount of hard currency transferred. It is unacceptable to allow inter-party fighting to bog down the investigation, he added, because the media has already reported the involvement of huge sums of money and important figures. If the matter is not sufficiently pursued, it will simply confirm the popular belief that the powerful can get away with anything.

Billions of dollars left the country through CC-5 accounts, particularly through the Bank of the State of Paraná (Banestado). It is estimated that around 100 billion dollars were sent out of Brazil this way from 1994 onwards. The Federal Police, an arm of the Ministry of Justice, uncovered the remittance of many millions of dollars by individuals who were in fact very poor, in some cases even unemployed, and were obviously being used as "fronts" for illegal transactions. The commission now has a huge amount of information in its possession, and this seems to frighten "a lot of powerful people," said Arns. This could certainly explain the pressure that is now being exerted on the commission's spokesman, he added.

But the members of the commission are determined to take the inquiry "to the last consequences," the senator declared, and will fully expose the illegal operations and the individuals involved. Part of the money in question undoubtedly stems from drug and arms trafficking and corruption, while some is tied to tax evasion, he said. The investigations should produce a great deal of evidence that can be used by the police to prosecute criminals and by tax authorities to collect billions of dollars that can now be used to finance development, he concluded. The CPMI, formed last year, was initially scheduled to complete its inquiry by early 2005, but its work could be extended.