High-level corruption scandal threatens Brazil's political stability

As Brazil's high-profile political corruption investigation 'Operation Car Wash' enters its third year, the inquiry's scale is shaking the country's government to its core. On April 11, one day before its scheduled release, Brazilian media obtained a copy of the list of politicians whose cases will go on to be examined by Brazil's courts.

Decided by federal judge Edson Fachin, the list will see scores of senior political figures preparing to face trial for crimes such as corruption and money laundering, including one third of President Michel Temer's federal cabinet.

More than a third of the senate also stands accused, including three state governors, one federal court minister, 24 senators, 39 federal deputies and 23 further names at federal, state and municipal levels.

With a slew of representatives belonging to the country's three main political parties named, analysts say the investigation could have a knock-on effect on next year's presidential elections, hurting their capacity to establish voter trust.

Nor have prominent figures from Brazil's recent political past escaped unscathed: ex-presidents Luiz Início Lula da Silva and Dilma Rousseff, plus Rio de Janeiro's Olympic mayor Eduardo Paes, will face gruelling examinations in court.

Testimonies reveal corruption at highest levels

Allegations include government ministers taking kickbacks from Brazilian conglomerate Odebrecht, which agreed to a plea bargain deal late last year in return for compliance with the investigations. Other accusations facing ministers include receiving illicit campaign donations, as well as laundering millions of dollars over a period of years.

The latest revelations from Odebrecht provide evidence of collusion between the company and Brazil's political parties. Accounts revealed direct interference during televised debates in the 2014 election, with the intention to privilege centre-right candidate Aécio Neves.

Further testimony places Temer himself in the room during several kickback negotiations prior to his presidency. However, neither Temer nor his cabinet members can be investigated while serving in office, unless the courts receive Temer's permission.

Temer saving cabinet to push economic reforms

Despite being implicated in bribes totalling at least 48 million Brazilian reals ($20 million Cdn),  the eight cabinet ministers named by Fachin are likely to be spared. Faced with low public approval ratings and lacking support in Congress, Temer is in need of cabinet support to push through widely unpopular pension reforms.

Those reforms are seen by observers as essential to stabilizing Brazil's economy.

"About a third of the increasing government spending over the last three to four years has been down to pension spending," says Neil Shearing, chief emerging markets analyst at Capital Economics. "These pension reforms are absolutely crucial."

Shearing believes the reforms are necessary to combat the country's gaping deficit and glacial economic growth. If the measure fails to pass, Temer's credibility may not recover, and Shearing says that Brazil's economy will face serious obstacles from inflation, interest rates and low wage growth.

But as electoral courts look into funds received by Rousseff's 2014 campaign with Temer as her vice-president, the corruption investigation could also point to the president, potentially unseating him and resulting in new elections before the 2018 date.

That scenario is unlikely, in part because Temer and members of his cabinet are exempt from questioning by federal judges.

Brazil's present, future political hopes 'tainted'

Many figures from Brazil's recent past and many of its future presidential hopefuls now face questioning in the scandal. Rousseff may face a jail sentence, and the same could go for Lula, who is currently the favourite in the polls for 2018's elections.

"It's destroyed a lot of people in certain political parties," says David Fleischer, emeritus professor at the University of Brasília's political institute. "Leading pre-candidates Aecio Neves, Jose Serra and Geraldo Alckmin have been tainted badly."

Fleischer believes that the anti-PT (Workers' Party) sentiment present in last October's municipal elections, where the party saw drastic losses across the entire country, could extend to the other main political parties, paving the way for wildcard candidates.

"This has really increased the possible candidacy of Joao Doria, the businessman-turned-politician elected mayor of Sao Paulo in the first round. He's been sort of described as a Brazilian-type Trump, never involved in politics before," Fleischer continues.

Voter apathy could jeopardise 2018 elections

But a dearth of viable contenders promoting waves of unknown, outsider candidates may not be the most serious obstacle facing Brazil's 2018 presidential race.

"The real danger, the biggest risk, is that this will create the sensation of fatigue in relation to politics, and to democracy," said Sylvio Costa, founder of Brazilian political watchdog Congress in Focus.

Costa says that this fatigue may pave the way for more radical, right-leaning politicians untouched by Operation Car Wash to enter the race. One such candidate is Congressman Jair Bolsonaro, who is the 2018 favourite in the polls after Lula and is known for his anti-LGBT, pro-torture views and advocacy for the return of Brazil's military dictatorship.

"There's a group of people that are contaminated by the idea of closing Congress, that everyone's a criminal – that's dangerous thinking," said Costa. "The big risk is political regression."