A week of much confusion for the new government

In this week’s issue: The week in review. The rise of gun ownership in Brazil. A week of much confusion for the new government.

The week in review

• Venezuela. Brazil’s Minister of Foreign Affairs Ernesto Araújo met with four dissidents of Venezuelan President Nicolás Maduro this week. The Brazilian government has stated it will do “everything to re-establish order, democracy, and freedom in Venezuela.” The country supports a transition of power, with Juan Guaidó, the president of the opposition-led National Assembly being brought into Mr. Maduro’s place. However, the Brazilian Constitution limits the actions Brazil can take on other countries’ affairs through its principle of “non-intervention.”

• Fissures.During an interview with magazine Época, VP Hamilton Mourão questioned the qualifications of Ernesto Araújo to head Brazil’s diplomacy. He criticized Mr. Araújo’s overzealous approach towards the U.S. and Israel. “So everyone is now fans of the Americans, no matter what? Diplomacy is about means and objectives; it is not an end in itself,” he said, adding that Mr. Araújo “has yet to show what he is here for.” The VP has held several meetings with ambassadors without the foreign minister, going against protocol.

• Trade.The European Union will impose limits on the import of seven steel products from Brazil from February 2, as part of a strategy to protect local producers. Brussels’ main target is China, but the move also hits Brazil hard, as the EU accounts for 18% of Brazilian steel exports. Brazilian producers fear that the Chinese steel that doesn’t enter the EU or the U.S. might flood the Latin American market, stealing Brazil’s share in the region.

• Davos.President Jair Bolsonaro will make his international debut next week at the World Economic Forum in Davos, Switzerland. This week, he signed a decree to increase fraud controls in Brazil’s pension system. Mr. Bolsonaro wants it to serve as a token of his commitment to austerity reforms. However, the government has yet to present a pension reform bill.

• Pensions.Pensions secretary Rogério Marinho said military careers will have their own special pension system and they may even be excluded from the pension reform effort altogether. Economy Minister Paulo Guedes, however, has defended that the Armed Forces should be included, to avoid sending a message that the government gives privileges to certain careers.

• Rio.Brazil’s best-known city, Rio de Janeiro has been chosen as the World Capital of Architecture for 2020. Having defeated Paris and Melbourne, Rio is the first to receive the title under a program launched by UNESCO and the International Union of Architects in November 2018. The city will host UIA’s World Congress, in July 2020.

• Corruption.Over the past four years, the federal government lost BRL 50bn due to corruption schemes within Brazil’s administrative tax appeals council (Carf). For years, auditors have scrapped or unjustly reduced fines owed by big Brazilian firms in exchange for kickbacks. Bribes were often covered up by way of money laundering through legal and consulting fees. The investigation into this scheme began in 2015 and has already indicted 159 people and counting.

The rise of gun ownership in Brazil

On Tuesday, President Jair Bolsonaro signed a decree loosening gun ownership rules in Brazil. While the changes are mild, it is seen as the first step towards a more permissive legal framework. Since the 2003 Disarmament Act, Brazilians are seeking out more guns — and the rate of homicides committed with a firearm jumped from 60% in 1997 to 73% in 2017.

A week of much confusion for the new government

Earlier this week, the corruption scandal involving the president’s eldest son made headlines again. Senator-elect Flávio Bolsonaro requested the Supreme Court suspend an investigation into his former driver, who is suspected of money laundering. The request was considered a move of desperation—especially because Mr. Bolsonaro himself is not yet being formally investigated. But that could change, as new evidence shows that the president’s son might have benefited from illicit transactions.

Let us explain the scandal in detail.

Fabrício Queiroz, a friend of the Bolsonaros

A former police officer and friend of Jair Bolsonaro, Fabrício Queiroz served as Flávio Bolsonaro’s security advisor between 2007 and 2018 — when Mr. Bolsonaro served as a Rio de Janeiro state lawmaker.

Illicit transactions

Mr. Queiroz became “famous” in December, when the press revealed a report showing that Brazil’s money laundering enforcement agency (Coaf) was monitoring him after flagging hundreds of suspicious transactions. Mr. Queiroz made a total of 176 cash withdrawals from his bank account in 2016, an average of two per day.

This kind of transaction is customary when the intent is to conceal the source and recipient of the funds.

Monthly deposits made into the bank account of Mr. Queiroz coincide with the paydays of public servants at the Rio’s State Congress, reinforcing the suspicion that Mr. Bolsonaro’s staffers were forced to surrender part of their salaries to the politician — which would be handled by Mr. Queiroz. This is actually a common—and illegal—practice in Brazil, even having its own nickname: a “Rachid scheme.”

New revelations

Primetime news program Jornal Nacional revealed on Friday evening that Flávio Bolsonaro himself was the recipient of 48 cash deposits between June and July 2017—adding up to a total of BRL 96,000. The deposits were made in five days, and all were to the amount of BRL 2,000. On July 9, 2017, for instance, Mr. Bolsonaro’s bank account received 10 deposits in a 5-minute span, between 11:02 and 11:07 am.

That explains why Mr. Bolsonaro wanted to put a halt to the investigation, as he appears to be more involved than he wants people to know.

The investigation into Mr. Queiroz also flagged a BRL 24,000 check paid to First Lady Michelle Bolsonaro, which the president claimed was the payment of a loan.

Judicial imbroglio

The investigation didn’t start by targeting Mr. Bolsonaro—Mr. Queiroz’s transactions were part of a broader investigation into the Rachid scheme within Rio’s State Congress. Upon stumbling on that piece of evidence, state prosecutors asked the money laundering watchdog Coaf for a more detailed account of Mr. Queiroz’s and Mr. Bolsonaro’s bank accounts.

This new report came on December 18, one day prior to Mr. Bolsonaro’s certification as a Senator. To the Supreme Court, the president’s son said he is protected by parliamentary immunity and that the evidence should be rejected. However, the Supreme Court ruled that immunity privileges only apply for cases connected to the term of the member of Congress, and Mr. Bolsonaro has yet to take office.

The case’s rapporteur is on vacation until February 1, but suggested he is bound to reverse the ruling and let the investigation continue.

Reactions within the administration

Military officers in the administration—who control 30 key positions in the government—have shown concern that the scandal may tarnish the government’s image even before the end of its first month. Especially because President Jair Bolsonaro has kept his sons close to him, handing them a lot of influence within the administration.

The reaction of VP Hamilton Mourão—who has enormous prestige among the Armed Forces’ top brass—is telling, for the lack of support he has shown. “I’ll wait for his clarifications before commenting on the case.” Military advisors also defended that Flávio Bolsonaro own up to the case in order to preserve his father’s government.

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