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Background information Caso Petrobras

Formed in 1953 as Brazil's national oil company, Petróleo Brasileiro is one of Latin America's largest companies. The government holds a majority stake, but it is also listed in São Paulo and New York and counts thousands of ordinary Brazilians among its shareholders.

After being partly privatized by the centrist government of Fernando Henrique Cardoso in the 1990s, the leftist Workers’ Party (PT) government of Luiz Inácio Lula da Silva steadily restored state control of the company during his eight-year rule which ended in 2010.

This process was turned into a patriotic cause when in 2007 Petrobras discovered the “pre-salt” oilfields, so-called because the oil lies under a two-kilometer-thick layer of salt, which is itself under the ocean. As the biggest deepwater offshore oil find in decades, the PT was keen to keep the pre-salt out of private hands. It invented a new regulatory regime that made Petrobras the sole operator of the pre-salt discoveries, leading the company to embark on what was the biggest corporate capital expenditure program in the world.

Why has it become embroiled in scandal?

The PT and its coalition partners appointed their own candidates to Petrobras’ most important executive positions. These figures, led by Paulo Roberto Costa, a former director, secretly diverted funds valued at up to 3 per cent of all contracts to the PT and its coalition partners. This amounted to billions of dollars because of the huge investment in the pre-salt and an accompanying refinery program.

The corrupt directors collaborated with Petrobras’ contractors, including some of Brazil’s largest construction companies, to line their own pockets. Some of the directors accumulated funds of more than $100m in Swiss bank accounts while others put the money into extravagant art collections. They were assisted by a ring of black market money dealers, led by convicted criminal Alberto Youssef, who was in charge of laundering the funds. Investigators suspect the scheme was part of a “project of power” to keep the PT and its allies in government by using funds from Petrobras to pay off the ruling coalition and fund election campaigns. The PT denies such claims, saying all its election campaigns were funded legally.

What political parties are involved?

The main political parties accused of benefiting from the bribery scheme are the ruling Workers’ Party, whose former treasurer João Vaccari Neto has been jailed in the case, as well as its coalition partners, the PMDB and the PP. But the opposition PSDB party has also been mentioned by some witnesses. All parties deny wrongdoing.

Why is the investigation called Lava Jato, or Car Wash?

Police first began tracking the black market money dealers, or doleiros, at the Posto da Torre, a petrol station in Brasília which also had a money exchange business. The doleiros eventually led investigators to Paulo Roberto Costa, enabling them to discover the corruption at Petrobras. That was 2014. Since then, investigators have uncovered R$6.2bn in bribes paid and total losses to the state estimated at between R$29bn and R$42bn. They have charged 179 people with criminal offences and secured 93 convictions. Added together, the sentences equal nearly 1,000 years in jail.

Who is Sérgio Moro?

Sérgio Moro, a federal judge in the southern city of Curitiba who has handled most of the cases stemming from the investigation, is known for his efficient and fearless judgments, such as his jailing for over 19 years of one of Brazil’s most powerful businessmen, construction boss Marcelo Odebrecht. The judge’s admirers credit him with ending Brazil’s culture of impunity for the rich and powerful. His detractors accuse him of siding with the opposition or riding roughshod over civil rights, such as the presumption of innocence.

What does Mr Lula da Silva have to do with it?

The former president is suspected by prosecutors of collaborating with some of the key construction companies involved in the Petrobras scandal, including the Odebrecht Group and OAS, in return for receiving favors. He denies wrongdoing.

Lula's arrest happened just after he announced that he would consider running for president in the next elections. Lula's return to the presidency is seen as one of the only ways the left-wing Brazilian Workers' Party could stay in power since current President Dilma Rousseff has seen public support plummet – mainly for her alleged connection to the Petrobras scandal and Brazil's weakening economy.

But critics say both Rousseff and Lula are facing a smear campaign by opposition parties, seeking to make it look as though the ruling PT party has lost control.

Following the announcement that he could potentially run again for president – what would be a major blow to the country's right-wing opposition given his popularity – he was arrested for allegedly orchestrating a plot to buy off a witness in the Petrobras scandal and was later detained on suspicion that he had directly benefited from the scandal.

If a judge decides to send him to trial, Lula could face up to 13 years in prison, essentially barring him from the next presidential election. 

First woman president

2010 October - Dilma Rousseff, of President Lula's Workers' Party, wins second round run-off to become Brazil's first female president.

2011 June - President Rousseff's chief of staff resigns amid corruption allegations.

2013 October - The rights to explore Brazil's biggest oilfield are awarded to a consortium led by the state-run energy giant Petrobas backed by French, Anglo-Dutch and Chinese firms. Critics say that allowing foreign companies a stake in the Libra oilfield will damage national interests.

2014 October - Incumbent Dilma Rousseff wins another term as president.

2015 March - Petrobras state oil company implicated in massive corruption scandal that brings hundreds of thousands onto the streets in protest at President Rousseff, who was company chairperson during the period in question.

2015 August - Hundreds of thousands of protesters march to demand President Rousseff's resignation, blaming her and the leftist Workers' Party over alleged large-scale corruption and looming recession.

2015 October - Top finance court says government borrowed billions illegally to offset 2014 budget shortfall. Election commission reopens probe into allegations that President Rousseff misused funds during 2014 presidential election campaign.

2015 December - Congress agrees to launch impeachment proceedings against President Rousseff.

2016 March - Junior coalition Democratic Movement Party leaves government. Judge bars President Rousseff from appointing ex-president Lula da Silva to her cabinet after he is accused of money-laundering, which he denies.

2016 April - Lower house of Congress votes overwhelmingly in favor of sending impeachment motion against President Rousseff to Senate. She rejects the accusations that she manipulated government accounts during the 2014 presidential election campaign and accuses her opponents of launching a "coup d'état" against her.

2016 May - Senate votes overwhelmingly in favor of subjecting President Rousseff to an impeachment trial. She is suspended from her post pending the trial.

2016 August: Senators vote to remove President Dilma Rousseff from office for illegally using money from state banks to bankroll public spending. Michel Temer is sworn in to serve the rest of her term to 1 January 2019.

Last updated: 10/17/2016