Considering the Diversion of Public Monies in Brazil -A Cool US$35 Billion for Starters

US$35 billion of public monies stolen. A colossal affront to the cities and country they work for? Yes. Preventable? Not yet.

The most significant news item on the diversion of public monies I have seen in some time appeared in yesterday’s Globo as the lead opinion piece: “The Indicators Show Billions Stolen.” The article cites grim figures: of 131 municipalities audited by the Comptroller General, 90 percent showed irregularities; and it is estimated that municipal officials and their accomplices steal 30% of federal and state transfers– US$ 35 billion dollars (R$60 billion) a year. As the author notes, this sum could tidily pay for Brazil’s primary schooling goals, or a presidential term’s worth of Bolsa familia conditional cash transfers –2.5 percent of Brazil’s annual GDP, which goes to its 44 million poorest (11 million families).

Minor in raw numbers, the second news item is equally disturbing. In the poor state of Amazonas, a Federal Police operation on ‘over-billing,’ found that the State University of Amazonas paid US$380,000 (R$615,000) for a website that should have cost US$3000. The contracting official and contractor would have split the excess funds.

In most advanced democracies, citizens, journalists, public advocates or competing firms tend to be the first to note over-billing or billing to nonexistent companies. But note how in both of these articles government entities did the auditing? Without a complete transparency infrastructure — the sort that can only be laid out by a comprehensive Freedom of Information Law — citizens will be unable to help government account for the $30 billion diverted by municipal governments and their co-conspirators. It’s also costly to have government officials do all the sleuthing.

Seeing as Brazilians labor under one of the heaviest tax burdens in the world, it’s about time to start ‘following the money’ and adopting the tools to do so. As the father of billionaire Eike Batista stated at an event I recently attended at the Rio de Janeiro Industrial Association (FIRJAN), the country cannot, should not, and need not go on “with the taxes of Switzerland and the services of Angola.” The country’s freedom of information law awaits passage in the Senate.

1 Comment

  • Alarming.

    Interestingly, at the national level the adoption of ComprasNet in 2003, an e-procurement portal that facilitates on-line bidding, has markedly increased transparency and reduced corruption in government contracting. Many states have also turned to similar technologies; the initial reports of corruption reduction are sanguine. However, what this report suggests is that the focus on national and state level improvements have obscured the fact that diversion of funds via government contracts at the municipal level is alive and well.

    Great post, Greg.

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