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Analysis

Vaccine scandals lay bare Brazil’s enduring graft problem

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Speaking to a local radio station this month, Brazilian president Jair Bolsonaro declared his government’s greatest achievement to date was “two and half years without corruption”.

But it is becoming ever harder for the rightwing leader — who was elected on an anti-graft platform — to make that claim.

Following a year when dozens of state-level officials, including three governors, were swept up in probes for skimming profits from emergency Covid-19 funds, the latest scandals have focused on the federal level and officials close to the government, who allegedly sought benefits from vaccine purchase contracts.

The allegations are taking a toll on Bolsonaro’s popularity and reveal how deeply entrenched graft remains in Latin America’s largest country.

“What is special about these corruption cases is that they are taking place in the midst of one of the greatest humanitarian tragedies in Brazilian history,” said Bruno Brandão, executive director of Transparency International in Brazil. “It’s something so sordid that it may provoke such indignation in the population as to overcome apathy and bring about change.”

The impact of the scandals is becoming evident. The popularity of Bolsonaro has begun to slide, with his approval rating now hovering at around 25 per cent ahead of elections next year.

Corruption regularly ranks alongside healthcare and security as top issues for Brazilian voters and recent surveys suggest a majority of Brazilians believe the president knew about the alleged malfeasance in the Ministry of Health.

“The scandals affect the president’s image and Bolsonaro is now being questioned over the quality of his government. His strongest defence was always that he had no corruption cases . . . but there is a perception now that Bolsonaro is no different from previous governments,” said Carlos Melo, a political scientist at Insper in São Paulo.

The allegations of graft — which have emerged in a congressional inquiry into the government’s handling of the pandemic — are linked to attempts by officials within the health ministry to buy vaccines produced by AstraZeneca, China’s Sinovac and India’s Bharat Biotech.

In the case of AstraZeneca, a salesman told the parliamentary inquiry that a senior official at the ministry had sought a bribe of $1 per dose in the purchase of 400m jabs developed by the British-Swedish company. The salesman, who claimed to work with US group Davati Medical Supply as a middleman for AstraZeneca, said the deal did not proceed.

Former health minister Eduardo Pazuello, meanwhile, allegedly negotiated with an intermediary group to purchase 30m doses of Sinovac’s CoronaVac jab at $28 per dose — almost triple the market price in Brazil — according to local media reports. Pazuello, a close Bolsonaro ally and an active military general, has denied the claim.

Former health minister Eduardo Pazuello, left, and President Jair Bolsonaro at the launch of Brazil’s Covid vaccination plan in December 2020
Former health minister Eduardo Pazuello, left, and President Jair Bolsonaro at the launch of Brazil’s Covid vaccination plan in December 2020 © Andressa Anholete/Getty Images

Most of the focus of the scandals has been on Bharat Biotech and its Covaxin jab. The affair came to the fore when a civil servant in the health ministry claimed he was pressured by senior government officials to sign off an order for 20m shots, despite supposed irregularities in the paperwork.

These included inflated prices for the doses and the use of a Singapore-based intermediary company, in addition to broader questions over why Covaxin was being purchased despite it not having completed late-stage trials.

In the end, the deal was suspended because the affair became public in the parliamentary inquiry.

The controversy, however, has now directly ensnared Bolsonaro. Earlier this month, the Supreme Court authorised a criminal investigation into whether Bolsonaro engaged in the crime of “prevarication”, the dereliction of public duty for reasons of personal interest. The populist leader has been accused of not acting on suspicions of wrongdoing after concerns about the $320m Covaxin deal were personally raised with him.

Bolsonaro and Bharat Biotech deny any wrongdoing, and political analysts are sceptical about the potential impact of the judicial probe given any criminal charges brought against the president would be unlikely to garner the two-thirds support of the lower house of Congress necessary in order to proceed.

The case, nonetheless, weighs on the president’s public image.

“Bolsonaro made honesty his key value. But there was nothing more dishonest than the administration of the Ministry of Health in the hands of General Pazuello,” said Antônio Delfim Neto, a former minister of finance.

“Pazuello irredeemably compromised the Bolsonaro government and these scandals will provoke a huge departure of Bolsonaro’s old supporters.”

Brandão from Transparency International described the alleged public procurement corruption as “not episodic, but systemic in Brazil”.

“It reflects serious structural flaws, such as a lack of lobbying regulation, a lack of controls on political appointments for key positions in the state bureaucracy and, very importantly, certainty of impunity in a judicial system designed to shield those with money and power,” he said.

Luis Fernando dos Santos Lima, a former prosecutor in the country’s long-running Lava Jato, or Car Wash, graft investigation, echoed the sentiment, saying: “Corruption in Brazil remains endemic.”

“The same political corruption schemes have returned, now under the Bolsonaro government and in the state and municipal governments,” said the member of the anti-graft task force, which was disbanded by Bolsonaro in February after seven years in operation.

“But the situation is worse today as the institutions responsible for graft investigations are now controlled by the government.”

Additional reporting by Carolina Pulice



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Analysis

Paris terror victims to make voices heard at landmark French trial

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Terrorism updates

The Palais de Justice in Paris has been at the heart of French legal affairs for centuries but the case starting there on Wednesday is like no other: the landmark trial of 20 men accused of planning and carrying out terrorist attacks in Paris that killed 130 people and wounded hundreds more.

Those deadly hours starting on November 13 2015, have been labelled by some as France’s own version of what the US lived through on September 11 2001. They formed part of a traumatic period in France when Isis fighters returning from Syria and Iraq, and French citizens who adhered to their cause, carried out a series of deadly acts, from killing journalists at Charlie Hebdo magazine in January 2015 to the truck rampage in Nice in July 2016.

Only one of the men on trial, which will take place with five judges in a specially prepared courtroom over nine months, is accused of being directly involved in the attacks. Most of the perpetrators died that night.

François Molins, the then Paris prosecutor who rushed to the scene of the attacks, said the trial would have stakes beyond judging the accused.

“The trial must fulfil several objectives, the first of which is revealing the truth of what happened,” he added. “It should help the victims in their healing process by having a cathartic effect. It will also be an occasion to remind us of our society’s values of humanity and dignity, which stands in stark contrast to those espoused by the Islamist terrorists.”

An aspect of the French legal system that differs from common law in the UK or the US will lend a particular intensity to the trial: about 1,800 victims, often the families of those killed, have joined the case as civil parties. 

That gives them the right to be represented by lawyers who can ask questions and call witnesses, just like the defence and prosecution. Victims who want to speak about how they were affected can do so during five weeks set aside for such testimony.

Journalists capture images inside the temporary courtroom prepared for trial over the 2015 terrorist attacks
The case will be heard in a temporary structure under the vaulted ceiling of a ceremonial hall in the Palais de Justice © Yoan Valat/EPA/Shutterstock

Philippe Duperron, whose 30-year-old son Thomas was killed in the attacks and who heads the victims’ association 13onze15 Fraternité et Vérité, will be among them.

“We must embody the victims so they are not relegated to anonymity,” he said. “I will carry the voice of Thomas. I owe him that as his father.”

Sharon Weill, a law professor specialising in terrorism trials at the American University of Paris, said the victims’ prominent role would set this trial apart. It will also allow for scrutiny of intelligence failures before the attacks, such as lack of co-ordination with other European countries.

“The proceedings will really be a mixture of a criminal trial and a sort of truth commission to establish the narrative and collective memory,” said Weill.

The attackers struck Parisians enjoying a Friday night. Supervised by Isis, three teams fanned out across the capital in rented cars. In just under four hours they set off suicide bombs near a football match at Stade de France, fired automatic weapons at people drinking at café terraces in the city’s trendy 10th arrondissement, and killed 90 people in a rampage at the Bataclan theatre, where an American metal band was playing.

Eleven attackers died, either blowing themselves up or being killed by police. French and Belgian investigators tracked the surviving attackers through recovered mobile phones to a cell in the Molenbeek neighbourhood of Brussels. 

Soon after, police killed two alleged attackers in a Paris suburb, including Abdelhamid Abaaoud, the Belgian-Moroccan mastermind of the operation. But it took a long manhunt to catch Salah Abdeslam, who will be the sole defendant at the trial accused of being directly involved that night.

Abdeslam told Belgian investigators in 2016 that he had rented cars and dropped off the commandos at the Stade de France, but did not follow through on the plan to blow himself up there. He said little during years of investigations by French magistrates and it remains to be seen if he will speak at the trial.

Thirteen other defendants allegedly provided logistical support, such as renting cars or apartments, providing fake passports, or obtaining weapons. Six defendants, including several Isis leaders who allegedly planned operations in Europe, are being tried in absentia, although some are thought dead in Syria. 

A person cries as she stands at a makeshift memorial for the victims of a series of deadly attacks in Paris
A memorial for the victims of the Paris attacks. The victims and their families will have access to an audio feed of the trial to follow proceedings © Lionel Bonaventure/AFP/Getty Images

Among the witnesses will be former president François Hollande, as well as the then interior minister and intelligence services chiefs. They are likely to face questions about how the attackers pulled off the operation even though many were on the radar of security services. “This will not be a trial to judge the state’s actions, but that of the defendants,” Hollande told Libération newspaper in comments published this month. “But I feel I have a duty to help with the search for truth.”

Since no courtroom was big enough, the case will be heard in a 700 sq m temporary structure under the vaulted ceiling of a ceremonial hall in the Palais de Justice. Cameras will record the proceedings, while efforts have been made to ensure that the victims and their families can exercise their rights as civil parties without renewed trauma. An audio feed of the trial will be accessible only to them, so they can follow proceedings. Psychologists will be available to provide support. 

Arthur Dénouveaux, a survivor of the Bataclan attack who leads Life for Paris, a victims’ group, said he was surprised by the powerful emotions revived by the upcoming trial.

“I do not have the control over them that I thought, despite having done many steps in recovery,” Dénouveaux said. “But the message I will carry at the trial is that terrorism does not destroy us. We are still here and we are alive.”



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Norway’s oil rises to top of election agenda as climate fears grow

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Norway’s voters are to give their verdict next week in what has become a “climate election” — jolted into life by the UN report last month that issued a stark “code red” over the impact of environmental change.

The UN report has forced Norway to examine a big contradiction at the heart of its economy. The country is one of the largest proponents of green solutions such as electric cars and carbon capture storage: seven in 10 new cars sold last month in Norway were fully electric.

But the country is also western Europe’s biggest petroleum producer, with a massive sovereign wealth fund accumulated on the back of oil and gas output.

That dissonance is being tested in the election on Sunday and Monday. Support is rising for the Green party, which says it will only join a government that promises an immediate halt to oil and gas exploration. The two other main parties campaigning on climate, the Socialist Left and Liberals, are also rising in the polls. The Greens’ membership numbers have jumped by a third in just a few weeks.

“It was a game-changer for Norway when that UN report came out. It is now the most important seven days in Norway’s history,” said Kriss Rokkan Iversen, deputy leader of the Greens.

Espen Barth Eide, energy spokesman for the centre-left Labour party agreed: “This is clearly the climate election, even more than people thought it would be.” Labour leads in polls but oil is likely to be an obstacle to a viable coalition.

Norway’s two biggest political parties — Labour and the centre-right Conservatives of prime minister Erna Solberg — stand firmly behind the oil industry, which is responsible for about 160,000 direct jobs, or about 6 per cent of the total.

Labour leader Jonas Gahr Store with prime minister and Conservative leader Erna Solberg
Labour leader Jonas Gahr Store with prime minister and Conservative leader Erna Solberg © Gorm Kallestad/Reuters

Tina Bru, the Conservative oil and energy minister, is firmly against ending exploration or setting an end date for Norway’s petroleum production, arguing for doing more to cut global demand.

“We are preparing for a future with less demand for oil and gas, we’re building new green industries, but we won’t get there by hurting our economy, destroying jobs and dismantling an industry,” she said.

Eide said: “We want to undermine the prospects for a long-term oil industry rather than closing the supply.”

Norwegian oil production has risen in recent years following the discovery of the giant Johan Sverdrup field in the North Sea. It is set to fall again from 2025 or so.

Solberg told the Financial Times this summer that she would not act to accelerate that decline but that Norway was on a gradual “shift” to green industries.

Following a tax tweak last year that helped the oil industry, Solberg’s government this month proposed another complicated fiscal change that appears mildly positive in the short term for most companies active in Norway, while making speculative exploration costlier.

Extinction Rebellion environmental activists protest outside Norway’s oil ministry
Extinction Rebellion environmental activists protest outside Norway’s oil ministry © Ole Berg-Rusten/AFP/Getty Images

“It’s a sign that the oil market in Norway is becoming mature and is only attractive to fewer companies. But the worry is that this is the second change in two years after years of stability — it shows how oil could become more of a political football,” said a senior executive at an oil company active in Norway.

For the Greens, the tax debate is a sideshow. As well as ending exploration, they also want to halt production by 2035.

Iversen said Norway was a petroleum pioneer in the 1960s and 1970s but did not have the same spirit for the “green shift” — with, for instance, the world’s largest wind farm developer found in neighbouring Denmark.

Of the willingness to stick by the oil industry, she said: “It’s a question of feeling and identity for many Norwegians. I don’t think it’s rational.”

Defenders of the oil industry have also stepped up their rhetoric. Sylvi Listhaug, the leader of the populist Progress party, this summer posted a social media picture of her filling her car up, with the caption: “Lovely with the smell of real fuel.”

Barth Eide said Labour, under its leader Jonas Gahr Store, would not go into government with a party that insisted on stopping exploration or production. However, its two favourite coalition partners — Centre, and the Socialist Left — hold almost opposing views on Norway’s biggest industry.

Eide said a compromise was possible, avoiding over-investing in oil but refusing to put an end-date on either production or exploration. He also hinted that contentious exploration in the Barents Sea, inside the Arctic Circle, could end as companies such as state-controlled Equinor favour proven areas in the North and Norwegian Seas.

The Greens’ Kriss Rokkan Iversen
The Greens’ Kriss Rokkan Iversen. Support for the party has risen recently © Siri Døsen

Labour is likely to have a much more interventionist industrial policy as it attempts to speed up the green transition. “It has clearly gone too slowly . . . The pace does not fit with the remaining time,” Barth Eide added.

Economists believe Norway’s move away from oil will be expensive but unavoidable. “Can we afford to wind down? It’s going to be extremely costly. But can we afford not to? No, we can’t. It’s hard to say that doing nothing is the best option, but we need to find a good balance,” said Hilde Bjornland, economics professor at BI Norwegian Business School.

Iversen argued that if Norway failed to move away from oil quickly enough, it could hurt both the climate and its famously generous welfare state.

“In the middle of the climate and Covid crises . . . we locked ourselves even more into oil and gas,” she said. “It is like we have this oil fog blurring our view and stopping us setting a course for our future.”

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El Salvador becomes a crypto laboratory with bitcoin gamble

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Like millions of Salvadorans, chauffeur Ricardo López has spent the past few weeks trying to get his head around bitcoin. Once the digital currency becomes legal tender this week, he is not sure he will accept it, but if he does he will convert it immediately into US dollars.

“They say the price varies and that it’s a bit like the stock market,” the 37-year-old said. “Most people are afraid because of the lack of information.”

Twenty years after it adopted the US dollar as its national currency, El Salvador will on Tuesday become the first country in the world to make bitcoin legal tender.

In a plan spearheaded by the Central American nation’s populist president Nayib Bukele, citizens will be able to shop, pay taxes and buy land using the volatile cryptocurrency.

Proponents say it will cut the fees Salvadorans pay to send home remittances — which represent one-quarter of the country’s gross domestic product — promote financial inclusion for those without bank accounts and facilitate access to a potentially high-yielding asset.

Critics say the rushed plan could cost poorer Salvadorans when the price falls, raise costs for banks and insurers, provide a shield for money launderers and risk economic stability.

Rating agency Moody’s downgraded the country’s debt rating in part because of the law. The IMF — currently in talks with the government over a new loan — said adopting cryptocurrency as legal tender could destabilise prices and put the financial system at risk.

Stickers against bitcoin on an ice cream vendor’s cart in San Salvador
An ice cream vendor in San Salvador voices her opposition to bitcoin with a sticker on her cart © Marvin Recinos/AFP via Getty Images

With a week to go, polls show the majority of Salvadorans are against the idea, and on the streets of the capital, few said they were prepared to switch to using the digital currency.

Small, sporadic protests by groups from pensioners to unions took place through the week, and a digital specialist who had spoken out against the plan was detained by police without an arrest warrant.

“I don’t know anything about it and I don’t want to learn either, I’m one of those people who says: no way, I won’t use it,” said Guadalupe Escobar, 35, who sells bread at a roundabout in the capital San Salvador.

Out of employees and owners from more than 20 different enterprises surveyed by the Financial Times in San Salvador — from informal street food stands to coffee shops chains — three said they knew they would accept bitcoin. The rest had not started preparing or rejected the idea.

Bukele’s government is rolling out a digital bitcoin wallet called “Chivo” — slang for “cool” — in the coming days with $30 in bitcoin free for every user. Across the country, Chivo ATMs will allow consumers to buy bitcoin or convert it into cash with the government absorbing commission costs.

A motorcycle repair shop in Aguilares that accepts bitcoin as a payment method
This motorcycle repair shop in Aguilares accepts bitcoin as a payment method © Jose Cabezas/Reuters

The move has excited cryptocurrency advocates abroad. Juan Pablo Thieriot, chief executive of Uphold, a digital platform that enables payments and trading in cryptocurrencies, national currencies and precious metals, said El Salvador’s move made “a ton of sense”.

This was because the dollarised country needed better alternatives to dodge the negative effects of the US government’s giant stimulus package on the currency.

“You see something like a . . . six or eight trillion [dollar] debasement exercise where most of the benefit is going to US citizens . . . and you are not the beneficiary of that,” he told the FT. “You would logically look for something else.”

The country’s large retail businesses are preparing to accept bitcoin and expect a September bump in sales from the extra liquidity, said Leonor Selva, executive director of private sector association ANEP, but what will happen beyond that is unclear.

“The government is preparing more of a brand or product launch than public policy,” Selva said.

In response to questions, the government said it would publish more information in the coming days.

The inspiration for the bold move was a project called Bitcoin Beach in El Zonte, a laid-back surf town a 50-kilometre drive from the capital, where tourists and locals are already using the cryptocurrency.

In 2019, an anonymous US crypto “early adopter” began funding community work paid in bitcoin in the town and now a team of mostly young Salvadorans works to promote its use.

Idalia Mejia sells pupusas — a popular Salvadoran corn patty often filled with cheese or meat — in bitcoin in the town and thinks it is good for attracting clients, but tries not to hold on to it. “I have lost out when it’s gone down,” the 49-year-old said. “I prefer not to have it.”

In the past year, the price of bitcoin has soared from about $10,000 to more than $60,000 and it is currently worth a little under $50,000.

Jorge Valenzuela, one of the project leaders, estimates that about half the town’s residents use it. Some save it, he said, but for others it is convenient for transactions in a nation where 70 per cent lack access to financial services.

Across the country, anyone with access to technology will by law have to accept bitcoin from Tuesday, although the three pages of government regulations do not mention penalties for non-compliance.

Apart from the initial incentive, the Chivo wallet will allow immediate conversion into dollars, backed by a recently approved $150m fund. Some economists question whether that is big enough, and say that a fall in the price of bitcoin would put the government under broader fiscal pressure.

“If, for example, taxes are paid in cryptoassets, while expenditures remain primarily in dollars, there would be significant pressure on the exchange market, and on the level of international reserves,” Torino Capital said in a note.

El Salvador’s central bank did not respond to a request for comment.

Steve Hanke, an economics professor at Johns Hopkins University who has advised emerging market nations on currency issues, said bitcoin made it virtually impossible for banks to comply with “know your customer” rules, and that the country risked a red flag from the anti-money laundering Financial Action Task Force.

“It isn’t a currency, it’s a very speculative asset,” said Hanke, a longtime advocate of dollarisation. “There is a lot of risk associated with bitcoin and that risk will be borne by the taxpayers.”

Additional reporting by Michael Stott in London

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