This story is over 5 years old.


Brazil's Top Court Outlaws Corporate Contributions to Political Campaigns

Although touted by good governance advocates as vital to the fight against graft and malfeasance, others believe the ruling in Brazil will simply force campaign cash under the table.
Photo via Flickr

Five years ago, the United States Supreme Court delivered a decision in the case of Citizens United v. Federal Election Commission that allowed corporations to devote virtually unlimited funds to political campaigns, provided that they were spent independently of candidates and political parties. On Thursday, a ruling by Brazil's Supreme Federal Court did the exact opposite, prohibiting businesses from financing campaigns in a move that has been hailed as crucial to the fight to rid Brazilian politics of rampant corruption.


Although touted by good governance advocates as vital to the effort against graft and malfeasance, others believe the development in Brazil will simply force campaign cash under the table.

The court ruled, by eight votes to three, that rules permitting companies to donate up to 2 percent of revenue to election campaigns were unconstitutional. Contributions from individuals, capped at 10 percent of income, remain legal.

Brazil's 2014 election campaign, in which President Dilma Rousseff won a tight race for reelection, was the most expensive ever. Figures from the country's top election court put overall campaign expenditures at 5.1 billion reais, which was equivalent to roughly $2 billion last October — small fry compared to the last US presidential race, in 2012, which official figures show cost an estimated $6.3 billion.

Related: Brazilian President Dilma Rousseff Reelected in Bitterly Close Race

It took Brazil's Supreme Federal Court two years to formalize its decision on election campaign funding, after some panelists refused to rule without the country's congress having deliberated on a related bill. The legislature passed the bill last week, ruling that companies could donate to parties to a maximum of 20 million reais (around $5 million).

The top Brazilian court's decision effectively renders this bill unconstitutional, even if Rousseff were to sanction it. But Rousseff has rock-bottom approval ratings as her administration weathers a persistent and pervasive financial scandal tied to the massive state-run oil firm Petrobras. Experts expect her to veto the corporate donations bill; if so, the court just made doing so much easier.


Brazilian President Dilma Rousseff. (Photo by Fernando Bizerra Jr./EPA)

Justice Luiz Fux sided with seven of his federal court colleagues, reasoning that the ban was needed to level the playing field for election candidates. Reflecting the disgruntlement expressed throughout much of Brazilian society, he condemned the "absolutely chaotic situation whereby economic power illegally trumps political power."

Justice Celso de Mello, one of the court's dissenters who voted against the ban, had argued that corporate contributions were constitutional and that effective controls were the answer to halting the "economic abuse of power."

The Brazilian Bar Association submitted the original case in 2011, citing an aim to "reduce the influence of the economic power of parties and candidates on election results." Reacting to Thursday's outcome, it praised the decision and called for the ban to come into effect in time for Brazil's 2016 municipal elections.

The topic has been divisive. In 2014's general elections, businesses were responsible for 76 percent of the cash raised by parties and candidates — up from 66.5 percent in 2006.

Rousseff's 2014 campaign for her center-left Workers' Party has been implicated by the Petrobras scandal, which has left Brazil reeling politically and economically.

Prosecutors allege that a cartel of politicians and executives at Petrobras and two dozen of Brazil's top construction firms ran a huge kickback scheme through which billions of dollars were skimmed off vastly overpriced contracts that were signed with the Brazilian oil giant — with at least $2 billion paid out in bribes. The scheme appears to have operated for many years, including a period during which Rousseff served as the chair of the Petrobras board.


Investigations have been authorized on dozens of politicians, virtually all of them from parties aligned with Rousseff's ruling coalition, including both acting congressional leaders and a former president.

While Brazil's biggest construction firms have donated large sums to parties of all stripes over recent elections, arrests have gotten uncomfortably close to the president, even though she is not yet being investigated and has denied all knowledge of the scandal.

Former Worker's Party treasurer João Vaccari Neto and ex-president Luiz Inácio Lula da Silva's chief of staff, José Dirceu — who was previously jailed over a political vote-buying scheme, known as the "mensalão," uncovered in 2005 when Lula was president — will both also stand trial over accusations companies were coerced into channeling bribe money to the Workers' Party as legal election donations. The party denies these claims.

The Supreme Federal Court's landmark decision this week aims to put a stop to this kind of illicit campaign fundraising, but many remain skeptical of its effects.

"The ruling could mean that campaign donations, instead of being declared, will simply be pushed under the table into illegal slush funds," said David Fleischer, a political scientist and professor emeritus at the University of Brasília. "And it is also possible that Brazil's election authorities won't be afforded the kind of budget needed to monitor campaigns and impede such practices."


Electoral courts currently take an overview of declared election contributions and compare it to what they believe is spent on the campaigns, including expenses for travel, media production, marketing, and infrastructure for rallies. They do so with an eye to uncovering significant discrepancies.

Fleischer's view is shared by Cristiano Noronha, a political analyst at the Brasília-based firm Arko Advice.

"Far more important than this supreme court ruling would be a boost in resources for organs that are responsible for monitoring and auditing election spending to make them more efficient," he said.

Despite the court's seemingly conclusive ruling, Noronha expects legal wrangling over the bill to cause a delay in the legal decision's application. Despite calls for the new rules to apply to the 2016 municipal elections, he thinks it more probable that they will first be applied to Brazil's 2018 general election.

Related: Here's Why Everyone Is So Pissed at Brazilian President Dilma Rousseff

Rousseff's 2014 campaign funds are under investigation. If they are proved to have been secured corruptly, Fleischer suggested, the country's top electoral court could potentially make history by invalidating her reelection.

This is not the only current threat to Rousseff's presidency. There are currently multiple requests for her impeachment, many of them centering on alleged fiscal "crimes of responsibility."


But whether or not Rousseff serves a full second term in office, doubts persist over the effectiveness of the ban on corporate political financing. Few expect that corruption can be rooted out of the Brazilian political system overnight.

Writing in the influential Folha de S.Paulo newspaper, the prominent columnist Bernardo Mello Franco quoted former Petrobras executive Paulo Roberto Costa — who turned state's witness — labeling the concept of legal corporate donations to political parties "the biggest farce in Brazil."

"The donations aren't donations, they're loans," Costa said. "The company is lending money to the person, and afterwards will be asking for it back."

Though the Supreme Federal Court's ruling is encouraging, the nature of such political "loans" is slippery. Brazilians are anxious to hold their political leaders to account, but the ability of interested parties to circumvent regulations suggests that the crusade against corruption will be a long one.

Follow Ben Tavener on Twitter: @BenTavener
Photo via Flickr