Brazil’s statute book carries a range of labour, environment and corporate governance regulation. Some require revision, but it’s enforcement where real effort is needed By Dom Phillips in São Paulo
When members of the state government of the federal district of Brasília were caught last year on secret cameras counting out large wads of money, and shoving cash from bribes for contracts into their socks and underpants, Brazil was shocked. Not because of the corruption – which is endemic in Brazilian politics and business – but because it is rarely so graphically exposed. Governor José Arruda lost his job and was briefly imprisoned, and there was a palpable sense that ordinary Brazilians were enjoying the embarrassment of their elected officials.
But as with many other corruption scandals, it is unlikely that anybody will be convicted. Corrupt Brazilian politicians and businessmen never are. In recent years, a number of money laundering and corruption cases involving high-profile corporations and businessmen have faltered when they reached the judiciary.
But a source inside the Polícia Federal – Brazil’s equivalent of the UK’s Scotland Yard headquarters – who has worked on some of the biggest corporate corruption cases tells Ethical Corporation he sees progress. Five years ago, these cases would never have got as far as they did nor received the attention they got.
International law
It’s here that cross-border legislation such as the US’s FCPA comes in. “The FCPA is relatively little known especially in reference to its extraterritorial application,” says João Piquet Carneiro, a partner at Brasília’s Veirano law practice who has chaired the president’s public ethics committee. “But its importance is unquestionable, because it obliges foreign companies and Brazilian ones to treat with caution their relationships with public authorities. Care has to be doubled for companies that do business with the government and those which operate in different parts of the country.”
João Carneiro also cites Brazil’s impropriety law, its public servants statute, its penal code and ethics code for civil servants as relevant for corporate responsibility professionals working in the country.
But when it comes specifically to responsible business, the Brazilian government is lagging behind. “The government basically hasn’t done very much,” says Marcelo Linguite of São Paulo corporate responsibility consultancy Terra Mater. “The Brazilian government is very focused on traditional development. In general, public power needs to advance a lot on this question.”
Brazil does have very strong laws about the environment – such as the forest code, which sets limits for how much forest farmers can chop down and whose limits are currently under discussion. But they are frequently ignored. “Brazil’s got a very aggressive environmental code but it’s not being implemented on the ground, and the government doesn’t have the resources to enforce it,” says John Carter of NGO Aliança da Terra (Land Alliance).
This is often the case with sustainability. Alex Spatuzza, editor of sustainability website Revista Sustentabilidade, cites the São Paulo law that requires new buildings to have a small reservoir that holds rainwater to avoid the flooding that frequently affects the city. “People just don’t do it and the city government doesn’t bother fining people,” he says.
Other laws are positively disadvantageous for corporate responsibility. The 1993 Lei de Licitações (auction law) is a case in point. It requires that state bodies, whether state, federal or municipal, should always purchase at the lowest price possible. This means the government doesn’t provide incentives for the sustainable practices. And when public spending represents 19% of Brazil’s GDP, that can have a huge impact.
But there are signs of change. In 2009 the city of São Paulo passed an ambitious municipal climate law, which set out a range of targets – from greenhouse gas emissions to provisions prohibiting the use of illegally logged wood in city construction works. The law also sets out “sustainable bidding” practices.
A new report by the Carbon Disclosure Project aims to identify corporate best practices in promoting energy efficiency measures in Brazil, China, India and South Africa. Companies want to see their work on improving sustainability in energy terms rewarded through a corporate energy efficiency index or individual energy government contracts, the report says.
“The findings show … the theory that policy and regulation has an effect on corporate behaviour is correct, and that effect is largely positive,” says James Cameron, executive director and vice-chairman of Climate Change Capita. In Brazil’s case, the challenge is not creating the legislation, but enforcing it effectively.