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GROUP REPORT

MPKT A
ANALYSIS OF THE CORRUPTION IN BRAZIL FROM MULTIPLE
PERSPECTIVES

HOME GROUP 4
Laksamana Zakiy Ramadhan

1306436754

Mohammad Ridho Nugraha

1306436760

Narayana Yuliandono Radiawan

1306436773

Natasha Chandri Egieara

1306436741

Widoseno Nur Sukma Atri

1306437372

Zain Zahran Azzaino

1306437044

FACULTY OF ENGINEERING
UNIVERSITY OF INDONESIA
2016

Abstract

This paper examines the case of corruption in Brazil through various
perspectives. The aspects that are taken into a consideration in addressing the problem consist
of the psychology of corruption, social and culture, and the past and present political situation
in Brazil. A case study regarding the effect of mass media and public opinion is also included
in order to provide a better comprehension of the situation .

Table of Contents
Abstract ............................................................................................................................ 2
Introduction ...................................................................................................................... 4
Background ................................................................................................................................ 4
Objectives .................................................................................................................................. 4
Issues ......................................................................................................................................... 4

Psychology of Corruption .................................................................................................. 5


Society and Culture in Brazil .............................................................................................. 5
Political Situation in Brazil in the Present and Past ............................................................ 6
Case Study: Effect of Mass Media and Public Opinion ........................................................ 8
Conclusion ......................................................................................................................... 9
Bibliography .................................................................................................................... 11

Introduction
Background
Corruption is defined as a fraudulent act that is conducted for personal gains rather
than for publics interest. This issue exists in all countries and is caused by the lack of
transparency in public-sector budgeting in which the executants, who commonly are the
people of authority, are lured by the advantage of their power in the system. The arbitrary
usage of power by the corruptors fuels many problems, such as misallocation of resources,
alteration of income distribution, and eventually poverty.
The government incomes obtained from taxes, aid, and extractives are secretly being
allocated for personal expenses instead of for public services, such as health care,
infrastructure, and education. Corruption significantly impacts child mortality rate due to
poor sanitation and education and economic development. It is very important to stress that
this problem can be ceased by implementing stricter punishment for the corruptors and
providing a public access to budget allocation information.
Brazil is an example of a corrupt country which is ranked in 76th among 168
countries. The most recent corruption scandal regarding state-run oil company named
Petrobras brought a major rank downfall to Brazil in the Corruption Perceptions Index. The
recent discovery regarding the involvement of former and current president in the diversion
of money obtained from Petrobras also causes turmoil in the country and sparks riots in the
streets on Brazil. This scandal has a ripple effect on the life of Brazilians that once benefited
from the prosperity of national oil producer.

Objectives
This paper aims to analyse and explore the cases of corruption which have tarnished
Brazilian politics and businesses. Various perspectives are taken into consideration in the
analysis: psychology behind corruption, society and culture, and current and former political
situation in Brazil. The purpose of using multiple perspective in analysing this case is to
create a constructive criticism that is fair and not biased and a case study regarding the effect
of mass media and public opinion is provided for better comprehension of the corruption in
Brazil.

Issues
The issues that are being addressed in this paper include:
1. The existence of biological gratification from corruption.
2. The effect of organization structure and societys perception in job recruitment.
3. The root and loopholes of corruption in Brazil.

Psychology of Corruption
In order to understand the origin of the corruption within Brazil, it is first necessary to
analyse the actual mind set of those who delve into corruption. A corruptor has their own way
of mind set compared to the common people; it all leads back to their brain and the effects of
the parts of brain. Chinese scientists say that the part of the brain responsible for a corrupt
person might lie in part of the left brain, the scientists argue over whether drugs or therapy
could fight the tendency for corruption. Scientists have searched for an explanation on why
people differ from regular behaviours. The study researched by the neuroscientists focused
on a region of the brain located slightly above the temple called the left inferior frontal gyrus.
There the scientists found out that that play a critical role when people prefer to choose
wealth over moral responsibilities.
A team led by Professor Li Shu from the Institute of Psychology at the Chinese
Academy of Sciences, found out that the brain has an increase in activity when a person is
accepting bribe along with the increase of the amount of money. The researchers carried out
an experiment involving 28 volunteers, where each was offered a gradually increasing
amount of money from 8 Yuan to 3000 Yuan. And with each offer the volunteers would be
asked whether they want to share it with others, getting an amount of percentage, or if they
would refuse the offer entirely. According to Professor Li this situation is almost the same as
bribery.
The volunteers are then placed inside a Magnetic Resonance Imaging (MRI) machine
and their brain activity is recorded. The volunteers would answer the conditions explained
earlier with a simple yes or no button. The researchers discovered with a cash offer,
regardless of the amount, would stimulate the feel good areas of the brain: the right lateral
prefrontal cortex and the bilateral insular cortices, which are at the front and sides of the brain
respectively. When the volunteers decide to accept the offer, their left inferior frontal gyrus
was activated more intensely than the other regions. The higher the amount of money, the
more activity seen in the gyrus. Of course the volunteers will provide different results, but the
conclusion is that people with more active gyrus had a stronger tendency to be easily bribed.
This discovery is of course a breakthrough in understanding the human brain
especially the corruptors brain, but yet it faces political challenges where to carry out this
experiment on the real corruptors requires government agreement. And the scientist need to
find out the reference brain to be compared with the corruptors brain, this discovery still
faces much more challenges.


Society and Culture in Brazil
According to Srgio Buarque de Holanda, Brazilians make no distinction between
private and public environment (Holanda 1936). For example, in regards to working in
Brazil, it is considered inappropriate to employ a relative instead of providing an opportunity
for those who had already been in the company or have undertaken a selection process. In

addition, Brazilian relates to each other according to the concept of neighbourhood and
friendship, and therefore is considered to have good communal relation within their society.
Many companies in Brazil still use the traditional organization structure in which
there is still a hierarchical organization form (Holanda 1936). Thus, many workers are subcoordinate with someone else. This is very different compared to the majority of European
companies which have adopted a flat organizational structure, meaning there are few or no
levels of management between staff and managers. In the hierarchal organization form, it is
logically easier to climb the corporate ladder. However, this structure also enables the
bosses to force their workers to undertake the majority of the corporate work while
exempting them from responsibility. It is also significantly difficult to obtain the maximum
effectiveness from each employee as the work load is unevenly distributed. Finally, this
hierarchical organization form indirectly encourages the promotion of corruption, which
leads to the current political and economic situation in Brazil.
The society of Brazil also has a heavy emphasis on appearance. People in Brazil
believe that the appearance of a person directly reflects the job position, the educational level,
the age and even the personality. This judgment is not restricted to what the person wears, but
it also includes several other aspects of appearance, including haircut, skin, nails and body
shape. However, there are still several groups of ethnicities that are not concerned with
appearances. There are also several cases in Brazil that consider the judging of appearance to
be racism and intimidating.
In the society of Brazil, there is a low emphasis on society and a greater importance
on friendliness. During a meeting in Brazil, the culture encourages the start of the meeting
with small talk. Regardless of how serious the meeting is, people will start the meeting with a
discussion on the weather or stereotypes of different cultures. In general, Brazilians do not
deal very well with an excess of formality. Brazilians tend to close deals with people that
they consider to be a friend. In essence, the friendliness during diplomacy is an important
factor to a successful negotiation.

Political Situation in Brazil in the Present and Past


The practice of political corruption in Brazil has a long history since the colonial
period, along two dimensions: first one is the manipulation of political decisions to favour
private economic gains; and then the illegal appropriation and detour of public funds by
politicians and/or their designates (persons or institutions), for their own use or for campaign
finance. The First dimension involves private economic gains for the decision makers
themselves, or for other parties or institutions. In the latter case, usually the decision makers
involved receive some material benefit in return. The second dimension is more complex and
involves a large variety of schemes and strategies: sweetheart loans from public financial
institutions, no-show public employees, over-invoiced public contracts with rigged
bidding procedures, diversion of public funds to philanthropic foundations linked to the
decision makers, allocation of funds to local governments for public works and services never
executed, requiring a percentage kickback from government contractors to insure
disbursements for services and public works already executed, etc. In some cases, such
detours of public funds to local pork barrel projects.

There is a tendency that the practice of corruption in Brazil occurred due to the
weakness of the bureaucratic system, especially the system of supervision. The high
involvement of executive and legislative officials is an indication of the weakness of
transparency and accountability for the use of public funds. As said by Mario Osava, the
existence of the state budget expenditure items confidential undermines access control so
many cases of misappropriation of public funds occurred in Brazil. Case razor operation
involving the Minister of Energy of Brazil and 50 staff clearly is systematic. Even checkmate
cases involving the president's family strengthens weak surveillance system on the use of
public funds.
Source emergence of corruption can be sourced from internal factors which are
factors desires and external factors that are associated with opportunities derived from the
weakness of a system. Internal factors are usually derived from the aspect of moral factors,
education, and urgency. The External factors are due to the influence of political system,
economic and social culture of a country. The theory of supply and demand on the rise of
corruption will be able to predict how often a combination of motivation (willingness) and
chance (opportunity will produce outcomes in the form of corrupt practices. As a result of the
real corruption is the loss of function of state services, which in turn re-legitimize the
perpetrator to continue to maintain the behaviour of corrupt because simple state is not able
to provide other alternatives to improve the lives Centre for International Crime Prevention
(CICP, bodies under UN office for Drug Control and Crime Prevention to enter the form of
contributions illegal, commissions, and abuse of authority as a form of corruption. This form
of corruption may occur because of laws weak or when the surveillance system is not
working.
As in many nations, Brazils social security system totters on the verge of bankruptcy,
constantly necessitating increases in levels of contributions and direct injections from the
National Treasury. One reason is the combination of early retirement rules (30 and 35 years
of service for women and men, respectively, without regard for age), coupled with an aging
population. Also, massive fraud plagues the system. Usually, such fraud takes two forms:
Retirement pensions for non-existent persons, through use of forged birth and social
security documents; and - fraudulent and/or exorbitant workmens compensations
claims/judgements for permanent disability (accident or sickness). In the latter case, judicial
and CPI investigations uncovered massive conspiracy rings in the State of Rio de Janeiro,
involving the claimants lawyers, social security officials and lawyers, politicians,
prosecutors and judges. Several individual judgements ranged upwards of US $25 million,
levels unheard of even in the first world. This money was usually divided among the
conspirators, with only some US $ 20,000 attributed to the humble claimant. As might be
expected, these investigations suffered heavy pressures (including death threats) and
corporate obstruction and many of the accused have fled Brazil with their assets; often to
Miami. The investigations and prosecutions continue, with few convictions to date, and have
not been extended to other states.
One of the reasons that political corruption is practiced with relative impunity in
Brazil is a near total lack of effective internal and external control mechanisms. One of the
first acts of the new Collor administration in 1990 was to trash the already ineffective internal
control agencies. The lack of control was one of the reasons that government estimates of
waste, misuse, fraud, etc. of federal resources ranged near US $40 billion in early 1994. If
by chance an internal control IG in a ministry or federal agency discovers a case of
corruption, fraud or misuse of funds, and tries to bring the case to the attention of the

respective minister or agency head, usually the superior requests the IG to cease and desist
for reasons of political convenience. If the IG does not head this advice, he or she will be
sacked, because the IGs have no political independence/autonomy.
The recent 1992 and 1993/94 anti-corruption CPI revelations merely exposed a very small tip
of the iceberg threatening governability in Brazil. When politicians are called to pass
judgement on their peers, rarely are the investigations taken to an exhaustive full conclusion.
In the above cases, sophisticated damage control was practiced and only a few smaller
fish were actually expelled from Congress, and, if criminal charges are brought against some
of the latter, the STF and federal courts will take years to prosecute the politicians and their
co-conspirators, respectively. Presently in Brazil, only a few federal judges have the courage
to use existing laws to prosecute corruption cases on the basis of the most blatant violation
income tax fraud (Buono & Bentivoglio, 1991).
In spite of the massive accusations generated by the CPI investigations of the
Budgetgate scandal, most of the accused continued to submit their budget amendments in a
normal fashion, and although the seven dwarfs have been banished from the Joint Budget
Committee, the latter continued to do business as usual in 1994 and 1995, with the same
old vices and corrupt practices (Jord do Brad, June 26, 1994, p. 3). Apparently, one solution
to the impasse of Constitutional Revision by the political class, which in the first semester of
1994 defeated all proposals for political reform, is an ever increasing popular clamour for
an exclusive [non- Congressional] constituent assembly. The latter would be elected
directly by the people and sit independently of Congress and the politicians, and carry out a
necessary political reform without consideration for the political survival of Senators and
Deputies. This proposal also involved transfer of power to amend the Constitution away from
the Congress to a popular referendum, as is the case in Switzerland (Fob de So Paulo, June
26, 1994, p. l-7). The 1995 Constitutional Revision process considered significant changes
(privatization of state enterprises, fiscal reform, equal treatment for foreign capital, social
security reform, reorganizing federalism, reform of the public service, etc.) but refrained from
any political reforms to address the situation described above. Although new tough
legislation (internal/external control, bidding regulations on public contracts, external control
of the judiciary, campaign finance, white collar crime, election system, budget process, etc.)
would certainly help matters, only long term measures to reorganize and upgrade the public
service generally, while infusing it with the concepts of public trust and accountability, might
be able to achieve major change.

Case Study: Effect of Mass Media and Public Opinion


History has continuously shown that corruption in developing countries hinders the
development of the country. Brazil is considered as one of the most corrupted countries in the
world. Brazils economy is going through its worst recession in more than three decades
following a drop in prices for Brazilian commodities such as oil, iron ore and soya (BBC
2016). As a result of corruption, countries face greater chances of riots and protests due to the
decreasing quality of life of its people. As such, Brazil has been continuously in a state of
protests, many which directly target the corruption within the country. It is clear that the
people and mass media of Brazil need to directly influence the future of Brazil into the proper
direction.

The public has a great influence on the laws of Brazil. One of the biggest effects of
corruption in Brazil is its negative influence on business. Tax administration, public
procurement and natural resource sectors are more likely to be affected by corruption. For
example, a large-scale corruption scandal holds the state-run oil company Petrobras at the
centre. Fortunately, Brazil has implemented The Clean Companies Act, which is considered
as one of the toughest anti-corruption laws in the world, but the enforcement is inconsistent.
The Act holds companies responsible for the corrupt acts of their employees and introduces
strict liability for those offences, meaning a company can be liable without the need to search
for faults (Presidencia da Republica 2015). In addition, in the eye of the public, bid rigging
and fraud in public procurement, direct and indirect acts of bribery and attempted bribery of
Brazilian public officials and of foreign public officials are illegal. However, the law makes
no distinction for facilitation payments.
Those are one of the example of most corruption cases that occurs in Brazil.
Correlation between the case and the roles of perception and communication is that the
people receiving the information could be biased due to the different perception interpreted in
the mass media. According to James W. Tankard and Werner J. Severin, perception is a
complex process that involves structural factors, or influences from physical stimuli, and
functional factors, or psychological influences from the perceiving organism (Tankard and
Severin 2001).
As mentioned above, Petrobras, Brazils oil giant and the largest company in Latin
America, was found to have been engaged and involved in corruption, including illegal
political campaign funding, to the amount of estimated 30 to 40 billion dollars. Dilma
Rousseff, president of Brazil, admitted that the allegations are not direct and there is no
money in her pocket. However, the public is keenly aware that she benefited from these
networks of corruption. The public is aware that funds that were provided to the election of
the current president and her party were not obtained entirely legal. Overall, mass media can
be considered as a reliable source of information; however, people must remain aware that
mass medias is also like a narrow lens where it can focus on one thing but we do not get to
see the whole thing. Therefore, people must continuously communicate in the usage of mass
media and constantly cross check information. Only when the truth and facts from mass
media is completely distilled can the people change the course of Brazil.

Conclusion

The deep-rooted case of corruption in Brazil has inflicted many problems upon its
citizens over the years and recently reached its worst. Based on the research of a Chinese
research team, it is found that left inferior frontal gyrus is responsible for a decision making
process regarding wealth over moral responsibilities. This shows that one will experience
gratification during bribery as indicated by brain activity record in which a certain part of the
brain is activated during the experiment. Brazil still employs hierarchical organisation
structure which enables people in higher positions to run the company and yet be exempted
from their responsibilities due to uneven workload. Factors such as appearance and
relationship influence the way Brazilians perceive other people hence formality is commonly
not found within the working environment. The practice of corruption in Brazil dates back to
the colonial era in which illegal appropriation of public funds for private gains was conducted

by politicians and since then, well-thought and slick schemes have been produced in order to
gain more personal benefits. Weak bureaucratic system and high involvement of executive
and legislative officials are the roots of the tainted politics and businesses in Brazil. These
factors indicate the lack of transparency and accountability for the use of public funds which
in turn trigger corruption.


Bibliography
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Fleischer, David. Political Corruption in Brazil. 1997.
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Tulchin, Joseph S., and Ralph H. Espach. Combating Corruption in Latin America. Woodrow
Wilson Center Press, 2000.