With Brazil’s state oil company Petrobras engulfed in a massive corruption scandal, the government looks poised to introduce an energy sector overhaul that would reverse a trend of using state-run companies to drive economic development. While most of the details of the scheme have only recently come to light—creating a political crisis for the president just as the economy is faltering—the corruption scandal follows years of political interference in the management of Petrobras and in energy policy more broadly.
The bribery scandal first came to light in March 2014, when a senior executive, Paulo Roberto Costa, was arrested on charges of money-laundering. In a plea bargain, he revealed a vast kickback scheme that involved inflating Petrobras contracts and pocketing 3% of the value. Many of the company’s top executives and senior government officials, including some from the ruling Workers Party, have been implicated.
The scandal has reached the highest levels at the company. Jose Sergio Gabrielli, Petrobras’ chief executive from 2005 to 2012, had his assets frozen by a court order in January. Although Gabrielli’s successor appears to have had no involvement in or prior knowledge of the scheme, the appointee Maria das Graças Silva Foster—a close friend of President Rouseff—resigned under pressure on February 4, along with five other Petrobras executives. Several top executives have since received fines and prison terms.