In Blow to Big Money, Brazil Bans Corporate Donations to Parties, Election Campaigns

The Brazilian Supreme Court ruling that corporate funding of election campaigns is “unconstitutional” because “it is for citizens to elect their government, not the companies” could be a turning point for Brazil’s politics and policy making

Sao Paulo: To kick out Big Money from politics is a tough job. Only a few countries have managed to curb corporate interference in politics and policy making. But now Brazil, an emerging economy like India, has banned corporate funding of all political campaigns – from municipal to federal elections. In a landmark judgment on Thursday, the Brazilian Supreme Court declared null and void the article of the Elections Act which allowed corporate donations to political parties and candidates. In an 8-3 verdict, the Supreme Court said that such donations were “unconstitutional” because “it is for citizens to elect their government, not the companies”.

Amid a corruption scandal that has shaken the country’s political class, the highest court has sent a clear message to the country: business houses have no right to participate in the electoral process. As of today, big corporations are the biggest campaign financiers in this country. In the last general elections in 2014, almost 95% of donations for election campaigns came from big companies. The rest came from individual donors.

With this verdict, the Brazilian law which allowed corporations to donate up to 2% of their gross revenue each year to political parties and candidates has now been consigned to the dustbin. Though individuals can still make donations, it has to be done under legislative oversight. The ban is likely to come into force next year when Brazil holds municipal elections.

Though the verdict was not unanimous, the judges were scathing in their criticism of the role money plays in politics. Making a case for curbing donations to election campaigns, Justice Celso de Mello said the “Constitution does not tolerate the abuse of economic power.” Another judge, Justice Carmen Lucia who also voted against the continuation of private funding, said because of corporate donations the candidates end up “representing the interests of companies and not that of citizens”. Defending the political process as per the country’s Constitution, Justice Rosa Weber said the “influence of economic power turns the elections into a political game of marked cards, which makes the voter a puppet.”

The judgment has come as a shocker to some of Brazil’s opposition parties with close ties to big corporations. Not surprisingly, it  has stunned some of the country’s leading politicians and business groups into silence.

Major implications

With this ban on corporate money in elections, the biggest South American economy may witness a huge change in the way elections are contested and policies made in this country.

It’s an open secret in Brazil, like so many other democracies, that corporate financiers of election campaigns use their clout with politicians to win lucrative contracts and get laws passed that protect their profits, often at the cost of larger public interest. “It is a historical decision. Corporate funding is a source of political corruption and it goes against the democratic principle of ‘one person, one vote’,” says Esther Solano, professor of political science at the Federal University of Sao Paulo. “Through corporate funding, the economically powerful indirectly control political power as government and parliament become hostages to corporate interests. Now, with public funding of campaigns, the candidates will pay more attention to real debates focused on public interest,” says the academic, a Spanish national who lives in Brazil.

With this verdict, Brazil has turned a corner but it was not easy. Till this week, several parties and their leaders were working overtime to block any move against corporate funding of campaigns. The case for “clean campaign finance” was filed by the Brazilian Bar Association in 2013, but a clutch of conservative parties managed to block a final verdict on this issue. Just last week, a lot of drama and heated debates happened in the national Congress in Brasilia. Even as the Supreme Court judges were writing their final verdict, the House of Representatives passed a new campaign financing bill that allowed corporations to make donations of over $5 million to parties. Led by Eduardo Cunha, the Speaker of the House who is himself embroiled in a major corruption case and has locked horns with President Dilma Rousseff, the new bill was seen by political observers as a pre-emptive strike against the president and country’s highest court. But, with growing demands from her own party for curbing the influence of money in politics, Rousseff was already preparing to veto the bill. That would have sparked a fresh round of hostilities between the president and the speaker, who both, paradoxically, belong to the ruling coalition.

Like all democracies, different political parties represent different groups and interests in Brazil. What compounds the problem in Brazil – almost like India — is the fact that parties with different ideologies are forced to form coalitions to win elections.

Standoff averted

Since 2003, Brazil has been ruled by the Workers Party (PT) in coalition with the Party for the Movement of Democracy in Brazil (PMDB). While PT is a centre-left party, PMDB is a loose conglomeration of interests groups which lobby for everyone – from the rich ranchers to business tycoons. To make matters complicated, PMDB often flirts with Brazil’s main opposition party, the Brazilian Party for Social Democracy (PSDB) – a right-wing entity pushing for neoliberal policies and the slashing of social welfare plans.

In this scenario, if the new bill is vetoed by the president, PMDB and PSDB and some other smaller parties may gang up in the House to pass the bill all over again. On Thursday, just a few hours before the court verdict came out, Eduardo Cunha was still pushing for a “legislative solution” to the issue of donations, giving a signal to the court to back off. But now, with the Supreme Court striking down the bill as unconstitutional, the issue of corporate financing has been almost settled once and for all. “The society is fed up with this form of corruption. Most people want to see an end to the influence of money in politics. The Supreme Court has done a good thing by declaring it unconstitutional. The judges have clearly said that the corporations can’t be bigger than the voters and they can’t participate in the election process like voters,” says Valeriano Costa, head of the political science department at the University of Campinas in Sao Paulo. “This could be a turning point in Brazilian politics which is facing a crisis of credibility at the moment.”

Petrobras scandal

The crisis has been sparked partly by a scandal in the state-owned oil firm Petrobras, which is engulfed in a kickback scheme in which, according to prosecutors, at least US $2 billion in bribes were paid by big construction and engineering firms, which were in turn given vastly inflated contracts. A part of the money, as per the charges filed in courts, made its way to the campaign funds of political parties via what were then legal contributions. With several top leaders of the Workers Party too facing charges in this case, President Rousseff, who is not involved in any corruption scandal, has been under pressure from the opposition and some of her coalition partners to quit.

Though the case against corporate financing has been before the court since 2013, it’s the burgeoning Petrobras scandal that sparked a national debate on the need to change the campaign finance model. Here again, political parties have been split on ideological lines. While the Workers Party has been demanding a ban on corporate money as part of political reforms, both PSDB and PMDB have been opposed to any curbs on campaign donations.

Now Brazil has a deadline – October 2 – to put this verdict into practice, which basically means the only legal sources of funding available to political parties from now on will be donations from individuals and party funds. While registered individual donors can still give up to 10% of their income recorded in the year before the election, political parties can also finance their activities with public money provided to party funds. The federal government has already marked US$ 311 million for this fund in the 2016 budget, and it can be raised further.

While big corporations, which have misused their proximity to politicians in recent years to enrich themselves, are virtually out of Brazil’s political process, the fight between the ruling Workers Party and other parties may now intensify.

Cunha, the speaker, has already condemned the verdict for putting the 2016 municipal elections in an “unnecessary limbo”. Aécio Neves, the PSDB leader who was defeated by Rousseff in the 2014 presidential election, is keeping quiet at the moment. Actually, the Workers Party, which led a campaign for electoral reforms in the Congress, may be the main beneficiary of the ban. “The Workers Party has a huge cadre base. It has an army of activists and it gets support from social movements. They all campaign for the party in elections. It doesn’t need much money. But other parties, mainly the conservative ones with small, elitist support base, need more money for campaigning,” says Costa, the political scientist who specialises in coalition politics including in India. “These parties are also ideologically aligned with the big corporations and that’s why they don’t want this ban.”

Enormous political implications

Now, as Brazil’s corporate sector and special interest groups rack their brains to find new ways – possibly back-door financing of campaigns – to influence politics and policies, this South American country of 200 million people with a  GDP of US$ 2.5 trillion is all set to join a group of countries which have taken steps in recent decades to keep corporate donations out of election process. According to a study by the International Institute for Democracy and Electoral Assistance (Idea), the funding of election campaigns by private companies is allowed in more than 125 countries, many of which impose some limitations on it.

In recent years, especially since the financial crisis of 2008, a number of countries have taken steps to check the influence of money power in elections. There are only a few countries in the world where there are no limits on corporate funding of elections. The United States leads this small pack. In a recent interview, former US President Jimmy Carter described the country as “an oligarchy with unlimited political bribery” resulting in “nominations for president or to elect the president.”

The American statesman is not the only one who strongly feels that the US politics is hostage to Big Money. Bernie Sanders, who is running to be the Democratic Party’s nominee and gaining popularity over the frontrunner Hillary Clinton in some states, has rejected all corporate sponsorship of his campaign. Sanders, who is very critical of the billionaire class for “controlling” the country’s politics, may not even win his party’s nomination but he has successfully made corporate funding of campaigns an election issue in a country where the Supreme Court in 2014 struck down the limit on the total amount of money wealthy donors can contribute to candidates and political committees.

In India, there is a limit on what an individual candidate for election to Parliament can spend but no ceiling on what his or her political party can spend for general election propaganda or where they can collect money for the same.

If India too were to one day go Brazil’s way, that would go some distance towards blunting the influence of money in politics.

Shobhan Saxena is a Brazil-based journalist who reports on South America and writes on international affairs

Credit for featured image: Márcio Cabral de Moura/Flickr CC BY-NC-ND 2.0