Brazil’s and South Africa’s Watergate Moment

Brazil and South Africa have a great deal in common – flagging economies, falling exchange rates and public bonds nearing junk status – all fueled by mounting allegations of corruption.

As if that weren’t bad enough, the ruling parties have also engaged in major confrontations with the rule of law, in a desperate and entirely self-serving effort to preserve the impunity of their national leaders.

In Brasilia, President Dilma Rousseff, who faces impeachment charges for budget mismanagement, is fighting for her political life.

She is also striving to protect her mentor (and predecessor), the former president, Lula da Silva, and an icon of Brazil’s social reform movement. In South Africa, President Jacob Zuma is also fighting for his political survival.

In both countries, former key political allies of these two leaders have just broken ranks and gone public to denounce them. Most seriously, both leaders have been challenged in recent days by top judges.

The judiciary is key

The core of democratic and accountable government rests in the independence of the judiciary. It must be free from political manipulation in the enforcement of laws in order to ensure that no politician is “above” the law (and hence immune from prosecution).

The reason why the cases of Brazil and South Africa matter so much beyond these countries’ orders is that they represent key tests and precedent-setters for other emerging market countries.

U.S. history as a key guide

The two countries’ history with the United States has been trouble-laden, especially regarding collusion with former dictators and autocratic rulers.

That is why it is all the more refreshing and relevant that modern U.S. history actually provides a helpful guide for South Africa and Brazil in terms of how to cope with a fundamental institutional crisis.

On the evening of Saturday, October 20, 1973, U.S. President Richard Nixon demanded that Attorney General Elliot Richardson fire Special Prosecutor Archibald Cox who was investigating the “Watergate” scandal.

Richardson refused, as did his deputy, William Ruckelshaus, leaving it to then Solicitor General Robert Bork to oust Cox.

Bork did as instructed. Even so, the so-called “Saturday Night Massacre” turned out to be the beginning of the end for Nixon in his battle of wills against the U.S. justice system. Mighty as a U.S. President is at home and abroad, in August 1974 Nixon resigned his office.

The U.S. democratic system had been challenged, but was found to be intact.

No better in Russia, Turkey and Malaysia

But the current crisis isn’t just about conditions in Brazil and South Africa. The situation there isn’t fundamentally different from situations in Russia, Turkey and Malaysia. All are leading emerging market economies.

And in all of these countries, national political leaders make current economic difficulties much worse by scheming to use their positions of power to give them immunity from prosecution.

These leaders are determined to intimidate and manipulate the judiciary and the media. What distinguishes Brazil and South Africa from the others right now is that the national political leaders may actually soon lose their jobs.

Economic costs of corruption scandals

This hijacking of the legal system is bad enough. But the economic costs of the corruption crises, which are substantial, make everything much worse.

The International Monetary Fund projects that Brazil’s economy will decline by 3.5% this year, while it forecasts just 0.7% growth in South Africa – and these predictions may prove to be optimistic.

In Brazil, government plans for essential structural reforms and fiscal measures have been set aside.

Virtually all policy making has been paralyzed by the mounting number of arrests and investigations into prominent politicians who allegedly took illicit payments from Petrobras, the vast state-controlled company.

At the end of last year, the internationally respected economist Joaquim Levy felt bound to resign as the nation’s finance minister.

In South Africa, the economic policy consequences of the corruption crisis are different, but just as grave. In December 2015, Zuma fired a respected finance minister and replaced him with a little known member of parliament.

That produced strong protests in the domestic media and very negative reactions in financial markets. Zuma then announced his third finance minister in five days, appointing former minister and revenue commissioner Pravin Gordhan. Now, the plot thickens.

In recent days, a letter has been leaked to the South African press suggesting that Gordhan is being investigated by the elite branch of the police for alleged irregularities in tax revenue service and that the police may prosecute him for obstructing justice.

The news comes as a team from Moody’s rating agency is in the country to determine whether South Africa’s bond rating should be reduced to junk status.

Former friends add flames to the fires

And, then on March 16, deputy finance minister Mcebisi Jonas issued a public statement where he warned against “state capture” and revealed that he had been offered the post of finance minister last December by members of the Gupta family (three brothers with sprawling business interests that are said to be friends of President Zuma and who employ his son, Duduzane Zuma, in their enterprises).

Now the media and opposition politicians are calling for investigations and for action by the executive committee of the African National Congress party, which so far is refusing to push for Zuma’s ouster.

While Jonas’s statements were doing direct damage to Zuma, developments in Brazil have been no less breathtaking.

It was all topped off by President Rousseff’s bizarre move on March 16 to appoint Lula as cabinet chief of staff – a position that would give him immunity from regular prosecution (as a government official he can only be investigated by the Supreme Court, an act that is extremely rare).

But just as Richard Nixon had his Judge Sirica, who was determined to ferret out every scrap of evidence in the early days of Watergate, so it is that Rousseff and Lula confront Judge Moro.

He not only issued an injunction to prevent Lula getting political immunity, but released a wire-tapped transcript of the Rousseff-Lula telephone call.

Rousseff’s associates rushed to have Moro’s decision overturned, but for the time being they have been defeated by the intervention of Supreme Court Judge Gilmar Mendes.

He suggested that Lula’s appointment might be viewed as obstruction of justice and said, “It would be plausible to conclude that the appointment and subsequent swearing-in could constitute fraud of the constitution.”

His decision could be overruled at a full hearing of the Supreme Court, which because of public holidays may not happen until March 30. Meanwhile, vast public demonstrations are being seen in Brazil calling for justice and an end to corruption.

Public demonstrations against Zuma are also being seen in South Africa, but so far, to use Watergate parlance, there is “no smoking gun” connecting him to bribe-taking from the Guptas.

However, it is clear that Zuma has few friends left at the helm of the nation’s judiciary. On March 15, the Supreme Court announced that the Zuma government acted unlawfully last June when it failed to arrest Sudanese President Al-Bashir who was in South Africa at an African National Congress summit and who is wanted for crimes against humanity by the International Criminal Court.

Then, on March 18, the Constitutional Court ruled that Zuma and his government colleagues acted illegally when they called police to Parliament in February to end criticisms from opposition politicians.

Justice Mbuyiseli Madlanga stressed that the decision goes to the heart of preserving democracy. He underscored this point in words that can be related to South Africa’s overall corruption swamp, arguing that democracy was “hard-won” and had come at a huge cost to many — “a cost that included arrest, detention, torture and — above all — death at the hands of the apartheid regime.”

When the rule of law has real teeth

Judges in two very different countries are prominently standing up for the rule of law. They are confronting charismatic national political leaders. But this battle is about far more than these individuals’ fates and political futures.

The crimes of corruption so often lead to major economic costs and to public distrust of all branches of government. In South Africa and Brazil, the good news is that the public at large is demanding justice today. They may just get it.