Lobbying Uncovered CORRUPTION, DEMOCRACY AND PUBLIC POLICY IN BRAZIL Milton Seligman and Fernando Mello, organizers. i Available from: BRAZIL INSTITUTE Woodrow Wilson International Center for Scholars One Woodrow Wilson Plaza 1300 Pennsylvania Avenue NW Washington, DC 20004-3027 www.wilsoncenter.org Cover: ISBN: 978-1-938027-91-8 January 2020 ii The Wilson Center, chartered by Congress as the official memorial to President Woodrow Wilson, is the nation’s key non-partisan policy forum for tackling global issues through independent research and open dialogue to inform actionable ideas for Congress, the Administration and the broader policy community. Conclusions or opinions expressed in Center publications and programs are those of the authors and speakers and do not necessarily reflect the views of the Center staff, fellows, trustees, advisory groups, or any individuals or organizations that provide financial support to the Center. Jane Harman, Director, President, and CEO BOARD OF TRUSTEES Chairman of the Board Bill Haslam, Former Governor of Tennessee Vice Chair Drew Maloney, President and CEO, American Investment Council Public Members: Alex Azar, Secretary, U.S. Department of Health and Human Services Elisabeth DeVos, Secretary, U.S. Department of Education David Ferriero, Archivist of the United States Carla D. Hayden, Librarian of Congress Jon Parrish Peede, Chairman, National Endowment for the Humanities Michael Pompeo, Secretary, U.S. Department of State Lonnie G. Bunch III, Secretary, Smithsonian Institution Private Citizen Members: Peter J. Beshar, Executive Vice President & General Counsel, Marsh & McLennan Companies, Inc. Thelma Duggin, President, AnBryce Foundation Barry S. Jackson, Managing Director, The Lindsey Group and Strategic Advisor, Brownstein Hyatt Farber Schreck David Jacobson, Former U.S. Ambassador to Canada and Vice Chair, BMO Financial Group Nathalie Rayes, Vice President of Public Affairs, Grupo Salinas Earl W. Stafford, Chief Executive Officer, The Wentworth Group, LLC Louis Susman, Former U.S. Ambassador to the United Kingdom Table of Contents Preface to English edition, Paulo Sotero and Anna Prusa 1 Preface, Marcos Lisboa 7 Introduction: Lobbying: democracy, public policy and corruption in contemporary Brazil, Milton Seligman and Fernando Mello 13 Part 1: Articles 1. Lobbying in the U.S.: the transparency of an imperfect system, Paulo Sotero and Anya C. Prusa 23 2. Regulation of lobbying activities: A comparative analysis of Latin America, Brazil and the United States, Nelson A. Jobim and Luciano Inácio de Souza 45 3. Leviathan as business in Brazil: past practices, future changes, Sérgio G. Lazzarini and Aldo Musacchio 67 4. Corruption and anti-corruption reforms in Brazil: a long journey, Matthew M. Taylor 97 5. Size of election district and corruption: Factors include not only lobbying, but also campaign costs, João M. P. de Mello and Fernando Mello 127 6. Government relations: significance and functioning; problems of democracy in Brazil, Carlos Melo 147 7. Can companies move away from crony capitalism and embrace integrity in government relations? Alana Rizzo and Joel Velasco 183 iv Part 2: Manual of best practices in institutional relations, section authored by Milton Seligman and Mateus Affonso Bandeira 1. Why is it important to engage with the State? 209 2. History of lobbying and definitions 217 3. The purpose of government relations: key issues and a few dilemmas 227 4. We want to speak to the government. Who are we? 245 5. A strategy for changing regulatory frameworks 279 6. Managing the routine of a government relations team: a practical approach 357 7. Looking at the world through artificial intelligence 428 Bibliography 438 About the organizers 444 v Preface to the English Edition of Lobbying Uncovered When this book was first published in Portuguese in 2018, the Brazilian National Congress was in the middle of a debate over the regulation of lobbying, the culmination of years of scandal and widespread frustration over the pervasiveness of corruption in business and politics in Brazil. Since then, the conversation over corruption, lobbying and political influence has evolved in new ways—yet no legislation has been passed, and lobbying remains largely unregulated. Lobbying is legal in Brazil: the Ministry of Labor listed lobbying as an official occupation for the first time in 2018, defining the job as “to participate in policy making, elaborating strategies of relations with the government, analyzing risks created by regulations, and defend specific interests.” And although there is yet no legislation governing the activity, public demand for greater transparency has led to several initiatives by elected officials, senior public servants, business leaders, and other professionals to begin to establish certain protocols. The executive branch now requires senior officials and agencies to disclose more completely meetings with lobbyists and the special interests they represent. Lobbyists themselves are eager to shed some of the more negative associations with corruption and back-room deals. The Brazilian Association of Institutional and Government Relations (Abrig) declared its support in 2019 for the regulation of the industry, and the Brazilian government recently indicated it may revisit the topic in 2020. The expectation in Brazil today is that elected officials and occupants of key positions in government will be honest in their dealings and account- able to society’s demands and interests, in contrast with a not-so-distant vi past. Nonetheless, it will take time and persistence to establish a new culture of transparency in the country. The fourteen chapters in this new English language edition of Lobbying Uncovered: Democracy, Public Policy and Corruption in Contemporary Brazil offers the wider public a window into Brazil’s efforts to build a modern democracy, and what it will take to change the political culture in a lasting way. Going beyond historical analysis, the book provides policymakers and voters alike a framework for discussing the role and regulation of lobbying in contemporary, democratic Brazil. The Wilson Center has been honored to work on this project alongside two other exceptional institutions: the BRAVA Foundation, committed to strengthening civic engagement and efficient public policies; and Insper, one of Brazil’s leading universities and research institutions in the areas of business, economics, and public administration—under the capable leadership of the two organizers of this book, Milton Seligman and Fernando Mello. It is our hope that the English version of this excellent book contributes to the current global conversation on the intersection of money, power and influence, offering lessons—and optimism—from Brazil’s history and its current fight to establish a more transparent and accountable democratic system. Paulo Sotero and Anya Prusa Wilson Center - Washington, DC September 2020 vii viii Preface MARCOS LISBOA e live in interesting times. Brazil has tired of the old methods and is taking up discussions that would once have been Wunthinkable. After much delay, we are beginning to talk about the differential treatment accorded to select groups by the government. The retirement laws are considerably more favorable to government employees than to other individuals. Half of the loans in Brazil charge market interest rates, while the rest carry subsidized rates for select businesses or sectors of the economy. The tax laws vary significantly from one sector to another, and even among professional services providers. Pressure groups and special treatment do exist in other countries. The surprising thing in Brazil, though, is that they are so widespread, and this has resulted in a complex set of laws governing taxes, foreign trade and access to credit. For many years, the Brazilian government’s distribution of discretionary benefits and protections to organized groups was looked upon by society as surprisingly natural. The enormous policy failures of the past decade, a serious economic crisis, and scandals arising from improper relations between the govern- ment and the private sector are the collateral effects of the development model followed during much of the past century. The nationalism of the 1950s attributed our poverty to open borders and exploitation by wealthy countries, particularly the United States. People believed that foreign companies such as Light were reaping massive 1 profits that were then sent out of the country. Brazil was exporting raw materials and importing industrial goods. International prices for our exports were seen as dropping over time, thus condemning the country to rising poverty. What had been, during the Getúlio Vargas administration and the Revolution of 1930, a reaction to the severe crisis of 1929 in the midst of a world closing in on itself, gradually turned into a national strategy starting in the 1950s. Development was thought to be achievable by curtailing relations with the outside world and increasing local production capacity. The government would take charge of decisions about private investment, choosing which businesses and industries would benefit, and protecting us from foreign exploitation. Tight controls were placed on foreign trade, foreign companies were nationalized, restrictions were placed on immigration and remittance of profits abroad was limited. National developmentalism increasingly dominated the country in the following decades, through democracy and the military dictatorship. The same