Thursday, August 31, 2017

Brasil: Green Justice


Green Justice

A federal judge in Brazil stopped a plan to allow mining in a huge swathe of the Amazon forest, saying President Michel Temer exceeded his authority in rescinding its designation as a protected area.
Last week, Temer issued a presidential decree that opened up an area the size of Denmark known by the Portuguese acronym Renca to mining operations, causing a local and international outcry from environmentalists. The court injunction came in response to a suit from Antonio Carlos Fernandes, a lawyer and university professor in the northeastern city of Fortaleza, the New York Times reported.
The government had argued that allowing regulated mining within the zone would curb illegal gold mining and generate jobs, and had offered a more detailed proposal for mitigating environmental damage and safeguarding the rights of indigenous communities after the initial outcry.
It’s now likely to appeal the court’s decision – opposition from model Gisele Bündchen notwithstanding.

Monday, August 28, 2017

A Judge's Bid To Clean-Up Brasil From The Bench

Judge Sérgio Moro in his office in Curituba, in southern Brazil, after a court hearing in the anti-corruption effort known as Car Wash, now entering its fourth year. CreditMauricio Lima for The New York Times
CURITIBA, Brazil — Outside the courthouse, T-shirts with Judge Sérgio Moro’s picture go for $12. Novelty passports for the so-called Republic of Curitiba — the city that’s become the hub of the judiciary’s crusade against corruption — are $3 apiece.
Inside his chambers, there are few signs of grandeur or the cultlike following now surrounding Judge Moro, the 45-year-old jurist who has rattled Brazil by sentencing some of the country’s most powerful politicians and businesspeople to prison on corruption charges.
His desk is a mess, with bulging folders, books and printouts stacked haphazardly a foot high. Down the hall, his courtroom, run by a clerk in sneakers and jeans, looks like a cramped classroom, with rows of cheap chairs. By official title and rank, he is a relatively ordinary federal judge, one of hundreds in the nation.
Yet Judge Moro has become the face of the national reckoning for Brazil’s ruling class. He has overseen some of the biggest corruption cases in the country, including the conviction last month of former President Luiz Inácio Lula da Silva, one of Brazil’s most influential figures in decades. In the process, he has jolted a legal system in which endless appeals and procedural delays once all but guaranteed that no one would be held accountable in corruption cases.
Now entering its fourth year, the sprawling investigation into corruption at the highest levels — known as Lava Jato, or Car Wash — is proceeding with surprising consistency and results in a country with a long history of impunity, both prosecutors and defense lawyers say, in part because of the unyielding pressure from figures like Judge Moro.
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Brazil’s anti-corruption effort is much broader than him alone. The prosecutors and investigators handling cases around the country have secured 157 convictions and recovered more than $12 billion and are overwhelmed by the number of leads.
Their work has reverberated well beyond Brazil, leading to what American officials called the largest foreign bribery settlement reached by the United States Department of Justicethe arrest of a former Peruvian president and criminal investigations in several other Latin American countries.
Even so, Judge Moro, who sent shock waves through the political establishment when he sentenced Mr. da Silva, the former president, to nearly 10 years in prison last month, conveys more concern than swagger these days.
“As I see it, the case known as Lava Jato represents the end of impunity as a rule in Brazil for this type of crime,” Judge Moro said. “The question is: Will it be a permanent change or just an episodic thing?”
On a recent afternoon, the judge strode in for a hearing in the mammoth corruption cases that have upended Brazil. Two former midlevel executives at the state-run oil company Petrobras, on trial and dressed in sweatsuits, looked crestfallen as a handful of witnesses took turns at the stand to describe the institutionalized system of graft that has siphoned billions of dollars from public coffers and helped cement distrust of lawmakers.
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A rally in support of Luiz Inácio Lula da Silva in Sao Paulo in July, after the former president was sentenced to nearly 10 years in prison for corruption and money laundering. CreditMauricio Lima for The New York Times
Judge Moro and Brazilian prosecutors believe that a deeper political transformation can be achieved only through sweeping changes like overhauling campaign finance rules, doing away with the de facto immunity members of Congress enjoy in office and winnowing down the vast number of political parties, to curb horse trading.
None of these changes is on the table. President Michel Temer, who was charged in June with ordering a bribe to silence a jailed politician, and other powerful politicians under criminal investigation are lashing out against the judiciary. Mr. Temer recently asked the Supreme Court to bar Attorney General Rodrigo Janot from taking further legal action against him, accusing him of a baseless crusade.
Members of Congress have introduced legislation that would make it easier to rein in judges who, the politicians contend, are abusing their authority by ordering pretrial detentions and relying too heavily on plea deals.
“Brazil is at a tipping point and it’s unclear right now which of these two forces is going to be victorious,” said Matthew Taylor, an expert on Brazil’s judicial system at American University.
Judge Moro, a studious, sullen lawyer who spent the early years of his career studying the history of money laundering and corruption investigations, is widely credited with setting up that clash.
In 2004, when he was still a relatively unknown judge in this city settled by German and Italian immigrants, he published an article in a legal journal about the factors that enabled Italy’s far-reaching “Clean Hands” corruption investigation. The use of pretrial detentions, plea agreements and the ability to shape news coverage enabled Italian law enforcement officials to create a “virtuous cycle” that led to the downfall of scores of powerful political figures, Judge Moro concluded.
It took a decade and a “highly improbable set of necessary conditions,” said Deltan Dallagnol, a Lava Jato prosecutor, for Brazil’s judiciary to start applying the tactics of “Clean Hands.”
It began in early 2014 with a routine investigation into money laundering at a gas station in Brasília, which eventually led investigators to unravel a gargantuan web of kickbacks at Petrobras.
Critical cases in the inquiry were assigned to a close-knit team of federal police officers and prosecutors in Curitiba that happened to have expertise in financial crimes. A new electronic case system allowed judges to expedite cases that had lagged for years. Switzerland, long a haven for stolen public funds, agreed to share information with Brazilian prosecutors. A 2013 update to Brazil’s penal code made it easier to turn defendants into cooperating witnesses by offering them leniency.
And then there was Judge Moro.
In May 2014, he startled the legal community by demanding that a former Petrobras chief, Paulo Roberto Costa, be held pending trial, calling him a flight risk. In doing so, he stared down a Supreme Court judge who had signed off on Mr. Costa’s release. But Judge Moro prevailed, and with Mr. Costa behind bars, several other suspects agreed to cooperate with investigators.
As a cascade of new charges were filed against politicians and Petrobras executives, Judge Moro soon became a celebrity. During a visit to a supermarket in Curitiba, an employee took to the loudspeaker to announce his presence. At large protests in 2015 against the government of President Dilma Rousseff, previously the chairwoman of Petrobras, many demonstrators wore Moro masks and T-shirts with the slogan “We are all Sérgio Moro.”
Judge Moro has become the face of the anti-corruption crusade, celebrated on T-shirts, car stickers and fake passports purporting to be from the Republic of Curitiba on sale at a stall set up by a supporter outside his office. CreditMauricio Lima for The New York Times
Many Brazilians hoped the judge would run for office, a prospect he has ruled out. Judge Moro, who comes across as reserved and taciturn, said that he stumbled into the limelight but that his newfound fame had served the investigation well.
“It was important so that these cases, which implicated powerful people, weren’t obstructed in some way,” he said.
As the cases advanced, Judge Moro and the Lava Jato prosecutors began to make a broader argument to the public about the need to change the nation’s political culture.
In March 2016, he issued a public statement praising anti-corruption protests, denouncing “the systemic corruption that destroys our democracy, our economic well being and our dignity as a nation.” Last October, as he sentenced a former senator to 19 years in prison, Judge Moro quoted a 1903 speech by President Theodore Roosevelt in his ruling.
“The exposure and punishment of public corruption is an honor to the nation, not a disgrace,” the quoted portion said.
Perhaps Judge Moro’s most contentious move also came in March 2016, when he released the transcript of an intercepted conversation between Mr. da Silva and his successor, Ms. Rousseff. In it, she appeared to offer a cabinet position to Mr. da Silva, which would have shielded him from prosecution in conventional courts.
The revelation fueled public outrage that contributed to Ms. Rousseff’s ouster last year. But it also focused anger on Judge Moro. Even some legal experts who support his work have argued that releasing the wiretap was improper because the warrant used to record the call appeared to have expired when the conversation took place. The judge says he has no regrets.
“I think that democracy wins when, shall we say, people learn what their leaders do in the shadows,” he said. “Especially when what they’re doing is illicit.”
Prosecutors charged Mr. da Silva in 2015 with corruption, accusing him of illegally receiving about $1.1 million in improvements and expenses for a beachfront apartment. They have also described him as the mastermind of the kickbacks scheme at Petrobras. As the case unfolded, the Brazilian news media covered it as a duel between two titans — Judge Moro and the leftist former president — that could shape the broader political future of Brazil.
Last month, in finding Mr. da Silva guilty, Judge Moro wrote that “no matter how important you are, no one is above the law.” The decision has thrown into turmoil next year’s presidential election, in which Mr. da Silva is currently the front-runner. He could be barred from running.
With the appeal pending, Mr. da Silva’s supporters are attacking Judge Moro and the Lava Jato team. This month, supporters held a mock trial in Curitiba, accusing them of abusing pretrial detentions, offering questionable plea bargains and trying the case in the press.
“Judge Moro cannot continue behaving like he was a czar,” Mr. da Silva said late last month in a radio interview.
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Wednesday, August 23, 2017

Bumpy Times In Brasil But Hedge Funds Boom

A protest in Brasília in May. Despite political upheaval, “Brazil is a very good place to make money,” said Márcio Appel, who has started a new hedge fund. CreditAndressa Anholete/Agence France-Presse — Getty Images
RIO DE JANEIRO — After more than a decade as an asset manager for large multinational banks, a Brazilian, Márcio Appel, wanted to make it on his own. The political and economic upheaval in his country was not going to deter him.
Even on the heels of a new scandal erupting in May that rocked the markets, the hedge fund firm he co-founded here, Adam Capital, started raising money for its newest fund. It is expected to be a $6.1 billion macro global fund, or one that invests based largely on the political and economic prospects of various countries.
If it succeeds, the firm could become one of the top independent asset managers in Latin America, based on total assets under management, and among the largest worldwide of its vintage.
Mr. Appel is going solo as Brazil’s hedge fund sector is growing even though the short-term prospects of the economy remain uncertain.
Total assets under management in June increased to $85 billion, a jump of 15 percent from the $74 billion in June 2016, according to data provided by the Brazilian Financial and Capital Markets Association, known by its Portuguese acronym Anbima.
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Brazilian macro funds had a total under management of $30.79 billion (or 97 billion reais) in June, a 51 percent increase from the same month one year earlier. Just in the first six months of this year, that figure grew by 18 percent.
Such funds are more and more sought after out here. They received a net increase of $5.3 billion (or 16.7 billion reais) in the first half of this year, a turnaround from the net outflow of $412.7 million (or 1.3 billion reais) over the same period last year, according to Anbima.
Even with all that money going into hedge funds, it is still an unusual time to form a new investment vehicle here and court investors.
Brazil’s president continues to be investigated for corruption, his low popularity has eroded even further, and his ability to shepherd unpopular reform measures considered by bankers as essential to turn around the economy has diminished.
Yet Adam Capital’s founding partners, Mr. Appel and his longtime colleague André Salgado, are no strangers to crisis.
“Brazil is a very good place to make money. It always has been,” said Mr. Appel in a recent interview at the firm’s office in the upscale Leblon neighborhood near the beach.
From 2001 to 2008, Mr. Appel led asset management at the Spanish banking giant Santander’s Brazil subsidiary. Then he did that for Banco Safra from 2008 to October 2015. There he gained acclaim for his performance with their Galileo fund, which gained 199.43 percent during his tenure, according to the brokerage firm XP Investimentos.
But, he said, “I always dreamt of opening my own firm.”
The two founding partners met while at Santander — Mr. Salgado headed its brokerage house from 2003 to 2010 and later held a similar role at Safra.
Adam Capital opened its initial funds in April last year. Two weeks earlier, Brazil’s lower house had voted to move forward the impeachment process of Dilma Rousseff, then president.
Still, the firm ended up raising $2.9 billion for its flagship macro fund and accumulated a total of about $3.3 billion in under nine months. That was in part because several private banks, including Itau Unibanco and Safra, agreed to be distributors, providing access to their private banking clients.
Adam Capital “has had very strong success in raising funds,” said Michael Viriato Araujo, a professor of finance at the São Paulo-based business school Insper. “For Brazil, the speed at which they raised was impressive,” he said.
The firm’s performance has been well above benchmarks. As of July 31, the flagship fund is up 27 percent since inception. That is about 1.65 times the return of the CDI, a type of certificate of deposit common among Brazilians and considered risk-free as it is tied to local interest rates, which have long been sky-high.
The firm currently holds about $4.51 billion in assets under management, according to Mr. Salgado.
That ranks it first globally among hedge fund managers established in 2016 or later and based on total assets under management, according to the research firm Preqin.
Black and White Capital in the United States is in second place with $2.8 billion. Only two others have surpassed the $1 billion threshold in assets under management. Those are the Holocene Advisors and Sagewood in the United States.
Adam Capital so far has focused on investing in equities, mostly indexes, foreign exchange and interest rates. It has done so in the United States, Japan, and Europe as well as in emerging markets like Brazil, Turkey, South Africa and Mexico.
Until May, the firm kept about a 50/50 split between investments in Brazil and overseas, its founders said. The leak of a taped conversation between Joesley Batista, chief executive of J & F Investments, the parent of the meatpacking giant JBS, and Brazil’s president, Michel Temer, who seemed to endorse Mr. Batista’s bribery, resulted in a market panic.
Immediately afterward, Adam reduced everything related to Brazil: stocks, local interest rates and the real. Its flagship fund fell 3.52 percent that month.
Yet the firm’s funds have since rebounded, as has their exposure to Brazil, including even betting on the real over the dollar. “As of today, we’re just back to pre-Batista levels,” Mr. Salgado said. “Now it’s back to 50/50.”
They also feel like they passed an important test during that episode. “Generally I think it was bad because nobody likes to lose money,” Mr. Salgado said. “But we managed to prove to the market that our size was manageable even with an event of this proportion.”
In Brazil, several factors have buoyed independent asset managers. Interest rates falling significantly in the past year forced normally conservative Brazilian investors to start taking more risks. The emergence of new brokerage firms, some online, has also cut into the dominance banks used to have in controlling hedge funds.
Large banks are starting to sell to independent managers, said Mr. Appel. “That is what allowed us to get that big that fast,” Mr. Salgado noted.
That bodes well for other firms, too. “It’s very likely the industry will continue to grow,” said Professor Viriato, the hedge fund expert at Insper.
The minimum amount needed to invest has also fallen, making the funds more accessible.
“Hedge funds in the past were for the ultrarich in Brazil,” said Mr. Salgado. Now a hedge fund investor needs only a minimum investment of $3,175 and can make that through his bank or other firms.
Reflecting that change, Adam Capital already has about 18,000 individual investors in its funds.
Mr. Salgado said that to put money in hedge funds in Brazil today, “you don’t have to be a millionaire anymore.”
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