Brazil’s top court bans corporate money in election campaigns

September 24, 2015

Brazil’s Supreme Court decided on Thursday to ban corporate donations to election campaign financing in a move to clean up Brazilian politics caught in a massive kickback scandal.

The top court voted 8-3 to allow election donations from individuals but not from companies, a decision that renders unconstitutional a bill passed last week by the country’s Congress allowing corporate funding for political parties.

The ruling comes in the midst of Brazil’s biggest corruption investigation into bribes and political kickbacks on contracts with state-oil company Petrobras. The funds allegedly went into the pockets of dozens of politicians in President Dilma Rousseff’s governing coalition.

The treasurer of her Worker’s Party is in jail, and her election-campaign accounts are under investigation to see whether bribe money was used to help re-elect her last October.

The scandal heightened public scrutiny of corporate funding as scores of executives from Brazil’s largest construction firms were indicted on corruption charges for paying bribes from overpriced contracts with Petroleo Brasileiro (PETR4.SA).

“We have come to an absolutely chaotic situation in which economic power dominates political power in an illegal way,” Justice Luiz Fux said, arguing with the majority that the ban on corporate funding is needed to set an equal playing field for election candidates.

The Supreme Court’s decision had been on hold for 16 months after one of its members, Gilmar Mendes, asked for more time to consider the issue, arguing that Congress should rule on the matter first.

Last week, lawmakers reversed their earlier position and passed a bill that would allow companies to fund parties in election campaigns but not make donations to individual candidates. The bill is awaiting Rousseff’s signature to become law.

Justice Mendes voted against the ban on corporate funding, arguing that it would only encourage funding through illegal slush funds dubbed “caixa dois” or under-the-table cash.

With the court’s ban on corporate funding, the law passed by Congress will become unconstitutional if Rousseff signs it, and the issue will return to the Supreme Court, Mendes said.

Campaign financing in Brazil is both public and private. Parties receive public funding in proportion to their number of seats in the lower house. Private individuals can donate up to 10 pct of their income and companies, until the court’s ruling, up to 2 pct of their revenue.


Brazil’s top court bans corporate money in election campaigns