Start-Up Brasil | Acorns to Oaks


«… solving the problems of an industry or a corporation is not a sexy way to make a living»

Source: Folha de S. Paulo | Brasilianas.Org
By: Reinaldo Chaves
Translation: C. Brayton

The Start-Up Brasil program, launched by the Ministry of Science, Technology and Innovation in November of last year, is an attempt to replicate international success stories in support for start-ups — fledgling companies in the IT sector — based on a joint effort by government and the private sector.

Chile founded a similar program two years ago and has already attended 397 companies and 888 entrepreneurs. The annual budget of Start-Up Chile is US$ 14 million. Israel has invested heavily in start-ups since the 1990s, mostly in the areas of military, energy and aerospace technologies. The University of Jerusalem receives annual funding of more than US$ 1 billion.

The Brazilian program calls for investing R$ 40 million in three years in at least 150 companies. At the outset, six accelerators will be selected to service the selected start-ups.

The accelerators will create incubators and provide research and consulting — see the «Mission Statement», below. Continue reading

Brasília | Oligopolies Under Observation in 2013

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Oligopolies in the Media Market

Source: Folha de S. Paulo | Brasilianas.Org.
By: Vladimir Safatle
Translation: C. Brayton

In recent weeks, Argentina made fresh headlines in Brazil with stories on clashes over the enforcement of Argentina’s so-called “Media Law,” which defines a new regulatory order for companies in the news and entertainment sectors.

Some of these new provisions, and especially those related to combating monopolies, have been viewed as signs of a vengeful State intent on limiting freedom of expression, as in the case of the archrivalry between President Kirchner and the Clarín group.

Leaving aside these heated public conflicts, however, the Argentines are engaged in an important debate that deserves to be treated more dispassionately. It seeks an answer to the question: “Do we or do we not need laws that restrict the concentration of ownership in the media sector?” That is to say, can we successfully argue that concentrated media ownership does not necessarily affect democratic practices?

At this juncture, it is worthwhile remembering that the global media market is currently among the most oligopolized in the world.

What is more, as we gather from  reading between the lines of the recent case involving Rupert Murdoch, this state of affairs really does affect our political life.

Murdoch built an empire of TV stations, newspapers, magazines, radio stations, book publishers, movie theater chains, and Internet portals that gave him the ability to mold debate, pressure governments and interfere in politics to the extent that it promised the American general  David Petraeus its unlimited support should he choose to run for U.S. president.

Situations like this are not exclusive to the Anglo-Saxon world, however. Recent decades have witnessed a brutal, highly negative trend toward consolidation of the sector that affects not only our politics but also our culture.

A single group like Time Warner, for example, exercises simultaneous control over production, distribution and development of new techniques. In this case, we are justified in saying that laws barring the formation of oligopolies is a way for society to defend itself against the coerced uniformity of opinion and the silencing of alternative voices.

Opponents of this viewpoint might reply that a more fragmented market would leave media companies more vulnerable to government pressure. This argument is not without merit.

The solution to this aspect of the problem, however, is not the perpetuation of the other aspect. Strategies are needed in order to prevent governments from framing the news according to their own interests.

In Brazil, this would imply limiting government influence by drastically cutting spending on government advertising — which should be confined to public service announcements — and enforcing laws such as the ban on politicians owning media outlets. Clear and absolutely fair criteria for the use of publicity budgets by state-owned firms should be developed.

São Paulo’s state-owned and publicly traded Sabesp might make an interesting case in point. It frequently walks the corda bamba between public service announcements and government propaganda, as is “this is your current government at work for you.”

But this could be an artifact of my own subjective impression as a couch potato. This might make a good little feature article to research.


Where are all the Sabesp TV spots stored? What PR techniques do they apply? Do they amount to the use of public money to promote a specific administration?

Anyway, I have always thought that the «monthly payola» cases should be combined and subjected to a parliamentary commission of inquiry — CPI — of the PR industry at the heart of these and other scandals.

After all, the exact same mechanism was used in several of these cases: Publicity services were contracted by a state or municipal government for a given cultural or sporting event — Rock in Rio, an Enduro motorcycle event in Minas Gerais — and then publicity fees were accounted for as having been paid to fictional or purpose-built Potemkin village PR outsourcers.

In fact, however, most of these PR funds were skimmed off for use by political and private parties. Enter the hidden camera video of political operators stuffing their socks and jocks with bundles of cash and you have yourself a classic Brazilian “mountain of money” scandal.

In any event, big PR has a demonstrated capacity for financial legerdemain — think of Duda Mendonça as well as Marcos Valério. Perhaps the second most common source of laundered campaign money: state-owned companies like Furnas in Minas Gerais.

The Vanguard of the Obsolete

Gilberto Maringoni e Verena Glass of the IPEA provide a detailed historical narrative of media law development in Latin America, explaining why regulation produced in the 1930s-1960s no longer applies.

Another factor that could not have been anticipated was the invention of digital technology and the deterritorialization of media companies through the use of virtual networks.

Before the digital revolution (1980- 90) news organizations had to be located in the country where they operated. This was not merely an arbitrary legal requirement, based on nationalist developmentalism. At this time, the entire network of businesses, and especially in the advertising sector and media finance, was anchored in calmer waters.

Now, however, an ISP, Web portal or cable TV provider can transmit content from any part of the world, without having to use antennae or sophisticated broadcast equipment.

The main problem is that the ISPs and cable operators are not classifiable as content and information producers as defined by the current, outmoded legislation.

The privatization of Latin American telecoms in the 1980s-90s, opened up a veritable  Pandora’s box. State-owned telephone monopolies were auctioned off. It may be that the authorities who sponsored this policy were blind to the about-face that would make possible a state of borderless media convergence.

Telephone operators, for example, which during the 1990s were limited to long distance voice communication, underwent a consolidation that two decades later would turn them into the biggest Internet providers in Brazil and arm them with the same political firepower as any traditional TV network.

As things stand, TV, radio, telephone, film, literature, music, data transmission, navigation data and many other services can be tapped using nothing more than a single smartphone.  Each of these functions, however, must still comply with rules specific to its sector.

ISPs use technology to produce and distribute content. To the extent that they are not subject to the old legal norms, their content can be produced anywhere in the world and transmitted to any other, with adjustments made for local characteristics [such as  language].

At the same time, now that global media maintains offices in many different countries, a complex series of loopholes in current local laws has been used to legitimate the local operation.

From the same symposium,, Denis de Moraes:

Brazil is in the  vanguard of obsolescence [sic] in terms of its regulation of the media. Its radio and TV regulator remains one of the most outmoded in Latin America. To date, the congress has made no progress toward regulating Articles 220 and 221 of the 1988 Constitution, which respectively ban monopolies in the mass media and gives preferential treatment to TV and radio stations “serving education, artistic, cultural and informative ends,” as well as “the promotion of national and regional culture and a plan of stimuli to independent productions who qualify. .The lack of action by successive governments in this area is just plain alarming.

Media a Priority for 2013

The president of the ruling PT has said that political reform and media regulation are the top priorities of this year’s Congress. The quote is from November of last year.

Rui Falcão said his party has at least two goals for 2013: A new regulatory framework for the media and political reform.

The party will begin to execute its strategy — calling on the federal president to issue a bill that regulates the media —  the party will include the issue in its agenda for the meeting of the national leadership.

Last week, Falcão told the international press that he hopes the presidency will send down a bill regulating communications in Brazil. “It is not our party that wants to pass enabling legislation for these provisions of the Constitution, it is the congress as a whole. We hope that our government will send down a bill establishing a regulatory framework that will increase freedom of expression and eliminate any possibility of censorship of the established media, regulating provisions in the Constitution that have yet to get off the drawing board.”

Risk Shopping | Brazilian Cases in Point


Source: Folha de S.Paulo.

Risk evaluation agencies assigned high ratings and low risk to several Brazilian banks that recently failed.

Banco BVA, for example, received a BBB rating from ratings agency LF Rating four days before suffering a Central Bank intervention on October 19.

Austin Rating assigned  BVA a BBB+ less than two months before its collapse.

The same occurred with  Cruzeiro do Sul, liquidated in September with R$ 3.1 billion in debt, and  Panamericano, which underwent a federal intervention on November 9, 2010.


Esteemed customer: you will be able to access funds in your StarCash account until December 13, 2012. Starting December 28, 2012, control will pass to Banco Bonsuceso, which will deal with new cards, card replacements, and so on

Risk ratings affect companies in one of two ways. On one hand, investors use the ratings as a guide to potential investment. Some funds invest exclusively in paper declared risk-free .

On the other hand, financiers evaluate risk using these ratings: the lower the rating, the more expensive it is to borrow money.

With the blessing of the ratings agencies, pension funds such as Petros, Brazil’s second largest, is able to invest in riskier fixed income paper, stamped “safe” by the agencies.  Petros had R$ 80 million in three funds with ties to BVA and invested in the bank’s bonds.

Shopping for Ratings

A practice still allowed by the market aggravated the problem: the so-called “shopping mall of ratings.”Companies needing positive ratings request a preliminary report from a given agency. If the rating is low, they try again with another agency, and so on until receiving the rating desired.

Since it is not yet required to make public these preliminary findings, the investor never suspects that the company has a bad credit rating.

To counter the negative effeects of this practice, the Brazilian SEC — the CVM — will as of January 2013 require the publication of preliminary ratings reports on the Web site of the rating agency

“This new CVM rule should mitigate the «ratings shopping center»  deve mitigar esse shopping de ratings,” says Rafael Guedes, CEO of Fitch Ratings Brasil.

“In Brazil, every agency has its own criteria, and there are major discrepancies,”say Sergio Garibian, ratings director, Standard & Poor’s, Latin America.

In February 2006, Cruzeiro do Sul exited its contract with Fitch, which had assigned it a rating of BB+(bra),  with “elevlalted risk of default.” The same year, the bank signed with Moody’s, which assigned it Baa1 for long-term deposits, and then three months later raised it toA3. Both are considered indicative of investment grade.

Responding to these contradictions, federal deputy Eduardo da Fonte (PP-PE) presented a bill that would make agencies responsible for “damages caused by intentional or negligent conduct in arriving at risk ratings.

“It is not norml for some agencies to classify a bank as low-risk and then watch it go out of business a few days later,” Fonte says. “Either the bank coopted the agency or else the agency is not qualified to rate anyone.”

Erivelto Rodrigues, CEO Austin Rating, says the “shopping mall of ratings” only occur in structures such as FIDCs — investment funds in rights to future receivables.”I don’t believe this happens with companies and banks,” he said.

Para Paulo Rabelo de Castro, CEO of SR Rating, which classified none of the banks in question, “strict regulation is required at a moment when the government is trying to stimulate the market for debentures.”

Brazil’s largest pension fund, Previ only accepts ratings from three agenices: S&P, Moody’sand  Fitch. Funcef, meanwhile, buys private debt instruments that are evaluated by at least one ratings agency, it matters not which.

Funcef was holding notes from both  PanAmericano and Cruzeiro do Sul. In the  Cruzeiro case, it received its entire investment back thanks to a special guarantee clause.

The Risk Mall 101

I can hardly claim to be an expert on the subject, but a study byVasiliki Skreta and Laura Veldkamp — «Ratings Shopping and Asset Complexity: A Theory of Ratings Inflation» seems like a good place to start. The abstract:

Many identify inflated credit ratings as one contributor to the recent financial market turmoil. We develop an equilibrium model of the market for ratings and use it to examine possible origins of and cures for ratings inflation. In the model, asset issuers can shop for ratings — observe multiple ratings and disclose only the most favorable — before auctioning their assets.

When assets are simple, agencies’ ratings are similar and the incentive to ratings shop is low. When assets are sufficiently complex, ratings differ enough that an incentive to shop emerges.

Thus, an increase in the complexity of recently-issued securities could create a systematic bias in disclosed ratings, despite the fact that each ratings agency produces an unbiased estimate of the asset’s true quality.

Increasing competition among agencies would only worsen this problem. Switching to an investor-initiated ratings system alleviates the bias, but could collapse the market for information.

The lede:

Most market observers attribute the recent credit crunch to a confluence of factors: excess leverage, underestimation of risk, opacity, lax screening by mortgage originators, improperly estimated correlation between bundled assets, market-distorting regulations, a rise in the popularity of new asset classes whose risks were diffcult to evaluate, as well as credit rating agency conflicts of interest.

This paper investigates the misrating of structured credit products, widely cited as one contributor to the crisis. Our main objective is to critically examine two arguments about why ratings problems arose and to show how combining the two could produce a ratings bias that imperfectly informed investors would not anticipate.

One argument focuses on asset issuers who shop for the highest ratings. The New York Times explains: The banks pay only if [the ratings agency] delivers the desired rating . . . If Moody’s and a client bank don’t see eye-to-eye, the bank can either tweak the numbers or try its luck with a competitor like S&P, a process known as ratings shopping.

A final thought: the Sadia and Aracruz derivatives crises of 2007 — exchange rate swaps — seem to illustrate the same logic. Risky assets kept off the books until the roller coaster came to a full stop..

In reality, the two largest agencies, Moody’s and S&P, account for 80 percent of market share. When a structured credit product is issued, the issuer typically proposes a structure to an agency and asks it for a \shadow rating.” This rating is private information between the agency and the issuer, unless the issuer pays the agency to make the rating offcial and publicize it. In the model, an asset issuer can purchase and make public one or two signals about the payoff of an asset. We call these signals “ratings.” After choosing the number of ratings to observe and which ones to make public, the issuer holds an auction for his assets. After each investor submits a menu of price-quantity pairs, the asset issuer sets the highest market-clearing price for his asset, and all investors pay that price per share.

Brazilian Electricity Wars | The R$ 5 Billion Feud


Surprisingly informative:


The history lesson is especially useful, as are the league tables — which may need touching up, however. The Brazilian government has set up a useful informational page on the New Model for the Electricity Sector, passed in 2004. Three of the largest state-owned — as opposed to federally-owned — generation groups are refusing to play ball.

IstoÉ Dinheiro magazine leads with a mocking headline:

Honey, I Shrank CESP

São Paulo electricity concessionaire will lose nearly 80% of its revenues by 2015. Learn how other companies who refused the federal plan to reduce electricity bills are faring.

After a period of intense political gamesmanship, scores of Excel spreadsheets and a sharp decline in their share prices — an estimated R$19.2 billion — Cesp, Cemig e Copel decided last week not to accept the federal goverment’s new rules for the electricity sector.

The three companies represent 60% of the generation capacity in play as part of Dilma Rousseff’s plan to reduce energy prices by 20% in 2013.

The most emblematic of these is Cesp, whose directors are overseen by governor Geraldo Alckmin of the opposition PSDB. In saying no to the proposal, the state-owned CESP will lose 77.8% of its revenues starting in 2015. Based on data from 2011, this implies a loss of R$ 2.3 billion in cash reserves, currently at R$ 3 billion.

[Caption] Alckmin: Govenor prefers to reduce the size of CESP rather than reduce the lighting bill of São Paulo residents.

“CESP will become a minor company,” says Ricardo Corrêa of the Ativa Corretora brokerage firm.

In Minas Gerais and Paranhá, respectively, Cemig and Copel have renewed their transmission concessions but plan to give up a number of generation plants, and so will suffer the same effects in 2015.

The three companies have three PSDB state governments as majority shareholders: the Alckmin government, in São Paulo, along with Antonio Anastasia in Minas Gerais and Beto Richa in Paraná. In turning down the concession renewals, these state-owned firms may make it impossible for Dilma Rousseff to keep her promise to reduce the average energy bill by 20,2% starting in March 2013.

Leaving out Cesp, Cemig and Copel, the guaranteed savings would be just 16.2%, according to data from the ministry of mines and energy.

We will take it, for now, and thank you very much.

The president, however, seems firm in her desire to provide cheaper electricity. “Reducing the price of energy is a decision from which the government will not back down, although it laments the lack of sensitivity on the part of those who fail to recognize the importance of this step for the sustainable growth of our economy,”Dilma told a group of business executives in Brasilia on Wednesday.

To realize its target, the government has a tax gambit up its sleeve, market analysts say.

“All it takes is a reduction of the PIS/Cofins tax on the energy bill,” says Nivalde de Castro, coordinator of the energy studies group at UFRJ.

Amid an exchange of accusations with the federal government, São Paulo says that the CESP decision was entirely technical.

Proof of this, according to state energy secretary José Aníbal, is that another of São Paulo’s state-owned firms, EMAE, accepted the federal government’s conditions and signed the contract. In the case of Cesp, the difference between the indemnity for unamortized investments offered by the feds and the sum judged correct by the state is R$ 5.4 billion.

Márcio Zimmermann, federal executive secretary for mines and energy, says: “We cannot understand the logic that led this company not to renew its concessions.” But CESP accepted lower energy prices, according to Anibal, it would have difficulty honoring existing energy contracts, worth R$130 Mw/h on average. “They suggested we buy this energy on the free market, but the price there is R$ 200 Mw/h,” Anibal said. “I challenge the federal government to show us their calculation. The situation of Cemig and Copel and very different from that of CESP. On Wednesday, Djalma de Morais, CEO of Cemig, took part in an analyst conference call and said that eventual losses, and especially those in the area of transmission, will be compensated with internal adjustments.

“Our plan provides for a 20% reduction of operating expenses in this segment, as a method of controlling costs,” Morais said. The CESP executive announced that the company will maintain its investment plan and, if necessary, will go to court to guarantee the right to renew concessions under the old rules, which apply to 3 of its 21 generation plants.

In the Senate, Aécio Neves (PSDB-MG) gave a speech in which he accused the presidency of “committing a foolish act in tryiing to reduce the price at the cost of bankrupting the sector.”

Currently, generation is responsible for 40% of Cemig revenues. Transmission accounts for another 20%. The rest is accounted for under “other businesses,” which include supplying natural gas to residences and industry.

“In the future, gas may also be used to generate electricity,” says Luiz Fernando Rolla, Cemig COO, who does not rule out the acquisition or construction of new plants.

Copel is already traveling down that path. By year’s end, the Mauá and Cavernoso 2 generating plants, with joint capacity of 380 MW, will begin operations. That is more than the 272 MW in capacity that Copel did not renew. Like Cemig, Copel adhered to the federal program only with respect to its transmission assets. In this case, the company took a hard blow. “Our revenues in this area are down 58%,” the company said in a note to investors.

Though they did not release their spreadsheets, Mines and Energy and ANEEL affirmed that the sums offered are more than sufficient to guarantee the profitability of the generation sector. “We do not understand the logic behind the refusal of these companies to renegotiate and renew,” said Márcio Zimmermann

Eletrobras, controlled by the federal government, adhered in full to the new rules, reasoning that a state-owned firm must take into account not only its balance sheet but is social role as well. Eletrobras intends to compensate for reduced income with cost-control measures.

“We will review our expenses and investments in the short, middle and long term,” said José da Costa, CEO Eletrobras. Investors did not like this news and Eletrobras shares plummeted 50%, costing it R$ 11.6 billion in market cap. Cesp, meanwhile, by not renewing its concessions, has laid to rest a persistent dream of the PSDB: to privatize the company.

“Not viable,” said Aníbal. “Who would want to buy a company with two concessions expiring in the next two and a half years?” The only other asset in the company’s portfolio is a large hydroelectric plant in Porto Primavera, whose concession expires in 2028. If it wants to rebuild its profile, CESP will have to compete in future auctions, a possibility no discarded by the S. Paulo state government.

7D | A Mexican Standoff?

On 7D, nothing will happen

On 7D, nothing will happen

Argentine media group Clarín announces a stay of execution.

It says it will not be required to comply with the 2009 Ley dos Medios until all appeals have been exhausted.

As soon as [the court] extended the stay in the case challenging the constitutionality of certain provisions of the media law, Clarín issued the following statement:

The Grupo Clarín has just been informed that the injunction has been extended until a definitive ruling on the constitutionality of provisions of the Media Law  has been arrived at.

As it has throughout the process,  Grupo Clarín will follow the law, respecting the Constitution, the law, and the findings of the courts.

Eric Nepomuceno of Brazil’s Observatório da Imprensa summarizes the case, below.

As it happens, and contrary to the image of a deeply polarized debate, there is internal disagreement among shareholders in the Clarín group over compliance — I will translate that, too. But first, Continue reading

Bingo! | Delta Goes Down


Source: Delta defines bankruptcy recovery plan — Portal ClippingMP.

In the annals of contemporary Brazilian bribery scandals, probably none are more painful than the saga of the public works contractor Delta and its ties to organized crime boss Carlinhos Cachoeira — Charlie Waterfall, whose principal business is the murky world of smuggling, numbers racketeering, and “nickel-hunter” gambling machines.

One of Brazil’s largest contractors, Delta had been a star player in the PAC — the federal growth acceleration program — and was afforded the honor of joining the consortium to rebuild the Maracanã Stadium in Rio de Janeiro.

Now, it would be difficult for it to obtain a bicycle-powered newspaper route.

Delta has since voluntarily withdrawn from Maracanã and most other projects.

A congressional investigation is underway — wrapping up early, actually, after company officials and other parties took the local equivalent of the Fifth — but federal police say they have ample evidence of wrongdoing — including the involvement of journalists in character assassinations of Mr. Waterfall’s enemies..

Delta executives appeared on court-ordered wiretaps discussing how to cheat federal contract bidding procedures and infiltrate regulatory agencies, among other things.

And so the rise and fall of Delta turns out to be a textbook case of moral hazard.

Delta intends to pay its non-financial creditors with equipment. Its plan is to reduce its inventory of idle equipment by reducing the number of projects contracted for since January 2012 by  50%. Banks and financial institutions will receive payment starting in June 2014,  payable in 72 monthly installments and corrected by CDI+1%, according to a recovery plan filed yesterday in a Rio de Janeiro court. The creditors assembly is scheduled for December 7. Bradesco is the company’s largest creditor. Continue reading

Policarpo, On His Oath? | Journo Wanted in RICO Probe

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The phony bribe-stuffed Swiss bank accounts cooked up and served by Veja magazine

I read it in Carta Maior: A congressional panel wants the federal attorney to probe relations among prominent members of the press, on one hand, and movers and shakers of the diversified, post-modern numbers racketeering sector, on the other.

Brasília – The rapporteur of the «CPMI of Charlie Waterfall», deputy Odair Cunha (PT-MG), will request that a subpoena be issued to journalist Policarpo Junior, chief of the Brasilia office of Veja magazine em Brasília, as part of the final report to be submitted today, 21 November 2012, in the Brazilian Senate.

The CPMI is a mixed parliamentary commission of inquiry. Charlie Waterfall is a numbers and gambling racketeer the depths and scope of whose influence are proving difficult to spelunk, although Goiás and Brasília should play a major role.

The Veja journalist is the subject of, or a participant in, a good deal of conversation recorded by the federal police in the case.

In an initial reading of the evidence currently available, it appears that Policarpo was often fed with microwave-ready scandal stories by and at the behest of Charlie Waterfall’s Vladimiro Montesinos, an ex-ABIN agent named Jairo Martins.

PT members on the panel argue that the documents analyzed during the 180-day term of the commission leave no doubts about the journalist’s involvement with the «Waterfall» criminal organization. “This is a  position we have taken from the very beginning,” says Dr. Rosinha (PT-PR), who presides the commission.

The question of issuing a subpoena to Policarpo has created constant friction among CPMI members. Submitted a number of times by PT lawmakers and Senator Fernando Collor de Mello (PTB-AL), the motion failed to receive a majority of the 32 votes on the panel.  The PT, PCdoB, PSB and PTB officially supported this position, but these parties only make up 11 of the votes on the commission.

Opposed to the subpoena, opposition members — PSDB, DEM and  PPS — obtained the support of the PDT and PMDB, which turned the tide in favor of the journalist.

In August, a study carried out by the Waterfall commission at the behest of  Dr. Rosinha found that the Veja editor not only used the Waterfall organization as a journalistic source but also requested favors from Waterfall’s RICO.

Pardon the Newspeak, but RICO = «racketeering-influenced corrupt organization» seems to define the issue ratherly neatly, and even makes for a bilingual pun.

Often, he would receive ready-made “journalism” serving Waterfall’s interests and feature it in the magazine a short time later.

“This study establishes that Policarpo maintained a personal relationship with the Waterfall RICO that went well beyond the source-reporter relationship. He owes Brazilians an explanation, yes he does, ” Dr. Rozinha said at the time.

The study did not confirm any direct participation by other Veja management or employees, including the Civita family, owner of the Abril Group. It did say, however, that stories published by the magazine directly served the interests of the criminal conspiracy.

The report was based on court-ordered wiretaps realized by the federal police in Operation Vegas and Operation Monte Carlo. In Monte Carlo alone, police recorded 42 calls between  Policarpo and members of the Waterfall RICO..

The journalist also faces accusations by Goiânia judge Alderico Rocha Santos, who said that Waterfall’s wife, Andressa Mendonça, tried to blackmail her in exchange for advantageous treatment for Waterfall, threatening her with a dossier that would allegedly compromise her.

Veja defended itself saying, among other things, that it does not compile, nor does it publish, dossiers.

Veja, Veja, as unbelievable as ever.

One example that comes to mind, for example, is the “bribe-stuffed Swiss bank account of Lula” gambit. Luis Nassif narrates the gambit with his usual candor and caution.

Veja’s partnership with investment banker  Daniel Dantas grew closer as 2006 drew to a close. The assortment of articles and dossiers, and especially the most outlandish. seem to have been furnished directly by the banker.

In its May 17, 2006 edition, Veja laid down a bolder bet.

Editor in chief Eurípedes Alcântara received a dossier from Dantas regarding supposed offshore bank accounts of senior government officials The same dossier was supplied to another member of the three musketeers + Dartagnan: Diogo Mainardi.

Assigned to track down the details was Márcio Aith, the same journalist who had covered the Kroll case for the Folha de S. Paulo.

At that point, Aith enjoyed a solid reputation among fellow investigative reporters, having worked at the Gazeta Mercantil and Folha de S. Paulo. He had an excellent knowledge of the capital markets, corporate earnings, macroeconomics and the like, and looked to be heading for a stellar career.

So Aith goes looking for evidence to support the dossier, and quickly finds out that it is a forgery. This in itself would make a good story.

The original dossier was prepared by Frank Holder, ex-CIA and a Latin America specialist who left government service to set up his own shop — Holder Associates – a business later acquired by Kroll.

Aith went looking for Holder in Switzerland. Holder told him that the list was the fruit of an Italian investigation into the Brazilian part of the Parmalat scandal. Aith tracked down Italian police officials in Milan, but they said they knew nothing of the matter.

Holder then changed his tune, saying that the dossier was prepared by the Argentine José Luiz Manzano, a former minister and, according to Aith, a living symbol of the corruption of the  Menen regime.

Aith tracked down Manzano, who confirmed the authenticity of the dossier and ordered aides to collect more data. The resulting article material was full of inconsistencies. The article was a new Caymans Dossier.

The reference is to  elaborate, but on closer inspection clumsy attack on the PSDB and its leadership during the elections of 1998

Aith had enough info now to guarantee him an Esso

But there is a rule of journalism: When the sources is trying to fool the reporter, the reporter has the obligation to out him by name.  But Eurípedes resisted released the name of Dantes. There was internal debate. There was no way to get around Aith’s finding, but on the other hand, Eurípedes wanted to defend his ally.

Aith wound up giving in. On one hand, he admitted that Dantas was his source. But the efforts to spare Dantes and his reputation turned the article into a «pterodactyl» — an ugly creature, designed by committee.

Aith had committed the error of a lifetime in letting his byline go on the Swiss dossier story. …

The story began with the cover. The headline made no mention of the dossier or its lack of authenticity. On the contrary, the forgery was presented as though it were real:

“Daniel Dantas: banker and suicide-bomber. In his arsenal, the number of Lula’s supposed offshore bank account.

The headline made no sense at all. Aith’s investigations had turned up no such thing — in fact, he had found it to be a fraudulent document cooked up by Dantas.

But the “lead” was even more incredible:

“Daniel Dantas is preparing to open a new chapter in the investigations into the “criminal organization” that has taken over the government and caused so many problems for Brazil …

The lead paragraph, rather than featuring Aith’s scoop –the discovery of a phony dossier – said:

“On the floor of the Senate, Arthur Virgílio (PSDB-AM) revealed the contents of a document in which Banco Opportunity, controlled by Dantas, said it was being persecuted by the Lula government because he refused to pay bribes of tens of millions of dollars to the PT in 2002 and 2003.

Veja editorialized on several occasions in favor of this “political persecution” theory, which formed a cornerstone of the banker’s defense in Manhattan Federal Court against the Citigroup suit.

The letter, written by Dantas attorneys and filed with the New York court where the banker was being sued by Citigroup for fraud and negligence, is merely the beginning of a soap opera that, judging by the story of Dantas’ life, will be much more than a simple shakedown.”

And on and on it goes. Charlie Waterfall wants to promote a model of new school construction, so Veja cooks up a massive special issue on the subject, pure puff. Abril further consolidates the textbook business with Ática-Scipione and suddenly competitors are the target of campaigns accusing them of “communist indoctrination.”

I s**t you not. Unbelievable.

IstoÉ also finds itself criticized as a rent-a-byline disinformation pipeline


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