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In academic debates about the government's role in the economy, Petrobras used to be known as the darling exception to the overwhelming empirical evidence against state-owned enterprises (SOEs). Such corporations are notorious for their lack of efficiency, vulnerability to political abuse, and draining of state revenue. However, since March 2014, Brazilians have been inundated with revelations of Petrobras-linked corruption that are considered unprecedented, even for a country so accustomed to corruption scandals. Until this point, experts in Brazilian politics considered Petrobras one of the few successful cases of bureaucratic insulation against political exploitation. However, the company's corruption investigation has cast doubt on the capacity of SOEs to insulate themselves from politicians, who see these companies as their hens with golden eggs. For Brazilians, the Petrobras case has also led to the realization that kickbacks and other bribery practices are not just likely, but the norm, in business deals in Brazil.
Dubbed "Operação Lava Jato" (or the "Car Wash Investigation") Brazil's federal police officially launched its investigation on March 17, 2014, after being tipped off by analysts from the Council for Control of Financial Activities (COAF), the country's financial intelligence unit. The analysts noticed frequent bank account transactions involving large sums of money between companies that did business with Petrobras, despite their evident lack of technical or operational expertise.1 The scale of the scandal is as massive as the state-controlled oil corporation itself, which, until 2013, figured among the fifteen largest oil companies in the world and generated USD 130 billion in revenue annually.2 Numbers in this scandal keep changing with every new revelation, but as of the writing of this article, Brazil's Federal Court in Paraná, a southern state, has indicted thirtynine suspects in the case, twenty-five of whom are now in prison. Twenty-five companies are also under investigation. In total, Petrobras' losses to the massive kickback and money laundering schemes are estimated to be BRL 88 billion (USD 31.5 billion).3 Stocks held by the company's shareholders, on the other hand, had lost on average 50 percent of their market value since September of 2014.4
Due to the idiosyncrasies of the Brazilian judicial system, the names of accused politicians and sitting government officials that surfaced in the testimony of the defendants in the lower courts...