A corruption scandal wrecked Brazil’s economy. Now, workers face the consequences.

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By Marina Lopes and ,

SAO PAULO, Brazil — Ricardo Coelho was a 50-year-old engineer at the peak of his career when he traded his calculator for a pair of eyebrow tweezers.

Once a top executive at the Brazilian construction giant Odebrecht, he found himself stranded with no prospects two years ago when the firm’s chief executive was arrested and jailed, triggering the loss of 100,000 jobs. With his savings dwindling, Coelho opened a hair removal salon, Eyebrow Design, in a mall on the outskirts of Sao Paulo. 

“I had 27 years of experience and a diploma from Brazil’s best university, but I couldn’t even get an interview callback,” he said.

 Coelho is one of thousands of skilled workers trying to navigate Brazil’s wrecked economy in the wake of Operation Car Wash, a sprawling investigation that has used plea-bargain deals to trace corruption from a Brasilia gas station to the highest levels of government. 

 The investigation has resulted in prison terms for many politicians, as well as executives in Brazil’s construction, petrochemical and meat industries, on charges of trading bribes involving lucrative government contracts. Three years in, the industry purges have sparked mass layoffs, hollowing out companies that were once world-renowned. 

 Brazilians overwhelmingly support the Car Wash probe and say they hope it will end systemic graft and usher in a new culture of transparency. But although the investigation is expected to pave the way for stronger accountability and governance over the long term, the progress has not been pain-free.  

Many Brazilian workers who had no direct involvement in the scandal have paid a steep price. And as top executives negotiated plea deals with authorities, their employees found themselves trapped under crumbling empires, with whole sectors of the economy gutted overnight.  

“Working at Odebrecht was an engineer’s dream. I was on track for retirement,” Coelho said.

 Five years ago, Odebrecht and other big firms were riding a commodities boom to international prominence, soaking up the country’s top engineering talent to build highways across the Andes, airports in Miami and World Cup stadiums across Brazil.  

That dream came crashing down in June 2015, when chief executive Marcelo Odebrecht was arrested and sentenced to 19 years in prison for bribing officials in return for millions of dollars in government contracts. The company imploded overnight, firing more than half of its workforce.

[How Brazil’s political class came undone]

Because Operation Car Wash has relied so heavily on plea-bargain agreements, with prosecutors granting defendants shorter sentences in exchange for information on other suspects, the executive ranks of some of Brazil’s leading industries have been decimated. Investigators struck such deals with 77 former employees at Odebrecht, along with dozens of others at the competing construction firms of Andrade Gutierrez and OAS. 

 The blow to the reputation of those firms and others has left the companies struggling to obtain new domestic and international contracts. As their revenue dries up, their workers have been getting pink slips.

 Coelho had no experience in the beauty industry and had never held a pair of tweezers before opening his store. But he learned on the job and put the negotiation and management skills he learned at Odebrecht to use in the salon, a sleekly designed black and white room with a row of reclining chairs.

Coelho makes more money than he did as a civil engineer. “I’ll never go back,” he said. 

 He is one of the lucky workers who landed on their feet. After 20 years working for Petrobras, Brazil’s state oil company, Silvia Boccagini, a 52-year-old pipe technician, was among 170,000 employees sent packing when police charged top executives with bribery and corruption. Two years later, Boccagini has yet to find another job and is surviving with help from relatives. 

 “The Brazilian engineering industry is finished,” she said. “Everything has stopped.”  

 Brazil’s economy has started showing signs of growth again in recent months, after two years of agonizing contractions — the worst depression in the country’s history.

[Brazil passes the mother of all austerity plans]

But experts worry that the sudden brain drain from Brazil’s most lucrative sectors will have a lasting impact on the country’s global competitiveness. When skilled workers such as Coelho or Boccagini leave their field, they take their expertise with them. By the time the country’s economy recovers, the next generation of Brazilian engineers may not have seasoned mentors to guide them. 

 The anti-corruption medicine is bitter, but it’s what Brazil badly needs to get graft under control, said Marcos Troyjo, director of the BRICLab at Columbia University, which studies emerging economies.

  “The damage that the probe causes pales in comparison to the ills it cures,” he said. Brazil is suffering from the implosion of a state-capitalism model that expanded under the governments of former presidents Luiz Inácio Lula da Silva and his successor, Dilma Rousseff, who was impeached last year, according to Troyjo.

In that closed, insular model, big companies paid bribes to secure bloated government contracts paid for by high taxes. That is the burden Brazil must overcome, Troyjo said.

“Brazil is showing that, at least in matters of corruption, many institutions — backed by the majority of the population — are rolling up their sleeves and getting to work.”

Brazil’s loss may be the world’s gain. In jailing the country’s top executives, Car Wash has pried open sectors of the economy once available only to a well-connected elite.

 International investors eager to jump into the Brazilian market have taken note. 

“This scandal has opened up the market to new people, investors, money and players. Even local companies that had no stamp of approval from the government can now partner with foreign investors to do business,” said Su Jung Ko, founder of Golden Hawk Consulting, a mergers and acquisitions consultancy in Sao Paulo. “With the big players looking weak, they see an opportunity.”

 Authorities involved with the probe can be confident that the majority of Brazilians are behind them. A whopping 90 percent of citizens want the investigation to continue, even if it means further economic instability, according to an Ipsos poll released last month. 

That includes Boccagini, the former Petrobras technician, who hopes her hardship won’t be for naught.

“The Car Wash investigation has to go on, no matter what the costs,” she said. “We have to get to the bottom of it.”

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