The economic situation in Brazil has continued to grow rotten, as prominent banker André Esteves has been arrested and jailed. Esteves is best known for transforming Grupo BTG Pactual into the largest standalone investment bank in Latin America. Esteves was a billionaire by his mid-30s, and he enjoyed bragging that the company’s name stood for “Better than Goldman”.
However, his life came crashing down on November 25 when police raided his residence and took him away on allegations of obstructing a federal investigation regarding a major pay-to-play scheme of state-run oil company Petrobras. Now, Esteves lives in a high-security prison in Rio de Janeiro that is best known for its drug traffickers and murderers.
Since the founder, CEO and chairman of BTG has been placed behind bars, the bank has essentially collapsed. Clients of BTG have been racing to pull out their money, pushing the bank to the brink of insolvency. The Central Bank of Brazil has raised $1.6 billion to try and save the bank, but this hasn’t stopped the bank’s shares from losing more than half of their value since the arrest.
This event is just the latest point in a series of substantial downfalls for the Brazilian economy. With many legislators in on the corruption, the Brazilian Congress has been virtually helpless as it was watch the country’s budget deficit expand at a tremendous rate.
Meanwhile, Brazilian President Dilma Rousseff has become so hated that lawmakers are reportedly trying to impeach her, saying that she dishonestly reported the government’s finances. Goldman Sachs, the same company that Esteves used to make fun of, has said that the Brazilian economy is in a “full blown depression”.
Having one of the country’s most prominent financiers incarcerated will do nothing to improve the confidence of investors, especially at a time when the country is desperate for money.
Former International Monetary Fund economist Monica de Bolle said, “It very much gives you the impression that the corruption scheme is so widespread that it induces a kind of counterparty risk. You enter into transactions with people in Brazil without knowing whether or not they might be implicated in something. Nothing gets done. There’s no business.”
So while going to prison is certainly a massive downfall for this prominent banker, it is also a severe downfall for the Brazilians, who have fallen deeper into a financial hole that grows larger every day.