Brazilians pay the price of Petrobras scandal

Marcos Paulo (pictured above) has been forced to give up his life's work for crimes he didn't commit. The 33-year-old business owner recently had to close the worker's hostel he'd been running for more than a decade in Itaborai, east of Rio de Janerio, after a corruption scandal ensnared Brazil's oil company, Petrobras.

"Losing everything is very depressing," Paulo says. "Especially when it's not your fault."

Paulo blames the building company subcontracted to construct a new refinery for Petrobras in the region. It was Paulo's main customer, providing his hostel with a steady stream of guests, until it was accused of corruption and filed for bankruptcy. Overnight, the worker's hostel was left with an unpaid bill and dozens of empty beds.

"If I had been guilty of corruption, I would accept paying for the mistakes I'd made," Paulo says. "But I didn't do anything wrong and now I'm paying for other people's wrongdoing."

Thousands of Brazilians, like Marcos Paulo, have seen their jobs or businesses dry up as a result of the bribery and fraud surrounding Petrobras. Since the wrongdoing first came to light a little over a year ago, police investigations have revealed the historic proportions of the case.

"It's now what I think is the biggest corruption investigation ever in Brazil," says Erika Mialik Marena, chief of the federal police in Curitiba in the country's south.

Just the beginning

Over the past year, authorities have accused more than 100 politicians and business directors of financial crimes like corruption and money laundering. Police say directors of some of Brazil's largest building firms conspired with Petrobras officials and several political parties to rob the oil company of around $3 billion (2.6 billion euros).

Building company executives allegedly formed a cartel to inflate prices on contracts already worth billions of dollars. Those contracts were awarded and handled by directors at Petrobras, who lined their own pockets and funneled funds to political parties.

Some of the money was allegedly used to finance political campaigns for the election of President Dilma Rousseff and former President Luiz Inácio Lula da Silva. Neither of the two has been linked directly to the scheme, although some 50 politicians - including the heads of both houses of congress - are being investigated. According to police chief Erika Mialik Marena, that may be just the beginning.

"This investigation is far from over," she says. "Not only Petrobras is involved. Soon other public companies and ministries will be investigated. We're talking about what companies in Brazil do to get good public contracts right now."

Political fallout

Many Brazilians are all too familiar with corruption, but the unprecedented scale of the current scandal has caused an uproar. The rage has largely been directed at President Dilma Rousseff, who was chairwoman of Petrobras from 2003 until 2010.

Rousseff denies knowing anything about the corruption, but polls indicate many Brazilians don't believe her. In a March survey, 84 percent of respondents said they believe the president knew about the scheme. That mistrust led hundreds of thousands of Brazilians to protest in March, demanding Rousseff's impeachment. Her approval rating fell to 9 percent in April - the lowest level ever for a Brazilian president.

For Petrobras itself, the scandal has harmed more than just the company's credibility. In April, it wrote off almost $17 billion from its annual revenue of 2014. More than $2 billion was directly related to corruption. Other losses came from refineries that are delayed and running over budget.

Troubled times for the economy

The losses, along with a sharp fall in oil prices, have forced Petrobras to halt many large construction projects, putting thousands of Brazilians out of work. From October 2014 to February 2015, the construction sector is estimated to have lost around 250,000 jobs.

Petrobras has brought contracts to a standstill with the more than 20 subcontractors under investigation. Several have had to file for bankruptcy as a result. The list includes some of Brazil's largest construction companies, including OAS, Alumini Engenharia and Galvão Engenharia.

The corruption scandal is also expected to take a sizeable toll on Brazil's potential growth this year. The world's seventh largest economy has already entered a downturn. The 7 percent growth that made the country famous as a fast-rising economy in 2010 is far from today's reality. Analysts have predicted Brazil's economy will contract around 1 percent this year, while inflation will exceed 8 percent.

'National crisis'

The knock-on effect of the stalled construction projects, and the downturn, are being felt across the state of Rio de Janeiro, where Petrobras is based. In the city of Itaborai, Marcos Paulo has seen more than just the downfall of his own hostel.

"Brazil is hurting and there isn't any forecast for improvement. It's only going to get worse. We are going through a national crisis," he says.

"We can only hope it passes quickly because there are so many people being affected by the problems surrounding Petrobras."

Paulo sits at a desk in a storage room full of dusty furniture, going through a stack of bills. The former business-owner hopes to sell the furniture to pay his debts. Soon, he says, he'll leave the hostel for good, so he can begin rebuilding his life.

"I lost everything that I created in the past 14 years, delivering a service for Petrobras," he says. "Now I'll have to take every step down the ladder before I can start climbing up again."