How many jobs has Lava Jato cost?

Translated from Carta Capital. The Brazilian economy had a sharp rise in unemployment in 2015 and 2016. The main reasons were misguided economic policies and malign effects of the Lava Jato operation. Today, we have more than 12 million unemployed, according to IBGE.

The abrupt drop in the activities of Petrobras and the contractors involved in the operation in recent years has directly or indirectly cost innumerable jobs in industry and civil construction. There have been almost 3 million workers fired from these two sectors alone in 2015 and 2016

Some studies have published that from the GDP contractions of 3.8% in 2015 and 3.6% in 2016, it is estimated that the anti-corruption operation accounts for between 2 and 2.5 percentage points of each year’s fall. In other words, if it were not for Operation Lava Jato, the recession each year would have been somewhere around 1.5%.

Petrobras makes investments that represent 2% of GDP and all the contractors involved in the operation together make investments of around 2.8% of GDP. The influence of these companies on overall economic results is significant. Investments as a proportion of GDP that had reached 19.5% in 2010, today stand at just 16.4%.

It is necessary to separate the effects of Lava Jato on unemployment from those due to inadequate fiscal adjustment policies and other vectors. It is important to quantify the magnitude of unemployment caused solely by the malignant effects of the operation.

Lava Jato did not only cause direct loss of jobs, such as at contractor OAS, which had 120,000 workers and today has 30,000, or Engevix, which had 20,000 employees and now has only 3,000. Neither caused negative effects only reducing the supply of jobs in construction and industry.

The effects of Lava Jato start at companies involved in the operation, but spread throughout the economy, reaching the informal labour market (for example, when an person is fired from OAS and dispenses with his or her own diarista employee).

Excluding the negative economic effects of the operation, the following estimates can be made:

1) The unemployment rate at the end of 2016 would not have been 12%, but would be between 8 and 9%.

2) The number of unemployed in December 2016 would not have been 12.3 million workers, but would be between 8 and 9 million.

3) Therefore, the negative effects of the Lava Jato operation may explain the unemployment of about 3 to 4 million workers.