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Is Hungary the EU's first rogue state? Viktor Orban and the long march from freedom

As a student activist, Orban helped free Hungary from communism. As its prime minister, he practises “illiberal democracy” and praises Trump and Putin.

Young people crowd the restaurants and coffee bars of central Budapest. Tourists ride its trolleybuses and admire its magnificent neo-Gothic parliament building and the imposing Buda Castle across the Danube. It seems the model of a post-communist city, transformed by Hungary’s membership of the European Union.

But appearances can mislead. For an alternative view of today’s Hungary, drive 25 miles west – beyond the monolithic Soviet-era apartment blocks of the capital’s outskirts and the much newer but equally monolithic distribution centres of the multi­national retail chains, to the rural village of Felcsút where Viktor Orbán, the prime minister, grew up and still has a weekend home.

Orbán loves football and played semi-professionally in his younger days. After winning power for a second time in 2010, he had a 3,400-seat stadium built next to his house. Designed by the top Hungarian firm Doparum Architects, it has curvaceous tiled roofs supported by arched wooden columns. And it has a football academy that Orbán’s son, Gáspár, attended, and no fewer than ten practice pitches. Beyond them, another huge building – an indoor training facility, perhaps – is under construction, but my interpreter and I were shooed away when we approached.

The Pancho Aréna – named after the great Hungarian player of the 1950s and 1960s, Ferenc “Pancho” Puskás – cost €15m and was largely financed by donations from big Hungarian corporations after Orbán’s government passed a law making gifts to sports organisations tax deductible.

The only problem is that Felcsút has a population of just 1,800, and its team attracts perhaps a few hundred spectators. Not even the construction of a narrow-gauge railway line from a nearby town, financed with €2m of EU funds, has changed that. Few people use the train.

From the start, the project was controversial. György Varga, a stocky 60-year-old, was Felcsút’s thrice-elected mayor when the idea was mooted. Standing in the unkempt front yard of his son’s small house, he told me how he refused to sell the land on which the stadium stands because the sum being offered was too low. He said the Orbán government responded by passing a tailor-made law that barred people with tax debts, such as Varga, from serving as mayor (a claim the government denies).

For whatever reason, Varga lost his job. He could not find other work because, he believes, people were afraid to upset Orbán, and he had to sell his home. “I suffered because I didn’t want to play these games and [indulge] the great dreams of the prime minister,” he said.

Varga was replaced as mayor by a childhood friend of Orbán, Lörinc Mészáros, a lowly utility repairman. Mészáros gave the stadium the go-ahead, and his tiny company was given a share of the construction work. He began to receive other lucrative state construction contracts. In six years, he has become the fifth richest man in Hungary, worth an estimated €384m, according to a list compiled by the financial website napi.hu. His business empire spans hotels, tourism, real estate, agriculture, banking and publishing.

Mészáros now lives on a substantial property on the edge of Felcsút, replete with a gatehouse and a fleet of expensive vehicles, but we found him at his office in the village. A pale, paunchy man in his fifties, he happened to be coming out of a toilet in the hallway as we entered. “Go away!” he shouted when he realised I was a journalist. “What are you doing here? This is private property. Leave immediately – I’ll tell you nothing.” He slammed the door shut.

The Pancho Aréna – once described by an opposition MP as “a monument to corruption and megalomania” – symbolises what Hungary has become over the past seven years. Superficially, it appears to be a conventional democratic country – an EU and Nato member in which elections take place every four years, people can protest on the streets and state-sanctioned violence is rare. But foes of the “Viktator”, as Orbán is sometimes known, allege that he rules it in an increasingly autocratic and corrupt manner. They claim that his government rewards loyal oligarchs with state contracts, many financed by EU development funds, and that Orbán seeks to gag the independent media, packs key institutions that are supposed to be politically neutral with supporters, crushes dissent and vilifies opponents.

Detractors also say that Hungary brazenly flouts EU laws as Orbán – an admirer of Vladimir Putin and Turkey’s Recep Tayyip Erdogan – practises “illiberal democracy”. “You signed up to the values of the union. You have violated every single one of them,” Guy Verhofstadt, the former Belgian prime minister and leader of the Alliance of Liberals and Democrats for Europe, declared during a European Parliament debate on Hungary’s conduct that Orbán attended in April. Indeed, some EU officials believe that if Hungary – the most economically and politically advanced of the eight formerly communist countries that gained membership of the European Union in 2004 – were to apply today, it would be rejected.

So how did a politician who began his career in the 1980s as a young student activist fighting Hungary’s communist regime, a champion of Western-style liberal democracy who helped bring down the Berlin Wall, become what he is today: the standard-bearer for Europe’s populist right who excoriates Brussels, courts Moscow, engages in Soviet-style cronyism and propaganda, erects fences to exclude migrants, threatens academic freedom and targets George Soros, the billionaire philanthropist who did so much to help him fight Soviet repression?

“Do you want to be remembered as somebody who liberated your country from communism?” Verhofstadt asked during that debate in Brussels. “Or do you want to be commemorated as an eternal enemy of our open European democratic society?”


Viktor Orbán was born in 1963 to a father who was a lowly agronomist and Communist Party member and a mother who was a teacher. At high school, he joined the Young Communist League, but he was a natural rebel who grew long hair, loved Western films and music and questioned what he read in state-run newspapers.

Orbán’s disillusionment with the regime of János Kádár, Hungary’s Communist Party leader from 1956 to 1988, began during his year of national service. He hated the rules and was appalled when it appeared that his unit might be deployed against the Solidarity movement emerging in Poland in the early 1980s.

At Budapest’s elite Eötvös Loránd University, where Orbán joined the law college, students enjoyed relative freedom. Hungary’s “goulash communism” was milder than that of other Warsaw Pact countries: a means of appeasing the populace after Soviet tanks crushed its 1956 uprising against Moscow’s rule and killed several thousand protesters in the capital’s streets.

Orbán fell in with a group of independent thinkers who listened to Radio Free Europe, watched Easy Rider, read Jack Kerouac and J D Salinger novels and abhorred communism. They published a semi-subversive journal, held debates and invited outside speakers – reform-minded communists, veterans of the 1956 uprising, as well as George Soros, the Hungarian-born billionaire financier and Holocaust survivor who had established a foundation to promote freedom, democracy and civic society in Hungary.

Clever, combative and charismatic, Orbán became the president of the student council. In 1987, he invited Wacław Felczak, a renowned Polish historian, to talk about the Solidarity movement. Igor Janke, Orbán’s biographer, records that when he asked what Hungarian students should do, Felczak replied: ‘‘Form a party!”

The following year, Orbán and three dozen other students from various Budapest universities formed the Fiatal Demokraták Szövetsége (Alliance of Young Democrats), or Fidesz for short. Soros provided material support including a photocopier, which was such a valuable means of spreading information in those days that the college authorities stored it in a locked room.

Soviet communism was already crumbling, and the Fidesz leaders were open about their “alternative, liberal and radical” movement. The Kádár regime questioned and warned them, but nothing more. Within a month, Fidesz had a thousand members. Other opposition groups sprang up. The regime responded by offering them round-table discussions on Hungary’s future governance.

The government also agreed to the highly symbolic public reburial in June 1989 of Imre Nagy, the former prime minister who was executed for supporting the 1956 revolution. A Fidesz speaker was invited to address the ceremony on behalf of the country’s youth. Standing on the steps of the Palace of Art in Budapest’s vast Heroes’ Square, before a crowd of 250,000 people and with millions more watching on television, the long-haired, unshaven, 26-year-old Orbán seized the chance to demand free elections and the withdrawal of Soviet troops from Hungary.

“It needed courage to do that,” Gábor Fodor, a co-founder of Fidesz and Orbán’s former college room-mate, recalled when we met in his Budapest office. “Nobody knew if it would end peacefully or in violence.”

Some reformers feared that Orbán’s words would provoke another Soviet crackdown, but nothing happened. “After the funeral, it was the end of the communist regime,” Fodor said.

Youthful ambition: Viktor Orbán (left) in the late 1980s. Photo: cink.hu

That September, Orbán went to Pembroke College, Oxford, on a Soros Foundation scholarship. Timothy Garton Ash recalled, in a recent Guardian article critical of today’s “fascistic” Orbán, how “the bright-eyed, seemingly idealistic young Oxford Soros scholar sought me out in my rooms… to talk about democracy”. Within months, Orbán returned to Budapest to contest Hungary’s first free elections in March 1990.

Fidesz’s vigorous campaign featured a poster headlined “You choose!” above contrasting photographs of Leonid Brezhnev kissing East Germany’s Erich Honecker and a young couple embracing. Fidesz won 9 per cent of the vote and 22 seats. Orbán became an MP and party leader.

The Fidesz MPs were fresh, innovative, energetic and irreverent. Their popularity soared but, behind the scenes, the party fractured. Fodor and others favoured collaboration with the liberal Szabad Dem­okraták Szövetsége (Alliance of Free Democrats) against the conservative government of the Magyar Demokrata Fórum (MDF). “Orbán said, ‘No. This is a boxing match. There’s a red corner and a blue corner. You have to fight against your enemy and our main enemy is the liberal party because we’re in competition,” Fodor recalled.

István Hegedüs, another Fidesz founder and a Fodor ally, said that Orbán was becoming increasingly autocratic. “We experienced a shift in his personality and character,” he told me during an interview in his art deco apartment in central Budapest. “Instead of collective leadership… the party became more and more centralised. He became more and more authoritarian. We were seen as internal traitors.”

Fodor, Hegedus and several others eventually left Fidesz, and with the MDF government struggling to save Hungary’s post-communist economy from collapse Orbán moved Fidesz sharply to the right. Zsuzsanna Szelényi, a former Fidesz MP, believes that this shift was purely expedient. “If there was room on the left, he’d have gone there,” she told me over coffee near the parliament building. “He has this extraordinary drive for power, which we see in few other politicians in Europe.”

Orbán’s repositioning of Fidesz backfired. The media rounded on the party and it won just 7 per cent of the vote at the 1994 elections as a coalition of socialists (ex-communists) and liberals took power.

Undaunted, Orbán set out to rally the vanquished Hungarian right behind a platform of nationalist, Christian and family values. He commissioned surveys, consulted public relations experts and ordered party officials to swap their jeans for suits. “They changed their minds, their values and their political ideologies,” Fodor said of his former party. For Orbán, “the only thing that’s important in politics is to win”.

Though he had always hated the Roman Catholic Church for collaborating with the communists, Orbán now embraced religion. He was confirmed. He remarried his wife, Anikó Lévai, whom he had met at law college, in a church ceremony. Their five children were all baptised. “Whether it was a real change or just for the political image it was hard to tell,” Hegedus told me, but the strategy worked.

In 1998, Fidesz won the election with 26 per cent of the vote and 90 seats, and Orbán, aged 35, became prime minister. But his party narrowly lost to the better-prepared socialists four years later, and again in 2006. Orbán blamed those defeats on a hostile media and liberal establishment, and evidently never forgave them. “Orbán keeps track of who his enemies are, who has done him harm, and who he hates, just as he keeps track of those who – in his mind – have tried to destroy him,” Hegedus told another interviewer.

In 2010, Fidesz swept back to power following the global financial crisis and Hungary’s humiliating bailout by the International Monetary Fund. It won 52 per cent of the vote and two-thirds of the parliamentary seats – a “super-majority” that gave it absolute power. The Hungarian system allowed Orbán to do, in effect, whatever he wanted – and he did. He launched a new Hungarian revolution. Its goal was “the complete refurbishment and renewal of the country”, Zoltán Kovács, his spokesman, told me.


On Budapest’s Szabadság (Liberty) Square, a monument, erected by the government in 2014, shows a German imperial eagle preparing to strike the Angel Gabriel, a symbol of Hungary. It is dedicated to “the victims of the occupation”.

The monument fails to mention that before the occupation of Hungary in 1944, the state had collaborated with the Nazis – hoping to regain the territories it had lost through the Treaty of Trianon following the Austro-Hungarian empire’s defeat in the First World War – and had sent thousands of Jews to their deaths.

Outraged by this “falsification of history”, Jewish and other civic groups have created a shrine in front of the monument using the photographs, suitcases, shoes and books of Hungarian Jews despatched to extermination camps, and stage regular protests there.

Listen to opponents of Orbán and you’ll hear that the monument is just one example of how his government is rewriting the past. Another is the House of Terror, a museum occupying the former headquarters of the Hungarian secret police in Andrássy Avenue, which stresses the evils of communism at the expense of Hungary’s shameful role in the Second World War. And last year’s 60th anniversary commemorations of the Hungarian Revolution ignored the leadership of the liberal intelligentsia and gave all of the credit to the protesters on the street.

Orbán has sought to rebuild his country’s national pride, whether it is based on truth or not. He has embraced ethnic Hungarians in neighbouring countries such as Romania, Slovakia and Serbia who are descendants of the three million people stranded when the Trianon Treaty stripped Hungary of two-thirds of its territory. He has spent hundreds of millions of euros on new football stadiums and academies, such as the one in Felcsút, in an effort to re-create Hungarian football’s glory days in the 1950s, when the national team beat England 6-3 and 7-1 in the space of six months. He is pumping money into Olympic sports, Hungary having once been a great Olympic nation.

Orbán’s government exhorts Hungarian mothers to have more children (marriage is restricted to heterosexual couples). The preamble to the newly rewritten constitution talks of “an abiding need for spiritual and intellectual renewal” after the “moral decay” of the 20th century. It declares: “We believe that our children and grandchildren will make Hungary great again with their talent, persistence and moral strength.”

Orbán has been content to trample on democratic norms to achieve that goal. In a notorious speech in 2014, he boasted of “breaking with the dogmas and ideologies that have been adopted by the West” and held up China, Russia and Turkey as models of successful states.

Since 2010, his government has used its super-majority to push through changes to electoral law that manifestly favour Fidesz. It has filled the constitutional court with supporters, eroded the independence of the judiciary and put Fidesz loyalists in charge of key bodies – the prosecutor general’s office, the central bank, the election commission, a new media council – that are supposed to be politically neutral.

“Institutions have been packed with nominees and appointees with often questionable professional careers, very short CVs but very clear loyalties,” Miklós Ligeti, the legal director of the anti-corruption watchdog Transparency International in Hungary, told me.

Evidence suggests that Orbán’s government also channels huge state contracts, sometimes accompanied by state bank loans, to a handful of friendly oligarchs, who, in turn, are expected to give the government financial and media support.

A study published in March by Democracy Reporting International, a Berlin-based NGO, found that in six years, four oligarchs with close links to Fidesz won 401 public contracts worth more than €1.8bn. One of the four was Mészáros, Orbán’s childhood friend who shouted at me to go away when I sought him out in Felcsút. Another was Orbán’s son-in-law, István Tiborcz, whose energy company, Elios Innovativ, secured contracts for street lighting in more than two dozen towns and cities across Hungary. “Politically organised high-level corruption has become a key feature of the regime,” the American NGO Freedom House declared in its latest Nations in Transit report.

“Hungary is a captured state. It is captured by a clique of business oligarchs and the political elite,” Ligeti said. He added that because the prosecutor general is a Fidesz loyalist, “There’s no hope that the prosecution service would thoroughly, reliably examine and investigate high-level corruption cases.”

At the same time, Orbán’s government has turned the state-owned media into what Gábor Polyák, the head of the NGO Mérték Media Monitor, calls a “propaganda machine”. It hobbles the independent media by withholding lucrative state advertising and using friendly oligarchs to buy hostile television stations, newspapers and websites.

In October, Népszabadság, Hungary’s leading opposition newspaper, was abruptly closed after exposing government scandals. A fortnight later, its parent company, Mediaworks, was bought by a business part-owned by Mészáros, who now controls an estimated 192 newspapers. “Pro-government outlets have come to dominate the market to an overwhelming degree,” Freedom House states. “We live in a sort of grey zone between democracy and dictatorship,” said István Hegedus, the Fidesz co-founder.


One morning, I visited Maria Schmidt, the director of Budapest’s House of Terror museum and a close friend of Orbán. In a top-floor office above the museum that would once have been occupied by a Communist Party intelligence chief, I asked Schmidt about Hungary’s approach to immigration.

In 2015, huge numbers of migrants and refugees, many fleeing the war in Syria, began crossing into Hungary from Serbia via Greece, because the EU failed to protect its external borders. Most wanted to continue westwards, Hungary having joined the Schengen Area in 2007. But rather than treating the refugees humanely and upholding their basic rights, Orbán’s government portrayed them as a threat to Hungary’s security, and to the ethnic homogeneity of a country where just 1.4 per cent of its ten million citizens are immigrants. The prime minister labelled the new arrivals a “Trojan horse of terrorism” and a threat to “Europe’s Christian culture and identity”. A 230-mile double-layered fence topped by razor wire was hastily constructed along Hungary’s borders with Serbia and Croatia.

“Because there are just ten million [Hungarians], we can’t accept that 10 per cent of our population are people we don’t know anything about or what their intentions are and can’t be integrated,” Schmidt told me, adding that some would inevitably be terrorists. “Also, in contrast to former colonial powers, we don’t have any sense of guilt towards them. We never colonised them, never bombed them. We have nothing to make up for.”

Orbán, she added, was being unfairly demonised for daring to oppose liberal orthodoxies about immigration and political correctness. He would be remembered as “one of the most significant and influential shapers of Europe”.

A frequent criticism of Orbán is that he creates enemies against whom he can rally his followers and portray himself as their saviour. After the refugee crisis, Brussels became Orbán’s principal enemy – not least for trying to force Hungary to accept 1,294 asylum-seekers under an EU quota system.

Hungary presently receives €5.6bn a year from the EU to spend on infrastructure, job creation and other projects, but Budapest was plastered with signs this spring bearing the slogan “Állítsuk meg Brüsszelt” (“Let’s halt Brussels”). A “national consultation” sent to every household asked questions such as: “In recent times, terror attack after terror attack has taken place in Europe. Despite this fact, Brussels wants to force Hungary to allow illegal immigrants into the country. What do you think Hungary should do?”

Most recently, George Soros has become the government’s favourite punchbag, even though he was Orbán’s patron in the 1980s and has since given more than $400m to civic organisations promoting democracy, free speech, human rights, education and other worthy causes in Hungary. Orbán’s government spent $20m in July on posters and television advertisements showing Soros’s grinning face above the words: “Let’s not allow Soros to have the last laugh.” A spokesman for Soros, who is Jewish, called it a campaign “reminiscent of Europe’s darkest hours”.

The octogenarian philanthropist has come to symbolise the liberal ideals of internationalism, multiculturalism and free movement that Orbán considers such a threat to Hungary’s nationhood. “A common mistake among humanity’s rich and powerful is to believe that they can act like God and be immune from the consequences,” the prime minister declared in his state of the nation address in February. “They declare supposedly incontrovertible facts. They push utopias on to other countries and peoples. They decide what others can or cannot say, and what they can or cannot believe in.”

In April, the Orbán government provoked international outrage by steering legislation through parliament that threatens the future of Budapest’s Central European University – a prestigious institution that Soros founded in 1991 to train the future elites of Europe’s post-communist nations.

In June, Orbán had parliament rubber-stamp a law that will stigmatise NGOs receiving more than $24,000 a year from non-Hungarian sources, by forcing them to declare themselves “foreign-funded” on their websites and publications. That includes 50 or 60 NGOs funded by Soros’s Open Societies Foundation, some of which are quoted in this article. The law “seeks to suppress democratic voices in Hungary just when the country needs them most. It attacks Hungarians who help fellow citizens challenge corruption and arbitrary power,” Goran Buldioski, the director of the Open Society Foundations in Europe, said.

Orbán routinely derides what he describes as the weak, sclerotic, out-of-touch leadership of the EU, but he welcomed Donald Trump’s victory in November’s US presidential election. He was also the only EU leader to congratulate Recep Tayyip Erdogan, Turkey’s increasingly dictatorial president, for winning the disputed referendum in April that gave him sweeping new powers. And he is much closer to Vladimir Putin than he is to most of his EU counterparts. He has commissioned a nuclear power station to be built by Russia with a $9bn Russian loan. He has criticised EU sanctions against Russia following its annexation of Ukraine.

In a telephone interview after I returned to London, Zoltán Kovács, Orbán’s spokesman, insisted that Orbán’s relationship with Putin was pragmatic, given Hungary’s dependence on Russian energy, and rejected the corruption and other charges levelled against the prime minister.

There was a “systematic effort on behalf of the opposition to discredit the government”, he said. “Most of the NGOs are behaving like primary political actors and that’s a real problem, especially as they are financed by a billionaire who has expressly stated he wants to become the political opposition in this country.”


On the May Day holiday, the 13th anniversary of Hungary’s accession to the EU, thousands of young Hungarians marched up the broad, leafy Andrássy Avenue. They waved EU flags and chanted, “Europe, not Moscow!” as they passed the imposing Russian embassy on their way to Heroes’ Square, where their leaders gave speeches. “In Hungary, a system of fear is being built on the Russian model,” one of the speakers told the crowd.

The anti-government demonstration was one of the many organised in recent months by a new, student-led movement called Momentum. The echoes of Orbán’s youthful rebellion against an authoritarian regime 28 years earlier are obvious. But so are the differences.

First, these young Hungarians are allowed to protest. Second, the bald fact is that outside the cosmopolitan Budapest, among older, more conservative and provincial voters, Orbán is far more popular than Kádár’s communist regime ever was and it won a sweeping re-election victory in 2014. The economy is healthy and Orbán’s unashamed nationalism, blunt speaking and brazen defiance of Brussels resonate in a country for which the 20th century was a litany of humiliations. Fidesz has a 20 to 30 per cent lead over its nearest rival in the polls. The opposition is fragmented. Orbán looks certain to win a fourth term next year.

In Brussels, 1,100 kilometres to the west, there is growing concern at Orbán’s hollowing out of Hungary’s hard-won democracy. The European Commission has launched infringement proceedings against Hungary for various alleged breaches of EU laws, and the European People’s Party, the umbrella group for conservative parties, has reprimanded Fidesz.

However, Orbán knows just how far he can push the boundaries. He knows that the crisis-beset EU would not dare invoke the ultimate sanction – Article 7 – which would suspend Hungary’s voting rights and push his country further into Russia’s orbit.

Meanwhile, the EU money keeps flowing, helping Orbán to strengthen the economy, build football stadiums and reward supportive oligarchs. “The EU is funding the first ‘managed democracy’ in Europe,” an astute British observer who lives in Hungary told me. “The money comes from Brussels. The money goes to Fidesz. And the project continues apace.”

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue

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Enough to educate 17 million children: the true cost of Brazil’s Car Wash scandal

As a new Netflix series dramatises one of the world’s largest corruption cases, Global Witness puts a figure on the cost of the scandal.

In the 1980s, Alberto Youssef was, alongside an older sister, smuggling whisky and electronic products from Paraguay to Brazil. Once, while being chased at a high-speed by police, VCRs kept falling out of the pick-up truck he was driving. Few would have guessed that this almost comical character would, one day, become a key player in what has been called the biggest corruption scandal in history. But then, the Car Wash, or as it’s known in Portuguese, Lava Jato, stretched far and wide across Brazil at a huge cost.

New research by Global Witness shows the damage caused by the Car Wash scandal far exceeds the sums stolen. The cost to the Brazilian treasury may be nearly eight times higher than the £1.4bn actually taken, enough to cover the salaries of more than a million nurses or provide a year’s education for over 17 million children.

Police only began to uncover the extent of the Car Wash scandal in 2013, when they became suspicious about the sheer quantity of cash churning through a bureau de change in a humble petrol station in the country's capital Brasilia. That led to the arrest of Youssef, which in turn led to further arrests. It soon became clear that this was no ordinary money laundering operation. Police had stumbled upon a racket that would involve at least 28 major corporations and 20 political parties, resulting in over 100 convictions. The list of those implicated reads like a Who’s Who of the Brazilian political elite, including two of the country's presidents.

Former Brazilian president Luiz Inacio Lula da Silva has been sentenced to more than 12 years, after it emerged he took bribes for helping a construction company win contracts with Petrobras. Lula says the case is politically motivated and remains free while appealing it. A ruling in a federal court on Monday, however, could send him behind bars, even as he takes the case to the Supreme Court.

Current president Michel Temer has also been at the centre of corruption investigations, most recently over allegations of bribery concerning a deal for operating services at the Port of Santos, Latin America’s largest container port. Congress has twice blocked Temer from standing trial on corruption charges while in office, and he denies the allegations.

The scandal has also inspired The Mechanism, a new Netflix drama from the director behind the biopic of Pablo Escobar, Narcos. The sums of money involved in Car Wash were almost at Escobar levels, but the billions lost to Brazil’s hard-pressed public services mean the scam might also have caused harm on a scale comparable to the druglord’s activities.

The fraud revolved around Petrobras, Brazil’s state-owned oil company. Instead of awarding huge contracts for construction projects, oil rigs, shipping and so on in the normal manner, the work was rotated around a cartel of companies in orderly fashion. Petrobras would over-pay the companies by at least 3 per cent, with the extra money forming a kickback to the directors responsible for awarding them the contracts. These directors would pocket some of the money, and hand the rest to the politicians who had appointed them to their lucrative posts. The money then went to the campaigns of Brazil’s political parties and provided backdoor funds that kept otherwise unstable governing coalitions together.

The result was a Byzantine racket of astonishing intricacy and scale in which everyone took a cut. Bribes came in the form of bricks of cash, expensive art works, aircraft and yachts; anonymously-owned companies in tax havens and foreign bank accounts helped launder the loot. One Petrobras director alone channelled €20m to banks in Monaco from accounts in the Bahamas, Panama and elsewhere.

“Once the mechanism is established, only the corrupt can take part,” says José Padilha, the Brazilian writer and director of The Mechanism. “If you’re an honest politician you’re doomed. The honest businessman will not get any contracts. There are only crooks.”

This “mechanism” had been running uninterrupted for at least 12 years.

Was this really the biggest corruption scandal of all time? Virtually every Car Wash explainer in the UK press poses the question – but none provides an answer. That’s probably because it’s notoriously hard to quantify value throughout history. In 193 AD, the Roman Praetorian Guard assassinated their emperor and held a fraudulent auction to appoint his successor, striking a deal worth 250 pieces of gold for each soldier in the army. (The empire was not theirs to sell). If not the earliest documented fraud, it was surely the most audacious – but trying to convert the ransom into modern currency is a fool’s errand.

But Padhila has no doubt. “It’s the biggest corruption scandal in the history of mankind,” he says. “It involves a mechanism which has been operating in Brazil in one form or another since at least the Eighties. Too many Brazilians fall into the trap of ideology, but the mechanism has no ideology. It is left wing and right wing. The whole political system is corrupted. Democracy has failed.”

Regardless of whether Car Wash is the biggest bribery case of all time, it certainly features in the ranks of the world’s corruption mega-scandals, sitting alongside mammoth state-thieving operations such as Malaysia’s recent “1MDB scandal” – US lawsuits claim an estimated $4.5bn has gone missing from a state development fund – and France’s Elf scandal, which shook the body politic and in which at least $400m was creamed off international oil contracts. All these scandals were linked to illicit political funding.

Taking a look at the cost of Car Wash to Brazil, first off there is the amount filched from the state oil company in improper payments. A Federal Police report seen by Global Witness conservatively estimates this at £1.4bn – all of which had to be laundered, sometimes moved physically. To put this logistical feat in context, if withdrawn in £10 notes the sum would make a stack eight miles high equivalent to almost 16 Burj Khalifas, the tallest building in the world (or, if you like, 343 Christ the Redeemers). The 119 tonnes of cash would take a fleet of 97 Ford Transit vans to deliver.

Then there is the £2.1bn fine Petrobras has agreed to settle a US investors’ class action, already bigger than the amount actually stolen. But both the theft and the losses are dwarfed by (and reflected in) the collapse in Petrobras’s share price. Before the scandal broke in September 2014, shares were at $19.33 but as of March 2018 they had dropped to $14.07. The government suffered a paper loss of £14.1bn for its 29 per cent stake in the company.

September 2014 was also the moment that global oil prices began a long decline, but the damage was too great for Petrobras to hide. “I would say 90 per cent of the fall in share price is due to Car Wash,” says Tiago Cavalcanti, a Brazilian economist at the University of Cambridge.

Petrobras’s 3.7 billion shares are supposed to furnish Brazil with a healthy income, and in the three years before Car Wash exploded, they provided Brazil with an average annual dividend of £360m. No dividend was paid in 2015, 2016 or 2017, costing the country £1.1bn.

Then comes the kicker. So vast was the upheaval  with billions slashed in investment   that some believe it helped bring about the worst recession in Brazil since records began. In March 2014, when the first Car Wash arrests were made, the Brazilian unemployment rate was 7.1 per cent. By last summer it was at 13 per cent. São Paulo consultancy GO Associados, headed by economist Gesner Oliveira, calculated that the fallout from Car Wash hit GDP by 2.5 per cent in each year the investigation was going on, from 2015 to 2017. The consultancy has now told Global Witness it has revised those figures up to an extraordinary 3.6 per cent — which would mean almost the entire drop in output during 2015 and 2016 was accounted for by Car Wash.

GO Associados said that would imply an annual $4.6bn (£3.3bn) in lost tax for each of the three years the fallout from Car Wash was at its most extreme £9.9bn. This figure would appear to be on the conservative side: it is based on the hit to the economy from Petrobras’s reduction in spending plans  but does not take into account the wider impact on Brazil’s giant construction companies, many of which lost contracts elsewhere in Latin America as a result of the scandal. Such firms were also banned from any public contracts in Brazil. The figure also fails to include the reduction in foreign investment in Brazil as a result of the political turmoil.

So even setting aside Brazil’s paper loss – Petrobras shares may well continue to rise  Lava Jato could have cost the government at least £11bn in revenue in lost tax and lost dividends from its stake in the company. That’s almost eight times the amount stolen from Petrobras in the first place.

“That number sounds very plausible and the calculation is logical,” says Cavalcanti, who has himself calculated that without Car Wash and other governmental policies Brazilian GDP would have grown by 1.2 per cent in 2015 and 2016 (as opposed to an actual fall of 3.8 per cent and 3.6 per cent). “Another reason for the recession was the falling price of commodities, but Peru and Chile did not have the fall Brazil had. Certainly Car Wash was a very big factor in the recession.”

Who knows the real difference that £11bn could have made in a country where universal healthcare is still some way off and about 7 per cent remain illiterate. The real price of Car Wash is incalculable.

“I feel disgust and exasperation,” says Padilha.

You might think that at such terrible cost, the Brazilian public would rather the fraud had never been exposed. But a recent poll suggests 94 per cent of Brazilians think the investigations should continue despite the current turmoil. For many, this is a golden opportunity to tackle the corruption that has afflicted the Brazilian body politic for decades before the mechanism started turning.

Because according to the filmmaker, Petrobras is the tip of the iceberg.

“There is no public contract in any village, town, city or state that is not affected, from the tiniest new road to the biggest government project,” he says. “All are corrupted - and none of this is exposed yet. In my country you can turn any stone and there will be cockroaches underneath.”

Ed Davey is an investigative journalist for Global Witness.

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue