Brazil tightens compliance rules for public contracts

The Brazilian government announced a decree to strengthen compliance rules in an attempt to reduce corruption involving public contracts.

According to the decree, from now on it will be mandatory for all companies that have contracts with the public sector valued at more than 239mn reais (US$40mn) to implement integrity programs.

"Integrity programs aim primarily to prevent misconduct, fraud, and harmful acts against the public administration. Companies will have up to six months after signing the contract to demonstrate the adoption of anti-corruption mechanisms, such as internal audits, whistleblower channels, codes of ethics, and policies to prevent fraud and irregularities," the federal government said in a statement.

The comptroller general’s office (CGU) will be responsible for guiding, monitoring and evaluating the implementation of the integrity programs as well as applying sanctions in cases of non-compliance. The adoption of these mechanisms will also be considered as a tiebreaker criterion in public tenders, encouraging ethical and responsible practices in the private sector.

Compliance practices involving public contracts are a sensitive topic for the ruling Workers Party. One of the largest anti-corruption operations in Brazil's history, Lava Jato, launched in 2014 and lasting nearly 10 years, focused on irregular contracts involving construction companies and state-owned oil firm Petrobras.

According to prosecutors leading the investigations, the corruption cases occurred with the complicity of political agents appointed by past administrations of the Workers Party, along with several other political parties, with direct and indirect connections to the companies and the contracts.