Billion-dollar Odebrecht scandal engulfs Latin America

February 3, 2017 9:49 am
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Odebrecht has agreed with the US Justice Department to pay a world record $3.5-billion fine after admitting it paid $788 million in bribes to win fat construction contracts in 12 countries © AFP/File / YASUYOSHI CHIBA

, Montevideo, Uruguay, Feb 3 – For years, Brazilian construction giant Odebrecht landed huge public works contracts by paying hundreds of millions of dollars in bribes.

Now, the company’s dirty dealings have caught up with it — and the fallout is spreading across Latin America, where the scandal has left a trail of abandoned mega-projects, high-profile probes and outraged citizens in its wake.

In December, Odebrecht agreed with the US Justice Department to pay a world record $3.5-billion fine after admitting it paid $788 million in bribes to win fat construction contracts in 12 countries.

The biggest payouts were for contracts with Brazil’s state oil company, Petrobras — the focus of a massive pay-to-play scandal that has upended Brazilian politics, landing a laundry list of powerful people in jail, including Odebrecht’s boss, Marcelo Odebrecht.

But the company’s reach spans far beyond Brazil — and now, so does the scandal.

Odebrecht, the biggest construction firm in Latin America, paid bribes in nine other countries across the region — Mexico, Argentina, Peru, Venezuela, Cuba, Panama, Honduras, Guatemala and the Dominican Republic — as well as Angola and Mozambique in Africa.

Most of those countries have now opened investigations of their own, asking Brazilian prosecutors to share information on dirty deals in their jurisdictions.

Billions of dollars’ worth of infrastructure projects are meanwhile paralyzed.

After the scandal broke, the Brazilian Development Bank (BNDES) — which funded many of Odebrecht’s international ventures — froze $3.6 billion for 16 projects across Latin America.

In Venezuela, six mega-projects being built by Odebrecht have ground to a halt, including an expansion of the Caracas subway.

In the Dominican Republic, which received $2.5 billion from BNDES, unfinished roadworks and a thermoelectric power plant are now in doubt.

In Peru, where Odebrecht says it paid $29 million in bribes from 2005 to 2014, the government sacked the company from a $7-billion gas pipeline project that is less than one-third complete.

That and other aborted Odebrecht projects will likely shave 0.5 to one percentage point off Peru’s economic growth this year, the economy minister said last month.

– Heads to roll –

Investigators across Latin America now have some heavy-hitting politicians in their sights.

In Peru, a congressional commission has summoned President Pedro Pablo Kuczynski to testify, along with former presidents Alejandro Toledo and Ollanta Humala, plus Humala’s powerful wife, Nadine Heredia.

In Panama, ex-president Ricardo Martinelli’s son and brother are under investigation.

Likewise Argentina’s intelligence chief, Gustavo Arribas, who is close to President Mauricio Macri.

In Colombia, a former deputy transport minister and ex-senator have been arrested.

The Venezuelan National Assembly, where leftist President Nicolas Maduro’s opponents hold a majority, has launched a probe into the $98 million in bribes that Odebrecht admitted to paying there — the biggest payoff outside Brazil.

And Mozambican prosecutors are investigating who received $900,000 in bribes to green-light an airport for the northern city of Nacala.

State news agency AIM condemned the project, completed in 2014, as an “embarrassing flop,” an “international airport with no international flights.”

More explosive revelations are likely on the way: Marcelo Odebrecht and 76 other current and former executives have signed tell-all plea deals with Brazilian prosecutors in exchange for lighter sentences.

– Mounting backlash –

Corruption-weary Latin Americans are meanwhile taking to the streets.

After two weeks of violent protests in Peru, authorities there scrapped plans for Odebrecht-operated toll roads.

In the Dominican Republic, tens of thousands of people protested last month to demand public officials be held to account for taking bribes.

Odebrecht, meanwhile, is still paying the price.

Several countries have banned it from bidding for projects or signing contracts.

And the $3.5 billion it has agreed to pay Brazil, the United States and Switzerland under the US Justice Department deal may be just the beginning.

It has also agreed to pay $59 million to Panama and $189 million to the Dominican Republic. And more fines could be on the way.

Odebrecht, which had $39.1 billion in revenue in 2015, is now in survival mode.

It has put 12 billion reals ($3.8 billion) in assets up for sale, and laid off 60,000 employees in the three years through 2015, according to Bloomberg News.

The company itself confirmed to AFP it had laid off 40,000 from late 2014 to late 2015.

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