Odebrecht's bribery scandal sends shockwaves across Latin America
December 23, 2016
The Brazilian company's corruption case has triggered judicial investigations and prompted denials of involvement from some current and former government officials
The admission by Brazilian construction conglomerate Odebrecht that it paid hundreds of millions of dollars in bribes to win infrastructure contracts over the last 15 years has sent shockwaves across Latin America.
Odebrecht, the region’s biggest construction firm, has agreed to pay between $2.6 bn and $4.5 bn in fines after admitting it doled out nearly $800 million in bribes across a total of 12 countries, including 10 in Latin America. US authorities describe it as the largest anticorruption settlement in history.
Here are some of the latest developments:
In Argentina, a federal prosecutor has opened a preliminary investigation after Odebrecht admitted to paying $35m in bribes to Argentine officials from 2007 to 2014 to obtain public works projects. During that time, the company won several contracts, including a water treatment plant operated by the state water company AySA and work on a refinery owned by YPF, the state-owned energy company, according to the La Nacion newspaper.
Other projects included the tunneling of a Buenos Aires rail line and the construction of a rail line to a potassium mine operated by Brazil’s Vale.
On Friday, Argentina’s former planning minister, Julio De Vido, who was the top public works official under former President Cristina Fernandez, said he never accepted any illicit payments from Odebrecht. “We want the alleged intermediaries to be identified and for them to say which officials were paid,” said De Vido, who is now a congressman.
Odebrecht's involvement has jeopardized projects in Peru and Colombia, especially the Gasoducto Sur Peruano (GSP) natural gas pipeline concession and the Rio Magdalena waterway PPP. However, the Brazilian engineering firm has restated its commitment to sell its controlling stakes so the projects can secure financing.
In Peru, Odebrecht paid $29m in bribes to secure public works between 2005 and 2014, according to the plea agreement. Odebrecht won the $6.5bn GSP contract in 2014, after the only other bidder was disqualified on the day of the auction. Peruvian President Pedro Pablo Kuczynski said the Odebrecht bribes had nothing to do with the GSP. He also said he did not accept money from Odebrecht when he was a cabinet minister from 2004 to 2006.
Odebrecht put its 55% stake in GSP on the block earlier this year. An attempt to sell a controlling share in the concession to Sempra Energy fell through in November, when the government refused to remove an anti-corruption clause. But now Canada's Brookfield is expected to buy at least half of the pipeline before the end of the year. Odebrecht recently sold sell its concessions in the Olmos irrigation project in Peru to Brookfield and Suez for an undisclosed amount. The Brazilian firm is also looking for a buyer for the Chaglla hydroelectric power plant in Peru.
On Friday, Ecuadorean authorities raided Odebrecht’s office in the city of Guayaquil, seizing documents, two hard drives and four laptops, officials said. In comments on local radio, prosecutor Galo Chiriboga said authorities were working to learn more about the $33.5m in bribes that Odebrecht said were paid between 2007 and 2016. The payments helped the company win $116m in contracts during that time. “We’re looking to identify names and we want to know where the money went,” he said.
Alexis Mera, President Rafael Correa’s legal secretary, told reporters on Thursday that one of Odebrecht’s biggest contracts in the country involved a project to build a part the metro in the capital city of Quito. Last year, a consortium led by Odebrecht and Spain’s Acciona was awarded the $1.5bn contract.
Odebrecht’s projects in Ecuador also included contracts to work on an expansion of a deepwater port in the city of Manta and the construction of the Pascuales-Cuenca pipeline, among others.
Mexico's civil service ministry SPF and the state-owned oil company Pemex said they will investigate the $10.5m in bribes that the Brazilian firm paid to Mexican officials between 2010 and 2014. Odebrecht earned more than $39m as a result of the bribes. According to the plea agreement, Odebrecht gave $6m in 2013 or 2014 to "a high-level official of a Mexican state-owned and state-controlled company is exchange for the official assisting the company with winning a project."
The plea agreement does not identify specific projects, but the Brazilian builder has a few construction contracts with Pemex. In March 2014, Pemex subsidiary Tag Pipelines granted a $1.2bn EPC contract for the Los Ramones II North natural gas pipeline to a consortium with Odebrecht, Arendal and Techint. In November 2015, Pemex granted a $1.2bn contract to to Odebrecht and ICA Fluor to build a facility at a refinery in the state of Hidalgo. Braskem, meanwhile, is part of the joint venture that operates the $4bn Etileno XXI petrochemical plant.
In Colombia, where Odebrecht paid $11m in bribes for public works contracts between 2009 and 2014, the government has asked the attorney general to open an investigation. Transparency Secretary Camilo Enciso told a local radio station that the government will cancel any contract that is tied to a bribe from Odebrecht. The company earned more than $50m from the bribes in Colombia, according to the plea agreement.
Odebrecht won three public works contracts in Colombia during the time period -- the second section of the Ruta del Sol federal highway, the Puerto Boyaca-Chiquinquira highway and the Rio Magdalena PPP. The company recently refused an offer from Mexico's Ideal for 51% of Navelena, the SPV behind the COP2.5tn ($834m) waterway project, but it still got a 12-year $250m loan from Japanese bank SMBC to cover part of the construction.
Odebrecht admitted to paying $18 million in illegal payments in Guatemala from 2013 to 2015. The payments helped the company obtain benefits of more than $34 million, according to U.S. authorities. According to the Guatemalan magazine ContraPoder, the company earlier this year suspended its work on the highway project after spending more than 70% of its budget but only completing 30% of the planned work. This week, Guatemala’s communications secretary, Aldo Garcia, said the government would move to cancel the project, which aims to expand the CA 02 highway connecting the cities of Tecun Uman and Cocales.
Freddy Guevara, president of Venezuela’s comptroller commission in the opposition-controlled Congress, has said lawmakers will open an investigation into Odebrecht’s admission that it made nearly $100m in illegal payments in Venezuela. Officials from the government of President Nicolas Maduro have not publicly commented on the scandal.
In 2011, a year before Odebrecht started operations in the Dominican Republic, it began paying what would become $92m in bribes by 2014. The company gave the money to an intermediary, with the understanding the funds would make it to a government official. "Through this agreement, Odebrecht was able to influence governmental budget and financing approvals for certain projects in the Dominican Republic," according to the plea agreement. Odebrecht earned more than $163m from the bribes in the Dominican Republic.
Prosecutors in Panama, where some $59 million in bribes were paid, said they plan to travel soon to Washington DC to meet with Justice Department officials to discuss the case, local media reported. Some business leaders have called on the government to prevent Odebrecht from bidding for any additional contracts until a local investigation can be carried out.