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Odebrecht corruption scandal leaves devastating aftermath

by: (Editorial Manager) on

I wrote in February about the fallout from the Brazilian corruption scandal that prompted the investigation known as Operation Car Wash. Almost three years to the day this investigation into bribery began, the aftershock continues to be felt. Earlier this month it was revealed that the Brazilian Supreme Court would open investigations into 83 politicians suspected of accepting bribes.  

The scandal – briefly - is centred on Petrobras, the partly state-owned energy firm that was said to have colluded with 16 companies to overcharge Petrobras for services in exchange for kickbacks. One of the implicated firms, Odebrecht, was fined $3.5 billion by the US Department of Justice under the Foreign Corrupt Practices Act, the largest ever foreign bribery resolution.

The 83 politicians to be investigated, whose identities have not been made public, were named by 77 former Odebrecht executives as part of their plea bargain testimonies. This is a scandal that has claimed prominent scalps, including former Odebrecht CEO Marcelo Odebrecht, who is serving a 19 year sentence. It also contributed to the impeachment of former Brazilian President Rousseff, though she has never been formally charged.  

Federal prosecutors are looking into Rousseff’s 2014 election campaign, in which current Brazilian President Michel Temer ran as Rousseff’s running mate. According to the Guardian, the campaign is suspected to have been financed by bribery - if this turns out to be the case, then the election results could be annulled and Temer potentially removed from office.

It’s sobering to contemplate the fact that this investigation could result in the removal of yet another elected head of state – following the impeachment of South Korea’s Park Geun-hye – as part of a corruption scandal.

Branching out

As is typical of corruption on this scale, its reach extends far beyond Brazilian borders. Prosecutors in Brazil, Chile, Columbia, Mexico, Ecuador, Panama, Peru, Portugal, Argentina, Venezuela and the Dominican Republic recently published a signed agreement to explore further the bribes paid by Odebrecht to politicians.    

Odebrecht’s decline has had a knock on effect in the South American region, where the company was in the process of several construction projects, such as Peru’s Gasoducto Sur Peruano, a gas pipeline, currently on hold indefinitely since the disintegration of Odebrecht’s leadership and management,

Incomplete construction projects like this one have led the Peruvian government to shave a percentage point off its growth forecast. In the same country, former president Alejandro Toledo is subject to an arrest warrant from Peruvian authorities for allegedly accepting $20 million in bribes. He is thought to be in San Francisco and denies the charges.

Projects began by Odebrecht have been cancelled in Colombia, and in the Dominican Republic a $2 billion Odebrecht build – a power station – has been put on hold, causing president Danilo Medina’s approval ratings to plummet. Medina has established a commission to look into Odebrecht’s conduct, but the fact remains that infrastructure essential to the development of countries like Peru, Colombia and the Dominican Republic is, at the time of writing, not being built.  

Corruption culture

PanamacorruptionCorruption has unquestionably hampered the growth of countries in South America. Now that Odebrecht has been found guilty by the US Department of Justice, prosecutors and authorities across the continent are looking at the recipients of the bribes Odebrecht has admitted to paying in an attempt to find and penalise those responsible.  

The testimony of former Odebrecht executives will extend the lifespan and broaden the scope of this corruption investigation, and as other countries have demonstrated, not even those at the very top are immune from removal of office. But it’s worth remembering that replacing leaders and presidents is often the easier option compared to rooting out the deeper culture of corruption. 

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