The Strategist

Latin America rocked by corruption scandal

02/16/2017 - 14:06

The largest corruption scandal in Latin America’s history is growing in strength, having already affected ten countries. The initiator was Brazilian construction company Odebrecht, which for a long time has been bribing high-ranking politicians of various countries in order to obtain lucrative contracts. A two-day extraordinary meeting of Attorney Generals of affected states is opening today in Brazil. Results of this event may replenish a list of compromised representatives of the Latin American elites.

Rodrigo César
Rodrigo César
A meeting of prosecutors and other officers of justice of Bolivia, Brazil, Colombia, Ecuador, Panama, Peru and the Dominican Republic will be held in Brasilia. The negotiators will discuss what needs to be done for effective investigation of the "Odebrecht case", a heavyweight corruption scandal.

Established in 1944, Odebrecht company is known as a construction company, although its activity extends to dozens of other business areas, such as chemical, petrochemical, defense, transport. The organization employs 167 thousand people in total. According to data for 2015, the company's turnover numbered $ 39.1 billion. Scale of Odebrecht’s recent activities boggles the mind. The company has participated in major construction work on stadiums and road infrastructure for the World Cup in Brazil in 2014 and the Olympics 2016, has been engaged in large-scale projects in chemical and petrochemical industries, the Latin America real estate market, and chipped in construction of the continent’s largest transportation hubs.

Legality of Odebrecht’s activities is not questioned in most countries. In Latin America, however, Odebrecht succeeded largely thanks to bribery of the first persons in politics and business. The company has spent for this purpose about $ 800 million over the past 15 years.

Front-and-center recipients of the black cash were senior officials of Brazil ($ 349 million) and Venezuela ($ 98 million). They are followed by the Dominican Republic ($ 92 million), Panama ($ 59 million), Argentina ($ 35 million), Ecuador ($ 33 million), Peru ($ 29 million), Guatemala ($ 18 million), Colombia ($ 11 million) and Mexico ($ 10.5 million). Besides, the scandal touched two countries on the other side of the Atlantic - Angola and Mozambique.

First information about the bribes came from the company's Head 40-year-old Marcelo Odebrecht. Back in 2014 in Brazil, he was charged with a sensational case called Lavajato ("Car Wash"). Then, a group of construction companies, led by Odebrecht, contrived an ingenious web of corruption network. The ring members extracted huge profits by bribing top managers of major Brazilian oil company Petrobras. Marcelo Odebrecht agreed to cooperate with the investigation and bore witness in exchange for abridging sentence for himself and 77 other employees of the company. Nevertheless, the businessman still faced a stiff sentence of 19 years and 4 months in prison. His company agreed to pay a fine of $ 3.5 billion in the United States Brazil and Switzerland late last year.

Since then, the corruption scandal wave flung over Latin American and other countries. In December 2016, tens of thousands of inhabitants of the Dominican Republic took to the streets demanding a fair and impartial trial of businessmen and politicians bribed by from Odebrecht. On Sunday, Venezuelan President Nicolas Maduro on national television promised to restore order, refuse to conclude contracts with the Brazilians and punish corruption. At the same time, his Peruvian counterpart Pedro Pablo Kuczynski addressed the nation in which he "declared war" to corrupt officials and businesses. The Republic’s authorities also referred to the US president Donald Trump with a request to extradite ex-president of Peru Alejandro Toledo, who is supposed to have been the country’s main recipient of Odebrecht’s bribes. However, it is unknown whether Mr. Toledo is located in the United States: it was reported earlier that he would head to Israel, which does not have an agreement with Peru on mutual extradition of citizens. The list of suspects in accepting bribes also includes President of Colombia Juan Manuel Santos. According to some sources, he used the black cash in his campaign. Head of the Argentinian intelligence services Gustavo Arribas is also being investigated.

A trial in relation to the next of kin of former President Ricardo Martinelli is held in Panama. In addition, the Odebrecht case brought into the picture Jürgen Mossack and Ramon Fonseca, founders of law firm Mossack Fonseca, dealing with registration and maintenance of offshore companies. Last year, the company became famous after a leak of confidential documents ("Panama Papers"), which threw light on politicians of different countries using offshore schemes to avoid taxes. According to Panama’s government, Odebrecht bribed officials through accounts opened in Mossack Fonseca.

Experts agree that the list of compromised senior officials and businessmen will only grow. In particular, former head of Odebrecht units in Colombia Eleuberto Martorelli promised to provide participants of today's meeting in Brasilia with a detailed list of the Colombian "congressmen, mayors, governors, councilors of different levels, businessmen and illegal armed groups" involved in the scandal.