Peru – Odebrecht ‘Disaster’ Claims More Than Reputations

The fallout from the Odebrecht corruption scandal has been felt across the entire region of Latin America. The investigation into the political dealings of the giant Brazilian construction company – known as Lava Jato (Car Wash) – has led directly and indirectly to the downfall of high-profile politicians, notably in Brazil.

Nevertheless, the impact of the scandal has been most dramatic in Peru. Variously likened to a “tornado”, a “tsunami” and an “earthquake”, Odebrecht is the unnatural disaster that has upended the existing political order.

As noted previously in this blog, the investigation has implicated all four of Peru’s most recent presidents, along with other important political figures. Alejandro Toledo remains a fugitive; Ollanta Humala is likely to be charged along with his wife, Nadine Heredia; and Pedro Pablo Kuczynski is under house arrest.

Yet all of that pales in comparison with the dramatic, near-public suicide of Alan Garcia on April 17th. When police came to his home in Lima to arrest the twice-president of Peru, Garcia was seen to produce a gun before retiring to an office to shoot himself. It was a tragic end to a controversial life and career, and has given rise to a new phase of public questioning of Peru’s approach to the Odebrecht scandal.

For many in Peru the sight of so many former presidents implicated in bribery is a source of considerable shame. But others point to the investigations of powerful figures as evidence that Peru is the only country in the region in which the “wheels of justice are truly turning”, and have exhorted other countries to follow Peru’s example.

It is certainly true that the tough approach adopted by Peru’s prosecutors and judiciary has come as a surprise to many given the country’s reputation for weak insitutions. However, it is also the case that these investigations have not run their course, and may yet be derailed. Furthermore, analysis of Peru’s political institutions reveals a more complex scenario.

Early investigations of so-called ‘leftists’ like Toledo, Humala and, most recently, former Lima Mayor Susana Villaran, were headline-grabbing but did not touch the real power players in Peruvian politics: Garcia’s APRA and the party led by Keiko Fujimori, Fuerza Popular. A more substantive test of the strength of Peru’s judicial system came with the scandal of the “CNM audios”i. Those recordings of judges peddling influence placed ‘fujimorismo-aprismo’ in the firing line.

The prosecutors running the Lava Jato invevstigation, José Pérez and Rafael Vela, have not backed down in the face of fierce attacks by apristas, including former Attorney General Pedro Chávarry, who attempted to oust them and was later forced to resign himself. For some, these events demonstrate the democratising force of public prosecutors, and represent the “triumph” of the judicial over the political class in Peru.

Such statements may be premature, hoewver, and it is clear that politics still matters a great deal. For starters, the backing of “accidental president” Martin Vizcarra, who has taken up the mantle of fighting corruption, has also proved crucial to date. Vizcarra’s programme of political reform outlined previously included dissolving the CNM, which effectively removed the ‘shield’ against prosecution that Garcia had erected through his control of a large number of judges.

But neither the smooth procession of the investigation nor the passage of Vizcarra’s reforms are by any means certain. The fujimorista bloc in the legislature has used its majority to weaken or obstruct the reforms, forcing Vizcarra to repeatedly threaten to dissolve Congress. Recently those in Fuerza Popular have taken to describing Keiko – who remains in preventative detention – as a “political prisoner”. The claim has been dismissed by Human Rights Watch, but found support from another public prosecutor, proving that not all prosecutors are alike.

Furthermore, following Garcia’s suicide many supporters of APRA openly blamed the prosecutors and civil society for his death. Initially Vizcarra’s resolve appeared to weaken when he questioned the use of preventative detention against politicians. But the subsequent testimony by Jorge Barata, erstwhile head of Odebrecht in Peru, wherein he produced documentation to evidence huge payments to a high-ranking Garcia aide, appears to have ended that line of attack.

All of which brings us back to the fallout from the Odebrecht investigations in Peru. Beyond whether or not the investigation and its impacts reflect positively or negatively on Peru’s democracy lies another, more fundamental question: does any of this matter?

In his recent book on Odebrechtii, Francisco Durand argues that the use of Peru as an “operational hub” and main channel for its investments in Latin America was not happenstance. Dating back to the government of Alberto Fujimori, Durand reveals that Odebrecht found in Peru an ideal mix of ideological compatibility and low state capacity that allowed its systematic bribery operations to thrive. Furthermore, Odebrecht family members established key personal and professional relationships with members of Peru’s business and media elites, granting the company unparalleled influence and access.

For Durand, the Odebrecht case is but the most prominent example of the “political capture” of the Peruvian state by corporate interestsiii. Per this concept, bribery is just one form that this influence can take in attempts by large corporations to avoid state regulation and lower standards, such as those relating to the environment. This influence, frequently but not exclusively channelled through associations known as ‘gremios‘, appears unaffected by recent events.

This analysis fits conceptually with that of other scholars who have noted Peru’s puzzling stability in the context of a collapsed party system and weak state capacity, wherein the prevailing neoliberal economic model functions largely on “auto-pilot”iv, untroubled by the government of the day. In other words, politicians are simply not that important to the running of the state in Peru.

The coming two years will put this theory to the test. In the view of many commentators the Odebrecht scandal signals the end of the existing political order in Peru, leaving an extremely open field ahead of the 2021 elections. Furthermore, these events have somewhat strengthened public faith in the judiciary and civil societyv, and have opened up new spaces to at least debate structural reform, albeit confined to the political sphere.

But others have interpreted the huge public concern with corruption as a demand for social and indeed economic inclusion. Whether political voice can be given to such demands will perhaps prove the true legacy of the Odebrecht disaster in Peru.

i “CNM” refers to the Consejo Nacional de la Magistratura, or National Judicial Council.

ii Durand, Francisco, 2018. “Odebrecht: La Empresa que Capturaba Gobiernos”. Fondo Editorial PUCP.

iii See also Crabtree and Durand’s book, “Peru: Elite Power and Political Capture” (2017).

iv Melendez, Carlos, and Paolo Sosa Villagarcia, 2013. Peru 2012: Atrapados por la Historia? Revista de Ciencia Social Vol. 33(1).

v The role played by Gustavo Gorritti and his teams of investigative reporters at IDL-Reporteros in exposing the scandal is particularly noteworthy.

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