Tag Archives: Lavo jato

Latin America – Odebrecht Scandal Expands across the Region

In my last post, I discussed the fallout from the Lavo Jato corruption scandal, which was partly responsible for forcing Dilma Rousseff, the former president of Brazil, out of office last year. Parts of this scandal involved allegations of kickbacks from the Brazilian construction giant, Odebrecht, to former worker party president, Luiz Inácio Lula da Silva (2003-2011). The scandal spread to Peru, where former president, Alejandro Toledo (2001-2006), has been accused of receiving US$20 million in bribes from Odebrecht in return for granting them the contract to build a large road and infrastructure project. This led to the Peruvian government offering a 100,000 soles award (approximately US$30,000) for information leading to Toledo’s arrest.

Well, the scandal rumbles on. And rumbles across the region, dragging into its orbit current and former presidents across Latin America.

In Panama, prosecutors are now seeking to detain the sons of former president, Ricardo Martinelli (2009-2014). Ricardo Alberto and Luis Enrique Martinelli are accused of depositing part of a US$22 million bribe that Odebrecht paid in return for lucrative state contracts in Panama. And current Panamanian president, Juan Carlos Varela, has been accused by a former advisor of receiving political donations from Odebrecht. In Colombia, a former senator who admitted receiving bribes from Odebrecht has accused current Colombian president, Juan Manuel Santos, of receiving illegal campaign donations from the Brazilian firm.

In Argentina, members of Mauricio Macri’s centre-right organization have been accused of ties with Odebrecht, and in the case of Gustavo Arribas, of accepting a direct bribe from the firm. All of this comes amid a controversy over a government plan to settle a fifteen year debt incurred by Macri’s father when he owned the Argentine postal service. In the Dominican Republic, the Brazilian firm admitted that it payed US$92 million in bribes to Dominican government officials to secure large and lucrative infrastructure projects. And on Wednesday, prosecutors in Chile raided the Santiago offices of Odebrecht as part of a larger 10 country investigation into the political links and acitivies of the construction company.

So is there an explanation for such an encompassing and massive scandal? Part of the problem clearly lies with norms and regulations governing campaign financing across Latin America. There are few public subsidies to political parties and most campaigns are paid for by corporate donors, while repeated attempts to regulate donations have fallen short, given the lack of an incentive structure for doing so among the political classes.[1] The lack of strict regulations governing campaign financing is surely compounded by the rise of populist outsiders who appeal to “the masses” via television. Kurt Weyland has argued that “over the past 15 years, such personalistic leaders have sought to bypass established political parties and interest groups in order to reach “the people” through direct, most often televised, appeals aimed at building up a loyal following from scratch. Because its methods are costly, the new media-based politics has given ambitious politicians much higher incentives to resort to corruption.”[2]

Political donation kick-back schemes therefore like the one operated by Odebrecht are simply too difficult for many Latin American politicians to turn down, given the spiraling cost of electoral campaigns across the region. Expect more revelations to emerge.

Notes

[1] See the recent Economist article on campaign financing across the region: http://www.economist.com/news/americas/21717985-unavoidable-trade-offs-paying-democracy-how-latin-america-deals-campaign-finance.

[2] Kurt Weyland. 1998. The Politics of Corruption in Latin America. Journal of Democracy 9 (2): 108-121.