Tag Archives: Odebrecht

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.

Peru – House of Cards Continues to Fall

One year ago a New York Times op-ed piece likened the political chaos in Peru to an ‘Inca-style Game of Thrones’. But the dramatic events of the past months indicate that ‘House of Cards’ may provide a better cultural reference, as former presidents and presidential candidates continue to tumble. In a referendum on December 9th the country voted overwhelmingly in favour of reducing corruption, at a time when every Peruvian president elected since 1985 was either in prison or under investigation.

As reported previously in this blog, fallout from the Odebrecht bribery scandal contributed to the resignation in March 2018 of President Pedro Pablo Kuczynski, saw the preventative detention of former president Ollanta Humala (2011-16), and led another ex-president, Alejandro Toledo (2001-06), to flee to the US.

Following this upheaval, the expectation in many circles was that the appointment of Kuczynski’s Vice-President, Martin Vizcarra, would herald a return to the political status quo. In other words, to dominance by the two most powerful political forces in the country: the Fuerza Popular party led by Keiko Fujimori (fujimorismo); and the APRA party of two-time president Alan Garcia (aprismo).

According to political scientist Martin Tanaka, Vizcarra’s ‘accidental’ presidency appeared unlikely to alter this situation given his “weak and precarious” position. An engineer and former Governor of the low-profile Department of Moquegua, Vizcarra took power under the worst possible circumstances, with his party leader discredited, and facing a Congress controlled by those responsible for ousting him. Vizcarra’s first three months in office saw his approval ratings fall from 57 to 35 per cent, appearing to confirm a trend of declining legitimacy for Peruvian presidents[i].

Instead events have taken a hand, transforming Vizcarra from lame-duck president to the last president left standing. With exit polls indicating that three of the four questions posed by Sunday’s referendum will pass by a huge majority (Vizcarra had distanced himself from the fourth proposal), an unlikely turnaround has been consolidated.

First, back to those events. Following Kuczynski’s resignation, Peru appeared set for several years of de facto co-governance by ‘fujimorismo-aprismo’, with Fuerza Popular commanding a majority in Congress, while APRA exercised unofficial control over many of Peru’s democratic institutions.

Then came the explosive revelations contained in what have become known as the “CNM audio tapes”[ii]. These recordings featured a group of corrupt judges and prosecutors known as the ‘white collars’ discussing the outcomes of trials, and appeared to implicate Keiko Fujimori[iii]. The scandal saw an eruption of public indignation, leading to large protests across the country during July.

The scandal seemed to energise Vizcarra, who presented proposals for a referendum to reform both politics and the judiciary on July 28th. When Fuerza Popular attempted to obstruct the referendum in Congress, Vizcarra threatened to dissolve the legislature if the measure was not passed. Congress blinked first and voted the measure through, albeit with some changes.

Emboldened, Vizcarra has taken the fight to Fuerza Popular. The referendum proposed four reforms. The first related to the judiciary, abolishing the CNM and replacing it with a new, restructured National Judicial Board that will halve judicial terms and involve civil society oversight.

The other three questions involved political reforms and, according to social scientist Sinesio Lopez, are aimed at ridding Peruvian politics of its most “backward” elements, i.e. ‘fujimorismo-aprismo’.

The first measure seeks to regulate the financing of political parties; the second prohibits immediate re-election of all congressional deputies (a measure Tanaka views as a “mistake”); and finally, a proposal to reinstitute a bicameral legislature. Due to changes made by Fuerza Popular, Vizcarra disowned this proposal as he claimed it would allow parties a means to bypass the ban on immediate re-election. Exit polls indicate that the first three measures received around 85% support, with the final question rejected by a similar margin.

Vizcarra could not have timed his second-coming as the new broom in Peruvian politics any better. No sooner had his referendum law been passed than the bane of presidents in Latin America – the Odebrecht corruption scandal – returned to claim more victims.

As the Financial Times recently noted, Peru has been particularly impacted by the scandal. This is not surprising given the well-documented influence of corporations on Peruvian politics[iv]. Sociologist Francisco Durand’s recently published book[v] on Odebrecht’s operations in Peru traces the evolution of Peru as an “operational hub” for the Brazilian construction company to the ‘competitive authoritarian’ rule of Alberto Fujimori[vi].

But while the scandal has involved three presidents to date (Toledo, Humala and Kuczynski), until recently ‘fujimorismo-aprismo’ had remained unscathed. No longer.

First to fall was Keiko Fujimori, who is being investigated by prosecutor Jose Domingo Perez for allegedly receiving US$1.2 million in campaign contributions from Odebrecht. Former executives of the company are co-operating with Perez’s investigation. Already damaged by the CNM tapes, leaked online messages from within Fuerza Popular point to coordinated efforts to obstruct the investigation and intimidate Perez.

The revelations have led to Keiko Fujimori and others within Fuerza Popular being charged with running a criminal organisation, a charge that carries a minimum sentence of 10 years in prison. Furthermore, Fujimori has been placed in preventative detention for up to three 3 years, on the basis that she might interfere with the case.

Viewed alongside the decision by a Peruvian court in October to revoke the highly questionable pardon granted to Keiko’s father Alberto – the former president immediately checked into a clinic, claiming poor health – some have asked whether these events represent the end of ‘fujimorismo’.[vii]

Following on the heels of those dramatic events came the investigation of Alan Garcia on charges of receiving illegal donations from Odebrecht. After returning from Madrid to address the charges, Garcia was ordered by a court to remain in Peru indefinitely.

Having agreed to abide by the court order, on November 17th Garcia presented himself at the Uruguayan Embassy in Lima seeking to claim asylum. Protesters took up a vigil outside the Embassy, and after weeks of consideration, President of Uruguay Tabare Vasquez announced on December 3rd that Garcia’s petition had been refused.

Where does all this turmoil leave Peruvian politics? It may be too soon to say that the influence of ‘fujimorismo-aprismo’ has been eliminated – their clientelistic networks, and links to influential business and media sectors remain. But these groupings have rarely been weaker since Peru’s return to democracy.

The question remains as to who or what will fill this power vacuum? Lopez has publicly urged Vizcarra to deepen his reforms by way of a Constituent Assembly to re-write Peru’s Constitution. While the caretaker president enjoys extremely high public legitimacy – his approval ratings have risen to 65% – it is far from clear where he would find the political or social support for more fundamental reform. Nevertheless, the referendum results provide a powerful endorsement of his new direction, and may induce him to seek further reforms.

As this overview of former presidents and prominent presidential candidates reveals, what can be said with certainty is that Peruvian politics is entering entirely uncharted territory.

Peru’s Presidents: Where are they now?

Alan Garcia: President from 1985-90, and 2006-11. Under investigation for corruption relating to Odebrecht; under court order to remain in Peru.

Alberto Fujimori: President from 1990 to 2000. Imprisoned in 2009 on human rights and corruption charges. Pardoned under dubious circumstances in December 2017, a court ordered his return to prison in October 2018. Currently in a health clinic while appealing against this order.

Keiko Fujimori: Daughter of Alberto, twice-defeated presidential candidate and leader of the largest party in Congress. Placed in preventative detention for 3 years while under investigation for corruption and running a criminal organisation.

Alejandro Toledo: President from 2001-06. Under investigation for corruption relating to Odebrecht, currently in the US from where he is contesting extradition to Peru.

Ollanta Humala: President from 2011-2016. Under investigation for corruption relating to Odebrecht. Spent eight months in preventative detention in 2017-18.

Pedro Pablo Kuczynski: President from 2016-18. Resigned in March 2018 following vote-buying and corruption scandal. Under investigation for corruption relating to Odebrecht, under court order to remain in Peru.

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

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

[iii]The recordings contained references to a meeting with a “Sra. K.”

[iv]See for example Crabtree and Durand’s recent book, “Peru: Elite Power and Political Capture” (2017).

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

[vi]Levitsky, Steven, and Lucan Way, 2002. The Rise of Competitive Authoritarianism. Journal of Democracy, Vol. 13(2).

[vii]Fowks, Jacqueline, 2018. El fin del Fujimorismo? Nueva Sociedad Vol. 277.

Peru – Ex-Presidents and their Legal Troubles

The legal woes of Peruvian former presidents continue at pace. It is barely a month since former President Pedro Pablo Kuczynski (2016-2018), facing an impeachment vote, resigned in the wake of allegations of vote buying and a lack of clarity surrounding US$782,000 that a company he owned received from the Brazilian construction giant Odebrecht. Now this week, another ex-President, Ollanta Humala (2011-2016) and his wife Nadine Heredia, were released from their pre-trail detention over alleged kickbacks they received, also from Obebrecht. Humala and Heredia are accused of receiving money from Obebrecht, which they then used to illegally finance Humala’s election campaigns. They have been under investigation in some form or other since 2015 when four of Heredia’s personal notebooks, containing details of the alleged kickbacks, were stolen by a former housekeeper and leaked to the press. Humala and Heredia have been in prison since July 2017, but prosecutors had yet to press any charges and so last week, the Constitutional Court ruled that their arrest and imprisonment did not comply with the rules of due process.

Former Presidents Kuczynski and Humala are not the only ones affected by the fallout from the Odebrecht scandal. Centered on the Lavo Jato corruption scandal, the Odebrecht affair has its roots in bribes given to Brazilian politicians (and elsewhere) by the Brazilian construction giant, Odebrecht, in return for a whole gamut of favors. In fact, Odebrecht has admitted to paying over US$1 billion in bribes and apparently, they even had a designated department whose sole function was to bribe governments across the region in return for state building contracts. The scandal has been partly responsible for forcing Dilma Rousseff, the former president of Brazil, out of office. In Panama, prosecutors are now seeking to detain the sons of former president, Ricardo Martinelli (2009-2014), Ricardo Alberto and Luis Enrique Martinelli, who are accused of depositing part of a US$22 million bribe that Odebrecht paid in return for lucrative state contracts in Panama. 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.

But while this scandal has dragged other Latin American executives into its orbit, it seems to have hit the cohort of Peruvian ex-Presidents particularly hard. 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. Toledo is currently on the run and the Peruvian government offered a 100,000 soles award (approximately US$30,000) for information leading to Toledo’s arrest. The presidency of Alan García (2006-2011/1985-1990) has also fallen under suspicion, given that Obebrecht won a record number of contracts in Peru during his tenure. Kuczynski is not allowed to leave the country while investigations continue and former Odebrecht officers in Brazil have also alleged that they partly financed the presidential campaign of Keiko Fujimori.

This week it also emerged that former President Alberto Fujimori (1990-2000) is set to face new charges over the alleged forced sterilization of five women during his time in office. Over 300,000 women were sterilized as part of a state programme during Fujimori’s presidency, but thousands of these woman have accused the state of forcing them to have the surgery against their will. In a 2014 investigation, Fujimori was cleared of any wrongdoing in this regard. This comes only months after Fujimori, who was serving a 25-year sentence for corruption and human rights abuses, was pardoned by former President Kuczynski. In December of last year, Kuczynski  defeated a motion to impeach him, by 78 votes against 19, with support from Keiko’s brother, Kenji Fujimori, who defied his sister by leading a small group of rebellious Fuerza Popular legislators to block the impeachment vote against Kuczynski.

By my count, this now means that every single living former Peruvian president is either under investigation, under suspicion, facing charges, on the run, or newly released from prison. Given the legal woes of these ex-presidents, it is perhaps no surprise that Peruvians tend to evince such low support for the executive office.

Panama – Ex-President Ricardo Martinelli Wanted in Panama on Charges of Spying

On Monday, as the current president of Panama, Juan Carlos Varela, was meeting with President Donald Trump in the White House, the former president of Panama, Ricardo Martinelli was fighting his extradition back to Panama in a court in Miami. Martinelli, who was president of Panama from 2009 until 2014, is accused of diverting and embezzling public funds in order to pay for a highly complex and sophisticated wire-tapping arrangement that allowed him to listen in on political opponents. He was arrested last week in Florida, where he has lived as a political refugee since the end of his presidency, claiming that President Juan Carlos Varela has pursued this corruption and spying case against him for political reasons.

Martinelli is accused of diverting approximately US$13.4 million that was set aside for targeted poverty relief, and using this money to instead illegally gain access to the phone calls and emails of 150 major political opponents. Martinilli’s defence in the face of extradition back to Panama is largely predicated on the argument that during his term in office, Martinelli fired the current president, Juan Carlos Varela, as his foreign minister, because it allegedly emerged that Varela was receiving illegal payments from foreign consulates. Varela’s actions, so Martinelli argues, are a type of payback for this.

Although not from the same party (Varela is from the Partido Panameñista and Martenelli is from Cambio Democrático), Varela and Martenelli established a coalition after the 2009 election, which saw Varela assume office as Martenelli’s vice-president and foreign minister. As relations became more acrimonious between the two men, Varela ran for, and won, the presidency in 2014, against the candidate of Cambio Democrático, José Domingo Arias. Shortly after he came to power, Varela launched an inquiry into the alleged illegal spying of former-president Martinelli, who then fled to the US.

Of course, this is not the first time that former president Martinelli, or former Panamanian presidents for that matter, have been embroiled in some form of corruption scandal. I have discussed the fallout from the Lavo Jato corruption scandal before on this blog, which was partly responsible for forcing Dilma Rousseff, the former president of Brazil, out of office last year. This scandal centers upon allegations of kickbacks from the Brazilian construction giant, Odebrecht, to former worker party president, Luiz Inácio Lula da Silva (2003-2011), but as the scandal has rumbled on, it has also dragged other Latin American countries into its orbit.

One of these is Panama. Prosecutors have been seeking to detain the sons of Ricardo Martinelli, Ricardo Alberto and Luis Enrique Martinelli, both of whom are accused of depositing part of a US$22 million bribe that Odebrecht paid in return for lucrative state contracts in Panama. In fact, current Panamanian president, Juan Carlos Varela, has been accused by a former advisor of receiving political donations from Odebrecht.

The US and Panama do have an extradition treaty (although rather an old one) and the US judge will decide Ricardo Martinelli’s fate next week.

Brazil – One Third of the Cabinet to be Investigated for Corruption

Everybody was waiting for this. I have written before on this blog about the long tentacles of the huge Lavo Jato corruption scandal, which has engulfed the Brazilian, and increasingly the regional, political establishment. The whole scandal centres upon bribes given to Brazilian politicians (and elsewhere) by the Brazilian construction giant, Odebrecht, in return for a whole gamut of favours. Odebrecht has admitted to paying over US$1 billion in bribes and apparently, they even had a designated department whose sole function was to bribe governments across the region in return for state building contracts.

Well, now in Brazil, a federal judge, Edson Fachin, has released a list of prominent politicians that are to be investigated for allegedly receiving payments from Odebrecht. This list is based on information provided to federal investigators in Brazil by 77 former Odebrecht executives as part of a larger plea bargain. It was due to be released earlier, but the former federal judge responsible for the investigation, Teori Zavascki, was killed in a plane crash in January.

The list was part of a ruling that allows federal prosecutors to begin investigating politicians named by the Odebrecht executives and for the somewhat beleaguered government of Michel Temer, it is particularly damaging. It may also have consequences for the 2018 presidential elections. At least eight government ministers, nearly a third of the cabinet, will now be under investigation for allegations of bribery and corruption. It includes Michel Temer’s chief of staff, Eliseu Padilha, and his foreign minister, Aloysio Nunes Ferreira. It also includes the Speaker of the lower house and the head of the Senate, not to mention a large chunk of sitting senators (24), 40 federal deputies and 3 governors.

This comes at a moment when Temer is trying to push an important pension bill through Congress, which would introduce a mandatory retirement age and reduce death benefits. This legislation is deemed crucial in order to deal with Brazil’s very large primary budget deficit. The deputy responsible for its introduction to the Chamber of Deputies has also been named on this list.

Potential candidates for the 2018 election have also been implicated, including Aécio Neves and José Serra (both from the PSDB). It is difficult to see how Temer’s party, the PMDB, could realistically contest the election given the incumbency curse they will face, and it remains to be seen whether the PT can shrug off its own involvement in the corruption scandal. Given that nearly the entire upper echelons of Brazilian politics have been caught up in this scandal, a cynical and downtrodden electorate might end up turning to an outsider like Marina Silva, or a populist, like the right-leaning Jair Bolsonaro.

One thing is for sure. There is more to come with this scandal. It has already spread across Latin America and its tentacles have thus far enveloped the sons of former Panamanian president, Ricardo Martinelli (2009-2014), the current president of Panama, Juan Carlos Varela, and 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 Peru, Odebrecht’s chief executive there has supposedly told Peruvian investigators that Alejandro Toledo, the former president of Peru between 2001 and 2006, has also received US$20 million in bribes from Odebrecht, in return for a lucrative infrastructure project.

We have not seen the end of Lavo Jato by a long shot.

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.

Peru – Peru Offers Reward for Arrest of Former President Toledo

One of the topics I return to most on this blog is probably corruption and specifically, corruption in the president’s office. The last number of years has witnessed a veritable landslide of corruption cases by those occupying the highest political office across Latin America. Guatemalan ex-President Alfonso Portillo was sentenced to five years in prison in the US for taking bribes from Taiwan. Another former Guatemalan president, Otto Pérez Molina, is currently in Matamoros prison in Guatemala City, serving a sentence for receiving bribes from importers. In El Salvador, evidence emerged linking former president Francisco Flores to illegal and hidden bank accounts. Argentine Vice-President, Amado Boudou, has appeared in court to respond to allegations that he illegally halted bankruptcy proceedings against a company that he supposedly had an interest in. In Mexico, Angélica Rivera, the wife of president Enrqiue Peña Nieto, has become embroiled in a scandal concerning a mansion she purchased in 2012, and Grupo Higa, a government contractor. In Peru, questions have been raised about the manner in which former president, Ollanta Humala, funded his presidential election campaigns in 2006 and 2011. And of course most famously, only last year, Dilma Rousseff, the embattled former President of Brazil was forced out of office partly as a consequence of the huge Lavo Jato corruption scandal which engulfed the Brazilian political establishment, which has also involved allegations of kickbacks from the Brazilian construction giant, Odebrecht, to former president, Luiz Inácio Lula da Silva.

Well now it seems the fallout from that crisis is spreading. Apparently, Odebrecht’s chief executive in Peru, Jorge Barata, told Peruvian investigators that Alejandro Toledo, the former president of Peru between 2001 and 2006, received US$20 million in bribes from Odebrecht in return for granting them the contract to build a large road and infrastructure project. Toledo has been under investigation in Peru since 2013, after his mother-in-law supposedly bought a number of expensive houses via offshore companies that seemed to extend significantly beyond the family’s means.

Somewhat ironically, Toledo came to power in 2001 in the tumultuous aftermath of the resignation of Alberto Fujimori, partly by railing against the corruption scandal engulfing Peru at that time following the discovery of videos of Peru’s head of intelligence, Vladimiro Montesinos, bribing TV network executives. Toledo was in France when this news broke and is now thought to be in California, where he currently holds a visiting professorship at Stanford University. Peru has now offered a 100,000 soles award (approximately US$30,000) for information leading to his arrest and current Peruvian president, Pedro Pablo Kuczynski, has asked Donald Trump to arrest and extradite Toledo back to Peru.

But this scandal looks set to explode to other presidencies. Apparently, Obebrecht had a designated department to bribe governments across the world in return for state building contracts. The presidency of Alan García (2006-2011) is now also falling under suspicion, given that Odebrecht won a record number of contracts in Peru during his tenure and allegations have also surfaced that Colombian president, Juan Manuel Santos, received illegal campaign donations from Obebrecht.

But why such persistent and prevalent cases of corruption in the very highest political offices? Explanations range from the historical development of the state and Guillermo O’Donnell’s infamous ‘brown areas’, to the lack of transparency during the economic reform process of the 1980s and 1990s, to the combination of presidentialism and the PR electoral system, a variant of which most Latin American countries employ.[1] Of course, while this type of graft is a problem in most other regions of the world, what makes the Latin American case particularly interesting is the often very public judicial and legislative battles to bring this wrongdoing to heel. It seems likely that the Obebrecht case is only going to inspire more of these.

[1] See For example, some of the chapters in Walter Little and Eduardo Posada-Carbó (eds.) 1996. Political Corruption in Europe and Latin America. Palgrave Macmillan or Jana Kunicová and Susan Rose-Ackerman. 2005. Electoral Rules and Constitutional Structures as Constraints on Corruption. British Journal of Political Science, 35: 573-606.