Tag Archives: Odebrecht

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.