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Bribery Case Haunts Odebrecht Despite Massive SettlementThe construction giant, which agreed to pay as much as $4.5 billion to settle international bribery charges, finds it is banned from bidding on public works projects in a growing number of countries.
ENLARGE
The Athletes Village residential complex for participants in the 2016 Summer Olympic Games in Rio de Janeiro in July; developers including Odebrecht raced to complete Olympics-related construction projects ahead of the Games. PHOTO: LIANNE MILTON FOR THE WALL STREET JOURNAL
By LUCIANA MAGALHAES AND RYAN DUBEJan. 5, 2017 5:00 p.m. ET2 COMMENTS
LIMA, Peru—Brazil’s Odebrecht SA, which last month signed the largest anti-corruption
settlement in history, faces a growing number of countries in Latin America banning it
from bidding on new public-works projects, potentially draining the company of a key
source of revenue.
On Thursday, Odebrecht, Latin America’s largest construction firm, reached a preliminary
deal with Peruvian prosecutors to provide information about bribes the firm paid in recent
years, and to pay an initial $9 million fine, which could grow over time, Peruvian officials
said.
“This will allow us ... to incorporate useful information into the investigation and ... shorten
the time required looking for evidence outside of the country,” the attorney general’s office
said in a statement.
The deal, however, doesn’t address the Peru government’s plans to prohibit Odebrecht from
gaining access to public-works projects in the future, according to a spokesman for the
attorney general’s office in Lima. He said any decision to allow Odebrecht to bid on future
contracts would be made by the executive branch.
A spokeswoman for the prime minister’s office wasn’t immediately available for comment.
In a statement, Odebrecht confirmed the agreement and reiterated that the company is
committed to cooperating with authorities.
The deal comes as more Latin American countries are closing their doors to the Brazilian
construction giant after the builder admitted in December to paying nearly $800 million in
bribes, including $439 million in countries outside Brazil, mostly in Latin
America. Odebrecht agreed to pay between $2.6 billion and $4.5 billion in a settlement
with authorities in Brazil, the U.S. and Switzerland.
ENLARGE
Worker at the Sao Conrado metro station in Rio de Janeiro in April 2016. The station is on the city’s Line 4, which began running in July 2016 and was built by a consortium including Odebrecht. PHOTO: CHRISTOPHE SIMON/AFP/GETTY IMAGES
This week, Ecuador followed the governments of Panama and Peru in banning Odebrecht
from signing new public contracts amid investigations into its corrupt practices. Peruvian
Prime Minister Fernando Zavala said last week the government was changing legislation to
ban companies involved in corruption from signing new contracts. The changes haven’t
been implemented yet.
The bans, which could be taken up by more countries, are another blow for the Brazilian
construction group. Odebrecht has increasingly relied on its international operations in the
roughly two years since it was placed on a blacklist and banned from signing contracts with
oil giant Petroleo Brasileiro SA, or Petrobras. Under the December agreement, Odebrecht
can bid on its home turf again.
The firm’s engineering and construction arm got 87% of its 58 billion reais ($18.13 billion)
in 2015 gross revenue from international operations, with about 13 billion reais ($4.06
billion) of that coming from Latin America. Odebrecht declined to break down the numbers
by country.
“I will be very surprised if [their international operations] are able to survive this,” said
Gregory Michener, assistant professor of government at Fundação Getúlio Vargas in Rio de
Janeiro. “They’ll probably be reduced to being competitive in Brazil,” he added, because of
reluctance elsewhere to do business with Brazilian companies due to the possibility of
corruption being revealed.
Current leaders in countries including Panama, Peru and Argentina are more likely to take a
hard line because the alleged corruption happened under administrations of political
adversaries, Prof. Michener added.
Odebrecht has admitted that from 2001 to 2016, it paid bribes in countries including
Angola, Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico,
Mozambique, Panama, Peru and Venezuela, according to the settlement with U.S.
authorities and others.
In Peru, the first Latin American country outside Brazil where Odebrecht expanded four
decades ago, it paid about $29 million in bribes over three administrations from 2005 to
2014, according to the company and U.S. authorities.
Odebrecht is now planning to sell some assets in Peru. In November, it agreed to sell its
Olmos irrigation project to Canada’s Brookfield Infrastructure and France’s Suez. It also
has looked to divest its stake in a major natural gas pipeline project in southern Peru.
Ecuador Attorney General Galo Chiriboga said on Twitter late Tuesday that Odebrecht is
temporarily banned from signing new contracts with state entities until prosecutors can
finish a probe into its contracts. The decision followed a raid on Odebrecht’s office last
month in the coastal Ecuadorian city of Guayaquil, where prosecutors said they seized
documents and electronic material.
Odebrecht has dished out $33.5 million in corrupt payments to Ecuadorian officials since
2007, when President Rafael Correa took office, according to the settlement.
The government of Panama also has barred Odebrecht from signing new public contracts
and demanded it return money it earned through corruption.
Between 2010 and 2014, Odebrecht made more than $59 million in illegal payments to
government officials in Panama and to intermediaries working on their behalf in order to
secure public contracts, according to the settlement with U.S. authorities.