Brazil's graft scandal engulfs rest of S. America

Ex-leaders of Peru, Panama under probe for allegedly taking bribes from construction firm

LIMA (Peru) • For more than two years, the "Car Wash" corruption mega-scandal engulfing Odebrecht, Latin America's largest construction company, has enraged Brazil.

It contributed to the drive to impeach then President Dilma Rousseff, landed numerous powerful people behind bars, helped stall the world's ninth-largest economy, and led to a US$3.5 billion (S$5 billion) corporate fine - a world record in a graft case.

Now, the scandal is metastasising across Latin America, as Odebrecht had many contracts for huge public infrastructure projects in 10 countries, from Argentina to Mexico.

Last Thursday, Peru issued an international arrest warrant for its president from 2001 to 2006, Mr Alejandro Toledo, even offering a 100,000 sol (S$43,700) reward for information leading to his capture, on charges of taking kickbacks worth US$20 million.

Yet, Mr Toledo's plight may mark a new stage in the Odebrecht scandal, as indicted executives reveal the complex dealings of the group's division of structured operations - effectively a bribes department - which allegedly oversaw US$788 million in illegal payments.

This past week has also seen allegations that Colombian President Juan Manuel Santos' electoral campaign received US$1 million from Odebrecht, as well as a police raid on Mossack Fonseca, the Panama City-based law firm at the heart of the Panama Papers leaks.

Mr Toledo was front-page news in Lima, Peru, last Friday, after a judge ordered his arrest for allegedly taking US$20 million in bribes.
Mr Toledo was front-page news in Lima, Peru, last Friday, after a judge ordered his arrest for allegedly taking US$20 million in bribes. PHOTO: AGENCE FRANCE-PRESSE

Mossack Fonseca has denied any connection with Odebrecht.

Mr Gustavo Arribas, Argentina's top spy and a close ally of President Mauricio Macri, is also under investigation. So is former Panamanian president Ricardo Martinelli.

Other corruption investigations involving Odebrecht are also moving forward at a snail's pace in Ecuador and Venezuela, two nations where critics allege the judiciary is controlled by their presidents.

The scandal, first named for a Brasilia service station used to launder bribes, is causing a huge outcry in Peru, where Odebrecht has won dozens of government contracts worth an estimated US$25 billion since the 1990s.

According to Peru's Economy Minister, the shock waves - including the need to find a new contractor to complete a US$7 billion gas pipeline abandoned by the stricken Brazilian giant - could knock as much as 1 per cent from Peru's growth this year.

Three other previous presidents of Peru - most notably Mr Alan Garcia - and several former ministers have fallen under suspicion.

Mr Julio Arbizu, the former anti-corruption prosecutor who first launched the probe into Mr Toledo's finances, told The Washington Post: "How could it be that these middle-ranking functionaries were the only ones taking money when Garcia had such a high-profile relationship with Odebrecht?"

Mr Garcia responded to his rival Mr Toledo's troubles by tweeting: "Pharisees. Hypocrites. They talked so much about corruption and it turned out to be them who are the real mega-corrupt (people)."

Some see the scandal as a positive sign: "This actually shows that there is less and less tolerance for corruption," said Mr Andres Hernandez, Colombia head of anti-graft group Transparency International.

"Latin America's democratic institutions are still young, but citizens are fed up, and the fact that these crimes are coming to light shows that we are progressing."

After a United States Department of Justice investigation, Odebrecht said it plans to reach settlements in all 12 countries where it has admitted to paying bribes to obtain contracts.

Since December, Odebrecht has agreed to pay US$32 million to the government of Colombia, US$59 million to the Panamanian government, and US$8.9 million to Peru.


A version of this article appeared in the print edition of The Straits Times on February 14, 2017, with the headline 'Brazil's graft scandal engulfs rest of S. America'. Print Edition | Subscribe