Under normal circumstances, the fallout from the Odebrecht case in Latin America would have bypassed Mexico, at least for the time being. But an upcoming election, agitated voters and widespread discontent have made things tricky for those in power.
The Brazilian construction company, with 128,000 employees and a gross income of 40,000 million dollars, is the central figure in a plot uncovered by Operation Lava Jato, a decade-old investigation into a mass network of corruption involving Brazil’s state oil company, Petrobras. Aside from kickbacks made to officials in Brazil, Odebrecht’s dark web extended to Argentina, Dominican Republic, Colombia, Guatemala, Mexico, Panama, Peru and Venezuela, among other countries.
Corruption was such an integral part of the company’s DNA that it ran an entire department dedicated solely to money-laundering and payoffs.
As part of a settlement under the Foreign Corrupt Practices Act, Odebrecht agreed to pay at least $3.5 billion in fines to the US, Brazilian and Swiss authorities, making it the biggest corruption-related payout in history. Their scheme involved over $800 million in bribes, many going to the region’s leading political figures.
“Odebrecht is a criminal mega-enterprise,” said Panamanian lawyer Miguel Antonio Bernal, professor of law at the University of Panama and leader of a citizen movement against impunity. “With premeditation and malice, [Odebrecht] acted with complete impunity, along with its collaborators and accomplices in diverse governments and sectors across Latin America and the Caribbean,” he told El Universal.
The company’s founder, Marcelo Odebrecht – who personally paid over $30m in bribes to Petrobras officials – is now serving a 19-year prison sentence in Brazil, reduced notably in exchange for his full cooperation.
Political repercussions for the region
The information provided by Mr Odebrecht and 76 other Odebrecht executives has opened a pandora box of accusations, criminal convictions and political payback. Presidents and ex-ministers from Monte Video to Santo Domingo have been linked to Odebrecht’s immense scheme.
Alejandro Toledo, president of Peru between 2001-2006, allegedly received over $20m in illicit funds from Mr Odebrecht personally. Believed to be in California, Toledo has rejected the claims. Ollanta Humala, president between 2011-2016, allegedly received $3m dollars, a charge he also denies. In Panama, Juan Carlos Varela was accused by Ramón Fonseca, the law firm involved in the so-called Panama Papers scandal, of receiving major campaign donations from the company. Mr Varela denies the charges. And Luis Enrique Martinelli, son of former Panamanian president Ricardo Martinelli, also allegedly benefits from the company’s largess. Both father and son deny the accusations.
In every country the company operated, it used a sophisticated network of offshore companies to make payoffs, facilitated by a bank it acquired on the Caribbean island of Antigua. According to prosecutors, Odebrecht employed multiple “money laundering layers” to make it difficult to track transactions. The “payoff department” used parallel accounting and made sure all funds transferred by the company were secretly recorded and vetted by its president.
What the scandal means
Although this is far from the first major corruption case to hit hit the region, it’s the first time a plot of such scale and international reach has been revealed in such detail. “This has always been the way (Latin American) politicians and entrepreneurs have done business,” said Peter Hakim, a specialist in international relations and president of the Inter-American Dialogue think tank.
Only now it’s all out in the open and – even more importantly – authorities are acting upon the news in unprecedented ways.
Multi-million dollar fines have been levied on the company in nearly every country it operated. In addition:
- Peru rescinded a natural gas pipeline contract worth at least $7.3 billion.
- Colombian authorities arrested a former senator on charges of illicit enrichment, and prosecuted an ex-deputy transportation minister for accepting kickbacks.
- Panama barred the company from making any more public bids.
- Dominicans took to the streets to protest $92 million paid to officials in return for favors.
This remarkable reaction led the Financial Times to claim that “the silver lining of the disruptive investigation is a newfound adherence to the rule of law in growing pockets of Latin America.”
What about Mexico?
Odebrecht has admitted to paying over 10.5 million dollars in bribes to figures affiliated with the Mexican oil giant Pemex during the terms of Felipe Calderón and Enrique Peña Nieto, between 2010 and 2014.
According to the civic association “Mexicans Against Corruption and Impunity”, the government was aware of anomalies involving Odebrecht since 2010, including significant overcharges and under-the-table payments. Despite strong evidence, it failed to initiate any investigation. On the contrary, it continued to award the construction company lucrative contracts, most of which were won without any bidding.
This all happened while millions in bribes were being paid out to Mexican officials.
Under pressure from public interest groups and the media, the Attorney’s General office announced plans to investigate these allegations in December. They really had no choice. But just as the case began heating up in Brazil and elsewhere, the Mexicans did an abrupt about-face, deciding to put the entire investigation under wraps for a period of five years.
“Given the nature of the case and considerations of due process,” said the official statement released on April 3, “we cannot reveal the names of anyone at this time”.
Unlike in Peru, Brazil or Colombia, the Mexican authorities decided to stick to the old script. In a rather feeble gesture, Pemex released four Odebrecht contracts to show that it was “cooperating” with the Attorney’s General office.
#Pemex reaffirms its commitment to transparency by making public the #Odebrecht contracts and contributes with @PGR_mx and @SFP_mx pic.twitter.com/mc2jiji5EC
— Petróleos Mexicanos (@Pemex) April 5, 2017
In sum, the government shut down the proceedings in order to shield – right before key elections -Peña Nieto (and the PRI) from the growing storm.
Which is where AMLO comes in.
“The Mexican Attorney General went to Brazil, received information and decided to protect those who took bribes…,” said Andrés Manuel López Obrador (“AMLO”) the leader of the political party Morena. “It’s clear that Felipe Calderón and Peña Nieto were involved”.
In a 9:25 minute video posted on his Facebook profile, AMLO said that the scandal demonstrates “a criminal association (which) is institutionalized, (just like) most political corruption in Mexico.”
“[Odebrecht] gave bribes exceeding 10 million dollars in Mexico, mainly during the administration of Felipe Calderón”, recalled the politician. “They even held a board of directors meeting in Los Pinos (Mexican White House) with Calderón present.”
He reminded his viewers that in the rest of Latin America, the case had become a major political issue. “In Brazil this is a scandal, in Peru the former president is a fugitive, and in Colombia, officials are on trial. It’s outrageous that in Mexico, the attorney general refuses to release anything.”
“What’s the purpose of the Office for Transparency, which costs taxpayers a billion pesos a year, if the Attorney’s General office is part of the corruption and complicity?” he asked.
AMLO for president in 2018
These pronouncements seem to be getting more traction now than ever before, especially among young Mexicans. Over the last decade, AMLO has hammered away at the institutionalized impunity and corruption that he claims pervades the nation’s political class.
The Tabasco politician has promised for years to stamp out graft and sweep out the “mafia of power.”
Which all puts the PRI on high alert, not only to the fates of their regional counterparts but to the reactions of ordinary Mexicans who witness – for the very first time – high officials in Spanish-speaking nations brought to account for corruption and fraud.
For they know – as do all who live in Latin America – that the trinity of poverty, inequality and corruption are fuel for leftist populist movements.
And now, more than ever before, the crowds smell blood. Odebrecht will be an amulet wielded by AMLO in his third attempt at the presidency. It should serve him well.