Odebrecht is back

“The Odebrecht case is the most well-organized corruption case ever uncovered in the history of capitalism.” This is how Transparency International, a leading NGO in the fight against corruption, described the widespread theft uncovered by Operation Car Wash. “We’ve never seen anything like it.”

According to the NGO’s report, more than $3.4 billion were “payments and/or profits from corruption” by Odebrecht, which paid bribes to politicians and government agents in 12 countries for over a decade. “Almost a Fordism of corruption, a production line with very well-defined methods.”

The money came from inflated contracts in tenders or with public companies. In Brazil, Petrobras, the state-owned oil company that was once the fourth-largest company in the world, was plundered. Only for the Workers’ Party (PT) were R$ 300 million paid in bribes, according to a statement by the former CEO of the company, Marcelo Odebrecht. It was part of the famous “blood pact” between Lula and Odebrecht, revealed by Antonio Palocci, former Minister of Finance and the Civil House.

Operation Car Wash symbolically began on March 17, 2014, with the arrest of the money launderer Alberto Youssef. Less than a decade later, on May 31, 2023, another symbolic milestone: Petrobras requalified Odebrecht to compete for contracts with the state-owned company. The contractor is back.

“Renewed and ‘Steeled’

Rebranded with a new name—since 2020 it has been called Novonor—and with a renewed board, the construction company managed to navigate the most complicated moment in its history. It overcame the economic crisis generated by Dilma Rousseff, the arrests of almost its entire top tier during Operation Car Wash, the drastic reduction of public investments in recent years, and the paralysis of major projects during the pandemic.

It downsized, going from over 150,000 employees and a turnover exceeding $22 billion to about 22,000 employees and a revenue of around $1 billion. It filed for bankruptcy protection. It paid billion-dollar fines to Brazilian and U.S. courts. But it endured. Or, as the former CEO, Marcelo Odebrecht, used to say, it ‘steeled.’

‘Even in the midst of the storm, the company maintained its engineering capacity,’ assures a source from Novonor who preferred to remain anonymous. ‘The construction company did not fall apart; it continued to exist. Emílio Odebrecht himself publicly itted that ‘mistakes were made.”

With the victory of the Workers’ Party (PT) in the 2022 elections, signs began to emerge that Odebrecht’s ostracism was coming to an end. Since 2014, companies involved in corruption cases investigated by Operation Car Wash were prohibited from doing business with Petrobras. Since the end of last year, however, they have progressively resumed commercial relations with the oil company.

Novonor today is not just a mere qualified supplier. It is the only Brazilian company that can operate in the category of megaprojects, through Odebrecht Engineering and Construction (OEC).

Megaprojects include, for example, the Abreu e Lima Refinery (PE), never completed, which yielded R$ 90 million in bribes. Or the Petrochemical Complex of Rio de Janeiro, also not completed, which would have yielded R$ 15 million to Lula’s party.

BNDES Will Reopen the Tap

In addition to Petrobras, another sign that bad times may be over for Odebrecht is the National Bank for Economic and Social Development (BNDES). Until the beginning of the last decade, the public development bank was one of the largest financiers of major Brazilian construction companies, especially for projects abroad.

Half of the largest financing contracts signed by BNDES were subject to investigations for suspicions of corruption. After Operation Car Wash and Dilma’s impeachment, this source of funds dried up. With the return of the Workers’ Party (PT) to the Planalto, the flow of money is preparing to resume.

‘BNDES will return to financing Brazil’s commercial relations and engineering projects abroad,’ Lula declared in January of this year, a few days after taking office. ‘This will be a source of pride for Brazil,’ he said. In the past, however, Brazil harbored another sentiment regarding these projects.

One example was the Port of Mariel in Cuba, financed by BNDES and built by Odebrecht. Even if its utility for the Brazilian economy was questionable, the development bank granted a credit line of around $641 million to the company Companhia de Obras e Infraestrutura (COI), part of the Odebrecht group, through the program to the export of engineering services.

Starting in 2018, Cuba began to delay debt payments to BNDES. The default was covered by the Export Guarantee Fund (FGE), which acts as insurance for this type of operation. The FGE is funded with public resources. In other words: in the end, it was the Brazilian taxpayers who bore the cost of the Cuban default for a port built 6,000 kilometers away from Brazil.

A similar case was the new subway line in Caracas, also built by Odebrecht. Another default for Brazil. Today, Venezuela owes us about $1.3 billion. Another example: Nacala International Airport in Mozambique, carried out by the contractor thanks to BNDES financing. Considered a ‘ghost airport’ for its negligible use, it has the capacity for more than 500,000 engers per year but receives at most 20,000. Only one airline operates a single route. After the work was completed, Brazil took another billion-dollar default.”

“It makes no sense at all to finance projects abroad. Considering what happened in the past and the dramatic need for infrastructure within the country, why use Brazilian taxpayer money to fund a project in Africa or the Caribbean">“Brazil Was Once a Heavy Industry Powerhouse

In theory, there are no problems if BNDES finances the export of Brazilian products and services abroad, such as those of the heavy industry. All developed countries use their public development banks for this type of operation. The United States uses the Exim Bank; uses the KfW; Koreans use the KDB; Italy uses the D; and the Spanish use Cesce. It’s a legitimate instrument of foreign policy. Thanks to BNDES contributions, Brazil once had 2.3% of the global engineering services market. After Operation Car Wash, this percentage dropped to 1%. The activity of Brazilian engineering companies abroad once represented about 45% of total revenue.

The issue is that there has never been a scandal of the proportions of ‘Petrolão’ anywhere else in the world. Nor have there been so many defaults by third-party countries. Rulings from the Federal Court of s (TCU) showed that BNDES granted values above what was necessary to finance projects abroad. Plea bargains from Operation Car Wash showed how officials from PT governments demanded bribes to influence the approval of financing.

‘We were always on Lula’s case because, deep down, he was the one who had gotten us into this mess,’ said Marcelo Odebrecht during a testimony in Operation Car Wash. The question is whether Novonor will or will not be able to avoid a new mess.