Operação Lava Jato and Odebrecht — What are they? And how did they change Latin America forever?
It is almost unimaginable that one name, Odebrecht, could have the power to disrupt politics and provoke protests in ten Latin American countries.
The year 2014 brought in a wave of corruption in Latin America like never before, including the resignation of former Peruvian president, Pedro Pablo Kuczynski, $25 billion worth of debt, fraud, money laundering, rampant bribery, and the incarceration of a CEO. Originating in Brazil, the Odebrecht scandal is still an ongoing investigation of what many consider to be the biggest corruption scandal the world has ever seen.
But what exactly happened? It is a complicated timeline with public figures and companies involved. Nevertheless, it brings to light the level of corruption in these countries and how their governments secretly operate. It is essential to understand that Odebrecht is the region’s largest construction conglomerate, concentrated in chemicals and petrochemicals. The company was founded in 1944 by a young engineer named Norberto Odebrecht.
The unique last name, Odebrecht, is German, which is the family’s origin. Back in 1856, Emil Odebrecht migrated to Brazil, where he married Bertha Bichels and had fifteen children. One of his grandsons, Emilio Odebrecht, was the first one in the family to become involved in the construction business. His first company was called The Isaac Gondim e Odebrecht Ltd., which then transformed into Emilio Odebrecht & Cla., in 1923.
When World War II began in 1939, raw materials used for construction coming from Europe became expensive and incredibly scarce, crashing the business back in Brazil. Emilio decided to leave the business and leave it to his son, Norberto, in 1941. After the war, the name was changed to Odebrecht, and it grew exponentially. By 2010, the business had over 181,000 employees in over 21 countries.
Unfortunately, it began to go downhill way before 2010. It all started in 2001, when the conglomerate began to pay bribes across Latin America. The reason for the bribes? Construction contracts. By accepting the bribes, Odebrecht would help countries with their presidential campaigns and ensure their triumph. Excluding Brazil, nine other countries were involved in the scandal, including Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Panama, Peru, and Venezuela. Totaling in around $788 million paid in bribes, it is safe to say that the exposure of this embarrassment changed the region forever.
The scandal first came to the surface in 2014, when Brazil’s Operation Car Wash, or Operação Lava Jato, was revealed. It was found that executives at a Brazilian oil company named Petrobras, had received bribes from Odebrecht “in return for awarding them contracts at inflated prices”. From that moment on, it was only a matter of time before the rest of the countries became exposed.
But how exactly did the company get away with these bribes for so long? They used a complex and secret network of companies and offshore bank accounts and constructed an entire division dedicated to bribes within the company.
Since 2016, the tensions in Latin American countries have only increased as more information has been released regarding the bribes. In Peru, according to press reports, “between 2005 and 2014, Odebrecht paid USD 29 million in bribes to Peruvian public officials in exchange for contracts worth billions of dollars.” In addition to this, in May of 2019, Peru’s president Alan Garcia committed suicide after the police was granted an arrest warrant for his participation in corruption. It was also recently reported that he had accepted bribes in exchange that Odebrecht built a new subway in the capital city of Lima.
Ecuador was also involved the scandal, and the vice-president of the nation, Jorge Glas, was sentenced to six years in prison for accepting USD 13.5 million in bribes in 2017. In Panama, Venezuela, and the Dominican Republic, about USD 250 million were paid in bribes amongst the three countries.
What consequences has this brought to Latin America post-scandal? The list of those involved and those who are still being prosecuted is long. Brazil’s former left-wing president, Luiz Ignacio Lula da Silva, was sentenced to 12 years in prison for taking bribes from Odebrecht. Former Salvadoran President Mauricio Funes is being investigated for allegedly embezzling USD 350 million. Last but not least, the mastermind behind the entire operation: Marcelo Odebrecht, Emilio’s son. He is the former CEO of the conglomerate, and in 2016, he was sentenced to 19 years in prison for being involved in the payment of over USD 30 million in bribes.
Today, the region of Latin America is still facing the consequences that the Odebrecht scandal brought. One of the most noticeable effects of the scandal was the abandonment of various projects that the company had already started in all of these countries. Some of the projects include metro lines in Venezuela, irrigation systems in Peru, electric dams in Panama, trams and highways in Colombia, and a port in Cuba. These were all abandoned after the scandal was brought to light, causing unemployment and overall chaos.
In the epicenter of the scandal, Brazil, Marcelo Odebrecht confessed to having paid USD 48 million to Dilma Rousse’s and Michel Temer’s political campaign in 2014 during the Brazilian presidential elections, which was of course, completely illegal. This act caused commotion and led protests and mayhem down the streets of the country against their corrupt government.
Mirroring the actions of Brazilians, people from all over the region stepped out to protest against their governments. It is now considered the largest bankruptcy in Latin America, with about USD 25 billion of debt.
It is no secret that Latin American countries need to enforce their criminal policies, and truly punish those individuals who engage in corrupt and illegal activity, especially when it involves politics and the democracy of a nation. It will definitely be a challenge considering that numerous Latin American companies are controlled by the most powerful families in their respective countries, making it hard to separate individuals from political involvement. Nevertheless, the Odebrecht scandal has sparked a protest movement across the region, and it is a conflict that is still going on today.
