Home Corruption Car Wash The structure and impact of transnational corruption in Latin America

The structure and impact of transnational corruption in Latin America

First Part



By Sheldon Birkett and Tobias Fontecilla
Research Associates at the Council on Hemispheric Affairs

Ángel Rondón, Odebrecht’s Dominican representative, was recently sentenced to one year in prison on corruption charges. Rondón is accused of having organized the distribution of $92 million in the form of bribes among several politicians to secure public work contracts and install a monopoly on the island.

Odebrecht is a transnational company created in 1944 consisting of diversified businesses, which include infrastructure, energy, oil and gas, in addition to petrochemicals projects and services.

The investigation further revealed the intricacy of the Brazilian conglomerate’s international bribing scheme. On June 7, 2017, the Dominican Supreme Court judge Francisco Ortega sentenced several individuals to house arrest or prison on bribery charges whilst others were barred from leaving the country.

Odebrecht’s involvement in corruption first became global headline news in 2014 following the discoveries made by the Federal Police of Brazil, Curitiba Branch, as part of Operation Lava Jato (Car Wash). Operation Car Wash eventually implicated top Brazilian government officials including former president Luis Inácio Lula da Silva, current president Michel Temer (with audio tape evidence) and former Senate leader Delcídio do Amaral.

Amaral was arrested after trying to buy the silence of jailed Petrobras executive Nestor Cervero who could implicate Amaral as a facilitator of illicit payments. Lula however has yet to be proven guilty, since no tangible evidence has been put forth. Cervero has denounced 74 individuals from across the political spectrum following a plea deal with the Brazilian government.

Odebrecht was involved in numerous corruption scandals across Latin America between 2001 and 2016. In total, Odebrecht paid approximately $788 million in illegal bribes in 12 different countries securing public works contracts. Odebrecht’s corruption scheme has been associated with more than 100 projects across Latin America in Argentina, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Panama, Peru and Venezuela.

The scheme was able to operate almost undetected for 13 years until the commencement of Operation Car Wash. The United States, together with the Brazilian and Swiss governments, which have been major hubs for illicit money transfers, initiated legal action under the Foreign Corrupt Practices Act (FCPA) on December 21, 2016. In a plea agreement the defendants agreed to pay $3.5 billion in penalties to all three countries.

Given the magnitude of the corruption ring, the largest ever uncovered, strengthening preventive measures is of utmost importance when dealing with the propensity of grand corruption. Court sentences in hindsight seem to do little to prevent corruption, especially when generous plea deals are proposed, limiting the risks involved when individuals and corporations decide to pursue these practices.

Corruption itself and the exposure of corruption, was and continues to be, detrimental to developing economies in Latin America. Although concealed corruption gradually degrades the quality of investment spending and, ergo, societies’ well being; the exposure of corruption results in the loss of investors’ confidence, and hence, a rapid reduction in investment.

Read also part II