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

The structure and impact of transnational corruption in Latin America – Part IV

President Pedro Pablo Kuczynski takes new measures against corruption

The Impact of Odebrecht’s Corrupt Business Ventures

A number of Odebrecht’s projects resulted in pernicious outcomes for the environment, for the displacement of peoples, and for local economies. Odebrecht’s use of bribery and other forms of political influence made it particularly difficult for critics of these harmful projects to be heard. In Peru for instance, Hitler Ananías Rojas Gonzales, an agricultural activist and mayor of the town of Yagen, situated in the northern part of the country, was assassinated in December 2015, after receiving several death threats. Gonzales was a fervent environmental activist who opposed the construction of a dam on the River Marañon awarded to Odebrecht, also known as the ‘Chadin ii project.’ Gonzales argued that if the project were to be finalized, many farmers from the region would no longer be able to maintain their livelihood. Many would be forced to relocate, since 32 square kilometers of Amazonian forest would be flooded. According to locals, Odebrecht had successfully infiltrated the local political elite, and with their help, tried to coerce the populace into signing an agreement to allow the project to continue. Government officials have both used physical force during protests and threatened to cut social programs, in order to satisfy  Odebrecht’s agenda.

Similar human rights abuses have been noted in Brazil with the Belo Monte dam in the state of Pará. The funding for this dam was jointly made by the Andrade Gutierrez, Camargo Corrêa and Odebrecht firms. This monumental dam set to be the fourth largest in the world could, according to critics, displace 20,000 people. The dam was approved without the consent of indigenous communities in the region, which is in violation of the Inter-American Court of Human Rights. The resulting reservoir would cover 193 square miles of virgin Amazonian forest. The impact on the biodiversity of the region and the Xingu river could translate into the loss of hundreds of species.

Nonetheless, the macroeconomic consequences have been much more alarming. The economic downturn Brazil experienced directly correlates with the public outbreak of Operation Car Wash. According to the Organisation for Economic Cooperation and Development (OECD), real GDP growth decreased sharply from 3.01 percent in 2013 to 0.5 percent in 2014.  2015 marked the start of a recession which averaged a negative 3.85 percent growth until the beginning of 2017. By the end of 2017, projections calculate Brazilian growth will reach 0.68 percent, showing first signs of a possible recovery. The Brazilian Ministry of Finance has argued that the decline of Petrobras’ investments, due to the large-scale scandal in the domestic economy, has subtracted around 2 percentage points from the GDP growth in 2015 alone. Although corruption is not the sole factor in the decline of the Brazilian economy, it has sharply contributed to the recession alongside the fall of global commodity prices in the recent years. The rest of the region might feel the ripple effect from the downturn in Brazil, and decrease in foreign investment, due to the loss of trust in Latin American politicians. Peruvian president Pedro Pablo Kuczynsk, who is also suspected of corruption, has promised a gradual disentanglement from Odebrecht in Peru. In March, he stated that in light of recent developments, many of the projects undertaken by the conglomerate will be terminated within the next six months. Other countries may take similar measures, which based on their level of commitment with the Brazilian company may translate into the loss of investments and distort GDP growth projections. As a result, declines in growth may manifest themselves in the region.

Read also part IIi or part V