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How one company's deep web of corruption took down governments across Latin America

Last month, Peru's two-time president Alan García died by suicide after police arrived at his door with an arrest warrant for alleged corruption. García's death on April 17 is the latest development in a sprawling corruption scandal unraveling across many countries in Latin America. What's the story, and how are countries fighting back?

Since 2017, prosecutors in Peru had been investigating García's alleged role in money laundering and conspiracy. During his second term as president (2006-2011), García reportedly accepted bribes from Brazilian construction giant Odebrecht, in exchange for awarding the company a contract to build a new subway system in Lima.

There's a wave of anti-corruption investigations in Latin America

García was one strand in a web of corruption at the highest levels of government in Peru. Between 2005-2014, according to press reports, Odebrecht paid $29 million in bribes to Peruvian public officials in exchange for contracts worth billions of dollars.

Two of Peru's ex-presidents - Ollanta Humala and Pedro Pablo Kuczynski - are currently in prison following accusations of corruption related to Odebrecht. Another former president, Alejandro Toledo, is running from justice. The runner-up in the 2016 presidential election, Keiko Fujimori, is in prison pending a trial for money laundering to cover up Odebrecht bribes.

This bribery scheme extends far beyond Peru, however. From Brazil to Ecuador to Panama to Mexico, prosecutors have investigated and/or charged hundreds of high-level public officials for receiving Odebrecht kickbacks. After investigating Odebrecht's bribery payments funneled through Swiss and U.S. banks, the U.S. Department of Justice called it "the largest foreign bribery case in history."

What is Odebrecht?

Brazil-based Odebrecht is Latin America's largest construction company, specializing in large-scale public-works projects. Odebrecht has won contracts to build mass transit systems in Rio de Janeiro, Quito, Panama City and Caracas. It has constructed highways, ports, dams and airports - including Miami International Airport. It built facilities for the 2014 World Cup and 2016 Olympic Games in Brazil and infrastructure for Brazil's state-owned oil company, Petrobras.

Why have prosecutors linked this Brazilian company to so many instances of corruption? In theory, governments award contracts for these types of massive construction projects through an open and competitive bidding process. This bidding process is important to keep costs down and to ensure that the most qualified firms receive government-funded contracts.

In practice, bidding for these public-works contracts is far from competitive. Odebrecht's standard procedure has been to secure lucrative contracts by offering kickbacks to influential politicians, according to press reports. Between 2001-2016, Odebrecht paid $788 million in bribes - for 100 projects in 12 countries, according to the U.S. Department of Justice.

With politicians in its back pocket, Odebrecht doesn't need to worry about losing out on future opportunities because of poor performance - there's little accountability. Expensive public-works projects often were over budget and sometimes not even completed. And there are reports that shoddy materials and workmanship left some projects in need of repairs almost immediately.

What's the good news?

While the Odebrecht scandals have dominated the news coming from Latin America, recent studies suggest that there are positive developments in the fight against corruption in the region. Here's what you need to know:

1. Powerful anti-corruption agencies have emerged

There is little reason to believe that corruption at the highest levels of government is anything new in Latin America. What is new, though, is that corruption no longer happens with impunity.

The reason we know so much about the Odebrecht scandal is because government anti-corruption agencies have gained new resources, autonomy and capacity in recent years. These agencies have stepped up corruption-related investigations and have pursued legal charges that were unimaginable in the past.

For example, Brazil has expanded a "web of accountability" with new auditing systems and expanded powers and funding for pro-accountability agencies like the attorney general's office and anti-corruption units within the Federal Police. These Brazilian agencies first broke the Odebrecht scandal through the "Lava Jato" (Car Wash) investigation.

In Mexico, prosecutors have increased judicial investigations into corruption over the past three decades. And Peru's attorney general's office designated an elite team to investigate Odebrecht's reach, uncovering malfeasance by García and other top politicians.

To be sure, anti-corruption agencies have not eliminated corruption. However, their actions reduce the chances that perpetrators go unpunished - and stopping the cycle of impunity is essential for anti-corruption efforts to have a fighting chance.

2. Citizens are mobilizing against corruption more than ever before

Citizens and NGOs have mobilized against corruption. Compared to 30 years ago, NGOs and community groups have greater autonomy and thus can hold public officials responsible for their actions.

In addition, as new books by Lindsay Mayka and Stephanie McNulty show, nearly every country in Latin America now has institutional spaces for citizen oversight of public policy. These policymaking councils engage citizens in monitoring the implementation of public policy. In the process, they create important opportunities to oversee public spending and detect abuses. Moreover, citizen groups and pro-accountability bureaucrats work together to push for greater transparency and responsiveness. As Jessica Rich's book shows, citizen-bureaucrat alliances in Brazil's HIV/AIDS sector reduced opportunities for corruption.

What's next for Peru?

Many Peruvians reacted to the news of García's suicide with outrage, viewing his death as just another form of impunity. Now investigators will never be able to question him, or hold García legally accountable for his crimes. Furthermore, García's death cuts off valuable information about the inner workings of the Odebrecht scheme. This information might have proven useful in preventing corruption in the future.

For those concerned with ending corruption, the one bright side to García's troubled chapter is that Peruvians appear to believe that rich and powerful politicians are no longer above the law. In the rocky road toward accountability, corrupt politicians may have far fewer options to escape justice.

[Source: By Lindsay Mayka and Andrés Lovón, The Washington Post, 23May19]

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Corruption and Organized Crime
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