#Odebrechting – an Easter egg in the Brazilian media

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Irma Palmieri as Dilma
Dilma Palmieri

Dilma Rousseff, the current President of Brazil, is leading a crumbling government, what with her poll ratings in the tweens. It’s always fun to see a chavista ally eating crow, particularly one as important for Venezuela as Rousseff.

But you know what I enjoy the most about this debacle? Brazil, with its lively democracy, its relatively unencumbered institutions, and its free press, shows us what Hugo Chávez could have become … but was too smart to let happen.

Unlike Rousseff, Chávez made sure that his ascent into a populist throne was accompanied by the squashing of anyone with real power to threaten his rule. That is why the media, the prosecutors, the judges, the military, and private businesses were all pretty much subjugated to the whims of chavismo. It’s not perchance that we really don’t have independent institutions in Venezuela any more.

Rousseff and her predecessor, Lula, could not (or, to their credit, perhaps did not want to) follow this path. The trickle trickle of scandals hitting Rousseff each week is proof that Brazil’s democracy retains a pulse. It may even be lively enough to bring her down in the coming months.

The latest scandal came today courtesy of the Brazilian weekly Época. In the article, we learn that the Brazilian Comptroller’s Office (TCU) is investigating corruption involving contracts given directly by Hugo Chávez – thanks to the intercession of Lula – to Brazilian construction firm Odebrecht for several Metro projects in Venezuela.

There appears to be a huge mismatch between the amounts disbursed by Brazil’s state-owned National Development Bank (BNDES) to Odebrecht and the work actually carried out, prompting us to wonder … who could have possibly pocketed the change …?

Here is the value added: (my translation from the Portuguese)

“The loan orchestrated by Lula and Chávez raises two main suspicions. The first has to do with the way in which the BNDES loan was approved. In order to free up the US$747 million for the project, the bank ignored its own rules by doing away with Odebrecht’s obligatory warranties, instead assuming the risk of default far above the limits established in its own statutes. The second indication of irregularities that the TCU detected is related to the “mismatch between the physical progress of the project and its financial disbursements.” In other words, BNDES sent money to Odebrecht while, at the same time, the work was not progressing in the same manner. That way, balances were accumulated overseas, and these balances were pocketed by the Venezuelan government and then passed on to the contractor to make a bit of progress. According to the TCU, close to US$201 million were given “in anticipation, without any justification related to the progress” of the project of the Los Teques metro, the most expensive of the projects Between January and April of 2010, Odebrecht had only spent 8.15% of the total value of the project while, at the same time, it was receiving hundreds of millions of dollars from the BNDES coffers, which it shared with the Venezuelan government.”

We’ve long been fans of the slick way in which Odebrecht does business in Venezuela, and there are extensive links between the Brazilian construction giant and Brazilian politics.

While this new scandal will barely register in Venezuela’s public sphere, at least it helps shed some light as to why the plight of Venezuelan democracy gets such little attention from the leaders of our South American neighbors.

1 COMMENT

  1. If the day comes when Rousseff is impeached on corruption charges… that could be even better than the 7-1.

    I think it is curious that people like Rousseff and Bachelet could survive torture with their dignity intact… only to lose it voluntarily to Hugo and his millions.

    You see, their dignity could not be taken by force, it had to be bought with hard currency.

    If the military had known dirty wars wasn’t necessary but money was enough. This is where Lee Kuan Yew was intelligent and Pinochet stupid.

  2. No colectivos in Brazil to murder the opposition and no control of the police/military by the Cuban mafia like in Venezuela. Big difference.

  3. “it helps shed some light as to why the plight of Venezuelan democracy gets such little attention from the leaders of our South American neighbors.”.

    Exactly. There’s tons of corruption and theft in every country, even the USA, or Singapore, or Europe.. But there are certain countries that are just waaaayyy out of control, mostly in Africa and M. East Arguably, with Vzla as the very worst, overall, in spite of what some say on the public sector:

    http://www.npr.org/blogs/thetwo-way/2014/12/02/367815515/which-countries-are-the-most-corrupt.

    With a low population and lots of Oil, Vzla can bribe other countries worldwide, literally. Entirely. Buy their silence and even their support. Even the USA and Europe. Brasil can’t afford to do that.

    The ways Corruptzuela bribes and buys other countries varies. With Oil and favors, AND/OR with Huge Kickbacks, as we do with Brazil and China, for example. (plus Financial debacles.. SBS, Andorra..)

    Hey, Vzla even Bribes and buys its Own People, with Freebies, guisos y tigres everywhere, 3 Million bogus public jobs, which Brasil, as this threat suggests, can’t do either with such a large population. So everyone is relatively happy and deals with it, keeping quiet: Other countries: Bribed. Our own country and its people: also sold. There’s a wicked “trickle-down effect of Massive, Astronomical corroption in Vzla, down to every level and town of the country. Unlike Brasil, North Korea or Somalia, where only a few do most of the stealing. Still, it doesn’t compare to ours, we’re the current Champs, Worldwide, all things considered now.

  4. It is NEVER acceptable to refer to Oderbrecht without linking to that video of the two gruas collapsing in Las Mercedes…

  5. Advanced payments are a common feature of Venezuelan contracting practice , ordinarily 10 % of the Price is advanced on contract signature , this is done to soften the impact of inflation on the costs of the contracts execution if they involve works taking a long time to perform. They allow the contractor to go out and buy stuff in advance before inflation makes it much more pricey than originally estimated. As work advances the a pro rata portion of the advance payment is allocated to the latest invoice. In a way its like a loan which the owner of the work makes to the contractor to keep the final Price stable. What the article seems to suggest is that the advance payment was grossly out of propportion with the work progress actually achieved allowing in this case either the govt or Odebrecht to have plenty of cash available to use in extraneous ‘transaction costs’ (bribes , kickbacks ??) . More information is needed to figure out what actually happened.

    I understand from reading an article in todays local news that the advance payment in effect represented something like 30 odd percent of the total Price , which is way too much !! In the article the suggestion is made that the brazilian investigation is discovering that Odebrecht would sometimes resort to bribes as a way of obtaining desirable contracts with other countries.

    Although large advance payments are frown upon by reputable companies, they become the norm in countries where inflation is high or subject to sudden jumps.

  6. “Rousseff and her predecessor, Lula, could not (or, to their credit, perhaps did not want to) follow this path. ”

    They could not. To give just a couple examples, Lula did everything in his reach to pass a law allowing him to run for president three consecutive times. But the Congress didn’t allow it. Dilma tried to pass a Venezuelan style “commune councils” law, which would have weaken the Legislative. Congress said NO again. They tried and tried and tried. And are still trying like the devils they are. But they can’t do much harm now.

    One of the founders of the Workers Party, a guy named Marco Aurerlio Garcia, has said recently that Dilma’s government is going downhill because they failed on creating a hegemonic media, implying that full control of the media would have prevented the people from waking up to how bad this government is. But he’s wrong. Even with censorship on the traditional media, we would still have one of the largest populations in the world on twitter, facebook etc. calling their bullshit 24/7. I think that what they really messed up was in not building gas chambers or ‘paredóns’ to genocide 30% or 40% of the population. Now that would have helped them.

  7. Dilma’s impeachment call on the 12th of April will have worldwide impact. Feel invited to take part if you live in the following cities!

    Atlanta – US – 14h00 – Piedmont Park no Park Tavern
    Brisbane – Australia – 11h00 – King George Square
    Dublin – Ireland – 12h00 – Block 8, Harcourt Centre Charlotte Way Dublin 2, Dublin
    Lisbon – Portugal – 15h00 – Praça Luís de Camões
    Melbourne – Australia – 16h00 – Federation Square
    New York – US – 14h00 – Union Square
    Orlando – US – 13h00 – 5403 Internacional Dr – Banco do Brasil
    San Francisco Bay Area – US – 11h00 – Justin Herman Plaza
    Santiago de Chile – Chile – 10h30 – Avenida Apoquindo 3039
    Sidney – Australia – 16h00 – Martin Place
    Toronto – Canada – 14h00 – Queen’s Park
    Zurich – Switzerland – 14h00 – Helvetiaplatz Zürich

    Source: https://www.facebook.com/VemPraRuaBrasil.org

    • I find this to be a very exciting demonstration of the power of the Brazilian opposition. South America has seen enough of the arrogance/power of one party rule, especially you-know-where. Were there ever to be changes in these various one-party exclusionary governments, rules/laws should be made that never again can the party in power steal from the treasury to finance their ability to stay in power. No exclusionary one-party hires for federal/state/local government employees, no exclusionary access for financing from state/nationalized companies (read PDVSA) and no one-party domination of the media and air waves. Very simple, but powerful means with which to restore a true democracy.

  8. Brasil is revolting not just because they haven’t been as widely repressed as Venezuelans.

    They are pissed-off because the vast majority is not getting a piece of the pie. Their corruption, while not as Humongous as Corruptzuela’s can’t be widespread with such a large population.

    Even if they had 3 Million Enchufados with bogus government jobs, Millions getting various government benefits, Freebies, free apartments and free land, etc, etc, Even if their entire military is Bribed too (it probably is), they don’t have the oil, and they don’t have the Small Population that can br Bribed.

    That’s Chavismo’s secret. Bribe the population too. Didn’y you see 9 million of them on vacation just now?

    • ” Even if their entire military is Bribed too (it probably is)”

      A correction: the Brazilian military is one of the last honest and well-regarded institutions in Brazil. They are never involved in corruption schemes and are self-proclaimed “anti-communists”. The Workers Party fear (and hate) the Brazilian armed forces, so they would try to bribe anyone – except the military.

      And what you said about some not getting a piece of the pie and getting angry with Dilma is definitely true for the poorer segments of society, because inflation has destroyed their purchasing power in the last months, and now they are feeling betrayed by Dilma. And no, there’s no oil to fill the vaccum and save the day. Those people are definitely on their own.

      • I stand corrected then, great news for Brazil !

        ““Brazil does not want and will not be a new Venezuela,” read one. “Nation + Liberty = PT (Workers Party) Out!” declared another.

        There was a range of voices. While one flag extolled “Peace and Love”, a sizeable contingent of the crowd expressed support for a return to the military dictatorship that ran the country between 1964 and 1985

        “Army, Navy and Air Force. Please save us once again of [sic] communism” read one banner in English. Among those holding it was computer graphic designer Marlon Aymes who said military force was the only way to unseat the Workers Party.

        “They are in power for 16 years. That is like a dictatorship,” he said. “In 1964 the military of Brazil took a stand against a president who was close to the Kremlin. Today, the PT is in a group that wants a Bolivarian socialist model across Latin America. Common people are protesting and calling for impeachment, but congress is too corrupt to approve that so we need military intervention.”

        http://www.theguardian.com/world/2015/mar/15/brazil-protesters-rouseff-impeachment-petrobas

        IMO, that would be the only solution for Corruptzuela. We are corrupt to the bone. A coup from the right , a dozen years of military rule, almost as tight as Singapore, without cutting hands for theft.. Unfortunately, our military is completely Bribed too.

        Good luck to Brazil !! at least Venezuela is helping other countries to realize what NOT to do.

  9. Advance payments are used by the assignment agent as insurance to get their piece. As Bill Blass mentioned, this mechanism was conceived to reduce contractor’s exposure to inflation by early procurement of construction materials. Today it is used by the government agent to get their own piece of the action upfront.
    Under Mision Vivienda, it was a common practice that projects will get 40% or more in advance payments so the contractor was able to give an agreed commission to the government agent assigning the contact. So, please imagine if you get a $3 million contract and they give you upfront $1.2 millions in cash. The profit from construction goes to a second priority due to the profit of the financial investment made through other mechanisms.
    A few months after the projects starts, the contractor will submit “price reconsideration” due to “high inflation levels unexpected by the estimator”. As a “unforeseen condition”, the government agent justify a budget increase and the entire “anticipo” process starts all over again. It is a vicious cycle.
    The construction system in Venezuela doesn’t incentivize competition, it is a well played game between Government and Colegio de Ingenieros. A game played since La Cuarta and professionalized en La Quinta.

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