Peru broadens Odebrecht corruption probe

Friday, December 1, 2017

Peru expanded its investigation into the ongoing Odebrecht corruption scandal to include three local construction firms that were former partners of the Brazilian group in infrastructure concessions.

Odebrecht, which in December 2016 admitted to paying hundreds of millions of dollars in bribes to secure contracts across Latin America, has been involved in Peru's largest infrastructure projects including the southern gas pipeline, the inter-oceanic highway (IIRSA), the Olmos and Chavimochic irrigation ventures and power plants.

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The investigation into charges of collusion and money laundering will include representatives of Graña y Montero (GyM), JJ Camet and ICCGSA, which were Odebrecht's partners in the IIRSA highway, the special prosecutor's office said via Twitter.

"The crime of illegal collusion is a serious one within our juridical system and carries a maximum sentence of 15 years," prosecutor Sergio Jiménez said in a video.

GyM's chairman José Graña and other top executives resigned in February after allegations by Odebrecht that its partners were aware of the payment of bribes sent the Peruvian company's shares tumbling.

JJ Camet, meanwhile, has faced tough times in recent years. Founder Jorge Camet was sentenced to four years in prison in 2011 on charges of collusion in an arms deal during the government of disgraced former president Alberto Fujimori (1990-2000).

While all three companies have denied knowledge of wrongdoing, the inclusion of more construction companies in legal proceedings could contribute further to the sensation of paralysis in the infrastructure industry, where billions of dollars in investments have been halted and tens of thousands of workers left unpaid.

"Overall, 2018 will be a challenging year for Latin America. The region remains highly vulnerable to events that could result in a rapid outflow of capital," Standard & Poor's analyst Joaquín Cottani wrote in a report. "We factor in a modest uptick in fixed investment in 2018 as some delayed infrastructure projects move forward."

The judiciary this week also excluded Odebrecht's former Peru country manager Jorge Barata from legal proceedings in exchange for his participation as a collaborator.

President Pedro Pablo Kuczynski in March ordered Odebrecht to pull out of Peru after the company admitted to having paid at least US$29mn in bribes to local officials from 2005-14. Peru awarded Odebrecht US$16.9bn in 23 contracts from 1988 to 2015.

But the scandal, which has already led to the detention of former president Ollanta Humala and his wife, an international arrest order for former president Alejandro Toledo and a ban on former Lima mayor Susana Villarán from leaving the country, is threatening to sweep up President Kuczynski to boot.

Kuczynski allegedly acted as an advisor to Odebrecht as part of investment banking entity First Capital Partners in 2006, Lima news magazine Caretas reported this week, citing a website that listed him as an executive until 2009.

Kuczynski, who served as Toledo's finance minister and later cabinet chief until July 2006, denied any truth in the allegations, echoing a televised national address on the subject earlier this month.

"President Pedro Pablo Kuczynski has repeatedly stated he is not nor has he ever been a partner or executive at First Capital," the presidential office said in a statement. "The alleged presentation of First Capital contains information that is not true."