Brazil’s Petrobras scandal taints works projects across Latin America

When the first former Petrobras official to be arrested in Operation Lava Jato, Paulo Roberto Costa, said that the corrupt practices under scrutiny were “taking place all over Brazil,” it may have been an understatement.

A document found by Federal Police inside the home of convicted black-market currency dealer Alberto Youssef, showing details about over 700 contracts, threatens to expand the scope of what is already the largest corruption inquiry in Brazilian history.

“This could be the tip of the iceberg of another enormous scandal”

Investigating judge Sergio Moro, who has become something of a celebrity, has admitted that the new revelations are “disturbing” and suggested that “the criminal scheme of fraud and bidding, of surcharges and bribes, could go well beyond” the state-owned oil company. And he was not just talking about Brazil.

The document includes information about public works projects carried out in other Latin American countries, including Argentina and Uruguay (who are Brazil’s trade partners in Mercosur), as well as Ecuador and Colombia.

Last weekend, the TV Globo television network aired details of 747 projects carried out by 170 companies, most of them specializing in construction, whose behavior closely resembled that of the businesses under scrutiny in Operation Lava Jato (car wash), which began 18 months ago.

These projects were worth a total 11.5 billion reales ($4.6 billion), which may sound modest compared with the massive amounts handled in the Petrobras universe of bribes, money laundering and illegal party financing, but sources familiar with the case told EL PAÍS that “this could be the tip of the iceberg of another enormous scandal.”

Petrobras was the final client of 59 percent of the projects on the list seized from Youssef, who remains behind bars at a penitentiary in Curitiba as a result of his involvement in the scheme. The main ones were transport infrastructure works such as ports, airports and subway systems, but there were also oil refinery, mining and drainage projects.

Judge Moro has requested “an in-depth investigation” into the new alleged irregularities. Attorney General Rodrigo Janot has confirmed that the new revelations are already the subject of a public probe.

One of the projects on the controversial list involves an extension to the port of Mariel, located 50 kilometers from Havana, Cuba. The new land is slotted to hold a free trade zone that will go up with Brazilian funding, and whose initial construction work was officially inaugurated in January by Brazilian President Dilma Rousseff. The builder, Odebrecht, which is already being investigated in Lava Jato, has denied paying any bribes to secure the contract.

Another project features a gas pipe in the Argentinean province of Córdoba that allegedly received subsidies worth 60 million reales ($28 million) in 2008 from Brazil’s Development Bank, the largest such lender in Latin America.

The real extent of the Petrobras case is hard to gauge. This past weekend, Judge Moro said the investigation should not be limited to the oil sector. With three weeks to go before Rousseff’s inauguration as president of the republic – which has been ruled uninterruptedly by her Workers’ Party since 2003 – the opposition could apply pressure to extend the inquiry into the electricity sector and most federal public works projects.

Then again, the hypothetical participation of opposition parties in the crimes under investigation could restrain the demand for a wider investigation.