Odebrecht, its fortunes collapsing, gets another public contract in Panama

by Eric Jackson

Panama City has gone through some unusual gymnastics to revise a points system for awarding a $100 million sidewalk, street and lighting project when the purportedly objective analysis indicated a Colombian-led consortium as the winner. But after the mayor ordered a revision of the points system, the data were run through once more and the “more objective” winner was, to the surprise of only the most uninformed, the Brazilian construction giant Norberto Odebrecht. The contract has yet to be signed and reaction is building, but it’s a good bet that this is not going to go down well even if Panamanians are jaded about such things.

Roberto Brenes, the founder of Panama’s Bolsa de Valores securities exchange, looks askance at the $782 million that was paid by hte Martinelli administration to Odebrecht to build the third phase of the Cinta Costera. That works out to some $250,000 per square meter and he says that it can’t be justified. He and the local chapter of Transparency International are among the business sector people who have joined with the usual church, civic and labor anti-corruption leaders to demand an audit of all public works contracts that Odebrecht has had in Panama in recent years. Administrative Prosecutor (Procurador de la Administracion) Rigoberto González concurs, and has asked Comptroller General Federico Humbert to audit both current and recent Odebrecht contracts with Panamanian governmental entities. González’s stated reason is a bit different. He cites reports from Brazil (and other countries) about Panamanian involvement in a series of scandals that may have its epicenter in overpriced contracts with kickbacks between Brazil’s state-owned Petrobras oil company and Odebrecht and other construction firms, but now goes way beyond that and way beyond Brazil.

The scandals get to Panama because:

• documentary evidence and a confession indicate that Odebrecht’s former CEO, Marcelo Odebrecht, who is now serving a prison sentence of just more than 19 years, paid political operative João Santana to manage the 2014 presidential campaign of Ricardo Martinelli’s Cambio Democratico party;

• Mr. Odebreecht’s emails were kept on a server in Panama but these are “unavailable” to Brazilian prosecutors; and

• Odebrecht bribes for Petrobras officials were laundered through an international chain of corporate shells, some of them Panamanian, designed by the Panamanian law firm Mossack Fonseca, one of whose partners was until recently an official in the Varela administration.

Just in themselves these things add up to enough to raise eyebrows, except perhaps those of President Varela. To him, these are all proceedings before foreign courts and none of Panama’s concern. Attorney General Kenia Porcell hasn’t disparaged the Brazilian prosecutors’ investigation, but she appears not to be cooperating with her Brazilian counterparts either by asking for information that might indicate crimes in Panama or by sharing information. In a gesture to the fight against corruption, Varela has sent a revision of the public contracting law to the legislature, which would bar companies convicted of certain corrupt practices from doing business with the Panamanian government — but only if those convictions are by a Panamanian court.

Somebody might be favorably impressed, but according to the Dichter & Neira polling firm Varela’s popularity rating for the second straight month registers at just 46 percent. He’s not hated, but the honeymoon is over. An overwhelming 75 percent of those surveyed found little or no transparency in government. It’s not an explosive issue, though — by far insecurity against garden variety crimes, rising unemployment and problems with the water supply top the list of public concerns, with corruption way down the list.

In Brazil the leaks and court rulings are often crudely partisan, but the Lava Jato (car wash) investigations are so deep and widespread and involve so many investigators and judges with their own opinions that it’s hard for any side to be protected. The revelations from the most recent raids, however, are spectacular.

Is President Dilma Rousseff, who was the minister in charge of Petrobras when most of the bribery took place, in danger of impeachment? The truly damning direct evidence implicating her has yet to be produced, but it’s hard to believe that she was unaware and few Brazilians do believe that. But a spreadsheet of payoffs to some 200 politicians of 24 different parties that was leaked to the press shows that the members of the Brazilian Congress listed include those leading the impeachment drive against the president. Was Dilma’s boss at the time, former President Lula da Silva, on the take? So far the allegations are not that he accepted money while president, but as an ex-president he clearly took money for a foundation he controlled and large speaking fees from Odebrecht and other major construction companies, and served as an intermediary for Odebrecht to secure contracts in other countries.

Prosecutors say that Odebrecht paid renowned campaign manager João Santana and his wife and business partner Mônica Moura to run the campaigns of not only Martinelli in Panama, but of the ruling leftist MPLA party in Angola and Hugo Chávez and Nicolás Maduro in Venezuela. When rightist Álvaro Uribe was president of Colombia — and afterward — he may have been railing against the Chavistas next door who were on Odebrecht’s payroll, but the Brazilian construction company had Uribe’s eldest son on its payroll as a high-priced corporate representative. Do the United States and Cuba have conflicted relations that are starting to get resolved? Odebrecht has massive contracts in Cuba, but also donated money to foundations controlled by the Clintons and by Jeb Bush. And the presidents of Peru and the Dominican Republic, both men who put on leftist airs to get elected but have been far to the center once in office? Odebrecht may have been paying for Santana and Moura to run Dominican President Danilo Medina’s re-election campaign — a job cut short by arrest warrants issued in late February — and other documents suggest the Peruvian President Ollanta Humala received payoffs from the company. Other tangents of the case have Odebrecht making payments to a former Argentine transportation minister and paying bribes to get the contract to build the mass transit system for the upcoming Rio de Janeiro Olympics.

Should it be any big shock that Brazilian authorities allege that Marcelo Odebrecht has been overseeing payoffs to politicians from the prison where currently resides? Consider that Odebrecht was a central player — a bid-rigging clearinghouse of sorts — in the 1992 scandal that led to the impeachment proceedings and resignation of the Brazilian president at the time Fernando Collor de Mello. There is not a politician who has been named who can say that she or he did not know about the company’s reputation. Certainly the investment world does — Odebrecht shares are way down and securities analysts give them a negative outlook.

Maribel Jaén of the Catholic Church’s Justice and Peace commission had already warned that contracts with Odebrecht — currently working on the construction of the Metro’s Line 2 and renovation of the Colon city center — are “suspicious.” So now comes the city contract to renovate the sidewalks and lighting in the Parque Porras area, parts of Via Expaña and Avenida Balboa and from Plaza Cinco de Mayo up the peatonal to the park in Santa Ana, roughly an $100 million job. The Colombian-led Centralvías EP consortium came in first with 95.9 points in the arcane numerical ratings that the bid evaluation committee had set up, as against Odebrecht’s 93.86. The mayor was unhappy with that and ordered the committee to tinker with its rating system. As revised, Odebrecht won the “competition” with 98.76 points to Centralvías EP’s 87.38. Now it still may work with some Panamanians to confer “objectivity” on a subjective process by assigning numerical values to it, but in the current climate it looks like Odebrecht won on another rigged bid. Mayor José Isabel Blandón may yet advance his reputation and career when all is done and he can point to all this rebuilt brick and mortar. The infrastructures involved are in fact crumbling. For now, however, Blandón has stepped into a controversy that was not his, picking up suspicions as he goes.

Will Humbert audit, and if so in anything more than a pro forma way? When Odebrecht won the Metro Line 2 contract, it was not the low bidder but an evaluation committee, unbeknownst to the public and most of the participants until after the fact including a man who had worked as a consultant for Odebrecht, gave the Brazilians the contract over the Chinese competition on the basis of some dubious points. Humbert ruled not that there was a harmless error, but that there was no conflict of interest at all. However, to be seen to favor Odebrecht now would look worse than it did back then because the backrop against which it would be viewed is worse today.

~ ~ ~

The announcements below are interactive. Click on them for more information

Ramírez and Arango picked for ACP board

by Eric Jackson

On March 22 President Juan Carlos Varela nominated Óscar Ramírez and Ricardo Arango to serve eight-year terms as members of the Panama Canal Authority board of directors. The nominations must be ratified by the National Assembly and it appears that there will not be any problem with that.

Ramírez, the rector of the Tecnologico (Technological University of Panama, the Universidad Tecnológico de Panamá or the UTP), is a UTP and SUNY-Buffalo educated engineer whose research and teaching has specialized in structural engineering for earthquake resistance. His doctorate from the State University of New York at Buffalo — for which he was assisted by a Fulbright scholarship — is in structural and seismic engineering.

The UTP has its origins in the engineering department of the University of Panama seceding over campus politics and low academic standards. Led by Dr. Víctor Levy Sasso, the engineering department gained a measure of autonomy in 1973 and an independent charter in 1981. Although it was a US military target in the 1989 invasion — American soldiers arrested Levy and although he was never accused of any wrongdoing he was stripped of his job and the car and other possessions that were seized by the US Army were never returned — the university continued on its independent way, growing to its present seven campuses and gaining a reputation as Panama’s academically best institution of higher learning. After the brief invasion interregnum Héctor Montemayor was elected rector and served in that post from 1991 to 2003. Salvador Rodríguez succeeded him and in 2009 Marcela Paredes de Vásquez became the first female rector of any Panamanian university worthy of the name. Ramírez, a native of Gualaca in Chiriqui province, was elected rector for the 2013-2018 term.

During the canal expansion work, the previously known Pedro Miguel Fault, which crosses the canal, was found to be a bigger and more active threat than was thought. There has been some thought about measures to strengthen the canal’s earthquake resistance, with one worrisome scenario being an event that breaches the Pedro Miguel Locks. Were that to happen Gatun Lake could empty out through Culebra Cut and the broken locks. It would take years for the lake to refill. One possible emergency response system would be strategically placed explosives along Culebra Cut that would cause landslides that dam up the cut to keep the water in. It’s an engineering problem fitting Ramírez’s specialty, expertise about which is otherwise missing on the ACP board.

Ricardo Arango, son of one of the prominent Creole families, has his undergraduate degree in law from the University of Panama and master’s degrees (LLMs) from Harvard and Yale in corporate law and financial law respectively. Part of his US studies were also on a Fulbright. A partner in the law firm of Arias, Fabrega & Fabrega, he is on the boards of directors of Panama’s scandal-plagued Bolsa de Valores stock and bond market, Banco General, the Latin American Export Bank (BLADEX) and the La Prensa newspaper.

Arango represents continuity on a scandal-plagued ACP board dominated by construction people (including Alejandro Moncada Luna’s alleged money laundering and bid fixing partner Nicolás Corcione), people in the maritime services sectors other than shipping itself, bankers and corporate lawyers. No PanCanal retiree or employee has ever served on the board since Panama assumed full control of the canal. A number of political appointees have, mostly people who had been involved in the negotiations over the waterway’s transfer from US to Panamanian administration.

The problem with continuity is that while La Prensa and the banks were deeply involved in the largely state-funded 2006 “yes” campaign based on many questionable premises, the financial plan for the canal expansion that was sold to those voters who showed up has been a failure from the start. This has never been acknowledged, and indeed you will find few in the ACPO or at La Prensa who will now admit that their projection was an increase in US imports from Asia to increase geometrically by the rate of increase in those between 2000 and 2005, through 2025. That would have meant that by now all US industrial production would have been exported to Asia but US wealth and purchases of Asian goods would still be climbing on a nearly vertical path. That didn’t happen so the ACP borrowed money for an expansion that had been billed as “self-financing” and ship tolls were raised high enough to prompt some shippers to move to other routes. If the new locks work — if not they will be adapted at whatever cost so that they do work — PanCanal finances will still be a mess and toll revenues won’t cover it. Thus we have the ACP seeking to get into the ports, oil pipeline, fossil fuel electric generation and other business because the institution needs new revenues to stay afloat. But this has set off rumbles among various interested parties, and has not gone down well with governmental institutions like the Panama Maritime Authority that would have the ACP grabbing some of their turf.

So does Banco General get a new interlocking directorate with the Panama Canal Authority? That would tend to indicate that if a new port is created under ACP auspices at Corozal and Diablo, the concession will go to the Mottas.

~ ~ ~

The announcements below are interactive. Click on them for more information