Stalled Brazilian Odebrecht projects decay in Venezuela

Stalled Brazilian Odebrecht projects decay in Venezuela
By Reuters
Published: 18:19 BST, 31 May 2017 | Updated: 18:19 BST, 31 May 2017
By Diego Oré

CAICARA DEL ORINOCO, Venezuela, May 31 (Reuters) - In the hot and humid
town of Caicara, in the heart of Venezuela, some 20 piers jutting out of
the vast Orinoco river gather mildew and rust.

Brazilian construction company Odebrecht was meant to build an 11-km
(seven-mile) bridge in the town - the longest in the South American
country - in 2011 but the project ground to a halt a year ago.

Now, a handful of workers do basic maintenance work.

The bridge, meant to link the towns of Caicara and Cabruta, is just one
of several abandoned Odebrecht projects deteriorating under the
Caribbean sun and dogged by corruption allegations.

Odebrecht has left at least 23 multi-million dollar projects unfinished
or stalled in Venezuela, according to company and government documents,
interviews with over two dozens workers, and site visits.

Late last year, Latin America's largest engineering company admitted to
paying hundreds of millions of dollars of bribes in 12 mostly Latin
American countries in exchange for contracts. The unfolding scandal has
already led to the downfall of high-ranking officials across the region.

On Thursday, Brazil's attorney general will share information from plea
bargain deals by dozens of Odebrecht executives with relevant countries.

According to a leniency agreement with U.S. authorities, which was made
public in December, Odebrecht and its representatives paid some $98
million in bribes to officials and intermediaries in Venezuela between
2006 and 2015 - the highest amount outside Brazil.

CASH-STRAPPED

Yet many of the company's projects in Venezuela ground to a halt even
before the Odebrecht scandal exploded, likely due to lack of payment
from the cash-strapped socialist government, sources said.

"All the state's projects are paralyzed, not only Odebrecht's," said
Wilmer Nolasco, a lawyer and president of Venezuela's largest
construction union, speaking in an office in Caracas adorned with a
statue of late leftist leader Hugo Chavez.

Odebrecht's stalled projects include the Caicara project, one other huge
bridge, subway lines, a train to link dormitory towns with Caracas,
hillside cable cars, an agricultural project, an overhaul of the
country's main airport, and a hydroelectric dam.

Nolasco, whose powerful SUTIC union works on several of Odebrecht's
projects, says that in some cases the Salvador, Brazil-based company
stopped receiving payments two years ago and subsequently pulled the
plug on building.

"The state hasn't paid Odebrecht," said Nolasco, citing meetings in
which Odebrecht asked the government to pay.

Odebrecht representatives in Venezuela and Brazil did not respond to
requests for comment, neither did Venezuela's public works and
communications ministries.

Odebrecht has not formally left Venezuela, nor has the government of
Nicolas Maduro canceled its contracts.

But Odebrecht's projects are under the protection of the National Guard
and other government personnel, according to a Reuters witness, and
company logos have been erased from the gates of their camps. Maduro in
February vowed his administration would finish the projects, though none
of them have been reactivated.

As a consequence, some 200,000 jobs have been lost, according to union
estimates. Some of the works will also have to be redone partially
because of flooding or because the cement has oxidized, project
engineers told Reuters.

"This is basically lost," said one worker, pointing to a pile of
materials for the construction of line 2 of the Los Teques subway near
Caracas, already six years behind schedule. Some 20 workers scour the
tunnels to drain water that threatens to flood them.

RISKY FRIENDSHIP

Odebrecht arrived in Venezuela in 1992 to build a mall in the oil hub of
Maracaibo near the Colombian border.

It grew steadily but it was not until 2003, with the election of Luiz
Inacio Lula da Silva as president of Brazil, that it began a string of
mega-projects in Venezuela.

After 2003, Odebrecht won 32 projects worth some $40 billion in
Venezuela, according to official numbers. Brazilian rivals Queiroz
Galvao, Camargo Correa and Andrade Gutierrez received a total of eight.

Even when Ecuador's former leftist president Rafael Correa kicked out
Odebrecht in 2008, accusing it of a scam after a hydroelectric dam it
built had severe problems, Chavez publicly defended the company.

"Odebrecht is a friendly company and in Venezuela it's behaved itself
extraordinarily well," Chavez said at the time.

While Odebrecht largely completed its works on time until 2007, it then
began to delay completion dates, according to government and company
records and interviews with engineers that worked on the projects and
with Odebrecht personnel.

Anti-corruption campaigners accuse Odebrecht and complicit state
officials of prioritizing personal gain.

"Seeing the quantity of unfinished works and the privileges this company
was given, we suppose it was better to receive bribes than to see the
works through," said Mercedes de Freitas, local head of anti-corruption
campaign group Transparency International.

The majority of projects also ended up costing several times their
initial price, according to documents on the projects seen by Reuters
and speeches by officials.

One part of the Caracas hillside gondola system cost $262 million, five
times that of a similar project in the Colombian city of Medellin,
though the Venezuelan line is shorter and flatter.

The construction of a bridge over Lake Maracaibo in the west of the
country is only 17 percent completed but has cost three times the
original budget, according to the documents and speeches.

OPPOSITION INVESTIGATES

Odebrecht and its petrochemical unit Braskem in late December agreed to
pay at least $3.5 billion, the largest penalty ever in a foreign bribery
case, after pleading guilty in a U.S. federal court in Brooklyn.

In mid-February, Venezuela's state prosecutor's office raided the
headquarters of Odebrecht in Caracas. It has not given details of what
it found.

The opposition-led National Assembly in February began an investigation
into possible embezzlement of some $16 billion in negotiations between
the Venezuelan government and Odebrecht, according to preliminary inquiries.

The report says six Odebrecht projects were subject to overpricing,
commissions, bribes, and poor planning, and also ran over budget. That
was just the tip of the iceberg, the head of the congressional
comptroller's commission, Juan Guaido, told Reuters.

"Venezuelans paid seven times more to contract Odebrecht," said Guaido,
basing his estimate on preliminary investigations by his team.

Guaido said the majority of Odebrecht's 32 projects were directly
assigned, via binational agreements, instead of public tenders as in
other Latin American countries. (Writing by Alexandra Ulmer; Additional
reporting by Eyanir Chinea and Efrain Otero in Caracas, Maria Ramirez in
Puerto Ordaz, Isaac Urrutia in Maracaibo and Tatiana Bautzer in Sao
Paulo; Editing by Bill Rigby)"

http://www.dailymail.co.uk/wires/reuters/article-4559750/Stalled-Brazilian-Odebrecht-projects-decay-Venezuela.html