Brazilian construction giant Odebrecht is disposing of its valuable portfolio of infrastructure projects in Peru in the wake of a corruption scandal that jeopardised the continuity of its interests in the whole of Latin America. Jacopo Dettoni reports. 

Brazilian construction company Odebrecht’s decade of activity in Peru is coming to a bitter end as the group sells its Peruvian assets to provide for any fine related to the so-called ‘Car Wash’ scandal. However, the process has not been smooth because Odebrecht’s interests in the country are worth billions of dollars, and the Peruvian government wants to make sure that any sale complies with transparency standards and guarantees the best outcome for the Peruvian state.

Odebrecht won projects worth about $12bn in Peru over the past decade, but the company’s Peruvian dealings have been the subject of intense scrutiny since it acknowledged paying $29m in bribes to secure public works contracts in the country between 2005 and 2014.

Funding shortfall

The future of some of the company’s landmark projects in Peru now hangs in the balance. The government has already scrapped Odebrecht’s contract for the development of the Southern Peru Pipeline, a massive $7bn project to transport natural gas from the Anta province to the south coast, because the company’s consortium failed to secure the necessary funding to continue the works. At first, it seemed as if Odebrecht had reached an agreement with Canadian pension fund Brookfield Asset Management to sell its 55% stake in the project. But the deal did not materialise and Peru’s private investment promotion agency, ProInversión, is now in charge of restructuring the project. Work is 30% complete, and a new tender was initially expected in 2018, although that target now seems unlikely to be met.

On the other hand, Brookfield did team up with France’s Suez group to acquire the Olmos irrigation concession in the northern Lambayeque region, a project that Odebrecht wrapped up in 2014. Odebrecht also sold the 456-megawatt Chaglla hydropower plant to a Chinese consortium led by state-owned China Three Gorge for about $1.4bn, according to local press reports, and is negotiating a way out of its remaining Peruvian concerns.

Yet Odebrecht must tread carefully. An emergency decree approved in February set stringent rules to ensure companies involved in corruption cases sell their interests locally, lest the capital needed to ensure the continuity of the attached contracts and pay future fines and indemnification charges leave the country. 

This article is sourced from fDi Magazine
fDi Magazine

Global greenfield investment trends

Crossborder investment monitor

fDi Markets is the only online database tracking crossborder greenfield investment covering all sectors and countries worldwide. It provides real-time monitoring of investment projects, capital investment and job creation with powerful tools to track and profile companies investing overseas.

Click here to find out more about fDi Markets

Corporate location benchmarking tool

fDi Benchmark is the only online tool to benchmark the competitiveness of countries and cities in over 50 sectors. Its comprehensive location data series covers the main cost and quality competitiveness indicators for over 300 locations around the world.

Click here to find out more about fDi Benchmark

Research report

fDi Intelligence provides customised reports and data research which deliver vital business intelligence to corporations, investment promotion agencies, economic development organisations, consulting firms and research institutions.

Find out more.