Bribery Case Haunts Odebrecht Despite Massive SettlementThe construction giant, which agreed to pay as much as $4.5 billion to settle international bribery charges, finds it is banned from bidding on public works projects in a growing number of countries.

ENLARGE

The Athletes Village residential complex for participants in the 2016 Summer Olympic Games in Rio de Janeiro in July; developers including Odebrecht raced to complete Olympics-related construction projects ahead of the Games. PHOTO: LIANNE MILTON FOR THE WALL STREET JOURNAL

By LUCIANA MAGALHAES AND RYAN DUBEJan. 5, 2017 5:00 p.m. ET2 COMMENTS

LIMA, Peru—Brazil’s Odebrecht SA, which last month signed the largest anti-corruption

settlement in history, faces a growing number of countries in Latin America banning it

from bidding on new public-works projects, potentially draining the company of a key

source of revenue.

On Thursday, Odebrecht, Latin America’s largest construction firm, reached a preliminary

deal with Peruvian prosecutors to provide information about bribes the firm paid in recent

years, and to pay an initial $9 million fine, which could grow over time, Peruvian officials

said.

“This will allow us ... to incorporate useful information into the investigation and ... shorten

the time required looking for evidence outside of the country,” the attorney general’s office

said in a statement.

The deal, however, doesn’t address the Peru government’s plans to prohibit Odebrecht from

gaining access to public-works projects in the future, according to a spokesman for the

attorney general’s office in Lima. He said any decision to allow Odebrecht to bid on future

contracts would be made by the executive branch.

A spokeswoman for the prime minister’s office wasn’t immediately available for comment.

In a statement, Odebrecht confirmed the agreement and reiterated that the company is

committed to cooperating with authorities.

The deal comes as more Latin American countries are closing their doors to the Brazilian

construction giant after the builder admitted in December to paying nearly $800 million in

bribes, including $439 million in countries outside Brazil, mostly in Latin

America. Odebrecht agreed to pay between $2.6 billion and $4.5 billion in a settlement

with authorities in Brazil, the U.S. and Switzerland.

ENLARGE

Worker at the Sao Conrado metro station in Rio de Janeiro in April 2016. The station is on the city’s Line 4, which began running in July 2016 and was built by a consortium including Odebrecht. PHOTO: CHRISTOPHE SIMON/AFP/GETTY IMAGES

This week, Ecuador followed the governments of Panama and Peru in banning Odebrecht

from signing new public contracts amid investigations into its corrupt practices. Peruvian

Prime Minister Fernando Zavala said last week the government was changing legislation to

ban companies involved in corruption from signing new contracts. The changes haven’t

been implemented yet.

The bans, which could be taken up by more countries, are another blow for the Brazilian

construction group. Odebrecht has increasingly relied on its international operations in the

roughly two years since it was placed on a blacklist and banned from signing contracts with

oil giant Petroleo Brasileiro SA, or Petrobras. Under the December agreement, Odebrecht

can bid on its home turf again.

The firm’s engineering and construction arm got 87% of its 58 billion reais ($18.13 billion)

in 2015 gross revenue from international operations, with about 13 billion reais ($4.06

billion) of that coming from Latin America. Odebrecht declined to break down the numbers

by country.

“I will be very surprised if [their international operations] are able to survive this,” said

Gregory Michener, assistant professor of government at Fundação Getúlio Vargas in Rio de

Janeiro. “They’ll probably be reduced to being competitive in Brazil,” he added, because of

reluctance elsewhere to do business with Brazilian companies due to the possibility of

corruption being revealed.

Current leaders in countries including Panama, Peru and Argentina are more likely to take a

hard line because the alleged corruption happened under administrations of political

adversaries, Prof. Michener added.

Odebrecht has admitted that from 2001 to 2016, it paid bribes in countries including

Angola, Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico,

Mozambique, Panama, Peru and Venezuela, according to the settlement with U.S.

authorities and others.

In Peru, the first Latin American country outside Brazil where Odebrecht expanded four

decades ago, it paid about $29 million in bribes over three administrations from 2005 to

2014, according to the company and U.S. authorities.

Odebrecht is now planning to sell some assets in Peru. In November, it agreed to sell its

Olmos irrigation project to Canada’s Brookfield Infrastructure and France’s Suez. It also

has looked to divest its stake in a major natural gas pipeline project in southern Peru.

Ecuador Attorney General Galo Chiriboga said on Twitter late Tuesday that Odebrecht is

temporarily banned from signing new contracts with state entities until prosecutors can

finish a probe into its contracts. The decision followed a raid on Odebrecht’s office last

month in the coastal Ecuadorian city of Guayaquil, where prosecutors said they seized

documents and electronic material.

Odebrecht has dished out $33.5 million in corrupt payments to Ecuadorian officials since

2007, when President Rafael Correa took office, according to the settlement.

The government of Panama also has barred Odebrecht from signing new public contracts

and demanded it return money it earned through corruption.

Between 2010 and 2014, Odebrecht made more than $59 million in illegal payments to

government officials in Panama and to intermediaries working on their behalf in order to

secure public contracts, according to the settlement with U.S. authorities.