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A Peruvian judge issued an international arrest warrant for former president Alejandro Toledo for allegedly receiving $20 million in bribes from the Brazilian construction giant Odebrech. (Photo: Peru Government)
Tuesday, March 7, 2017
Perspectives

Latin America Politics: The Odebrecht Impact

Will Odebrecht’s graft scandals disrupt the region’s political map?

BY LATIN AMERICA ADVISOR
Inter-American Dialogue

Revelations about Latin American politicians’ alleged involvement in the multi-country Odebrecht bribery scandal have marred reputations and even led to arrests of some of the most powerful political figures in the hemisphere. Testimony from Odebrecht employees may implicate Brazilian President Michel Temer’s closest allies, former Peruvian President Alejandro Toledo was ordered to be arrested and investigations have been opened in numerous other countries, including Colombia, Panama, Venezuela and Chile. How might the Odebrecht scandal change the lineup of candidates expected to run in the presidential races slated in Brazil, Colombia and other countries of the region next year? Which parties and forces stand to benefit from the wave of corruption revelations? Will the Odebrecht scandal propel non-establishment political candidates to victory in the coming year?

Jimena Blanco, head of Americas politics research at Verisk Maplecroft: The bribery scandal will play a key role in Brazil’s 2018 presidential race, but its effect across the wider region will be minor in comparison. The PT’s Lula da Silva, the current front-runner in all polls, could be unable to compete for a third term, while most presidential hopefuls in the pro-business PSDB and the senior leadership of Temer’s PMDB could also be disqualified. The emergence of a relative outsider, particularly one propped by a clean slate, a strong anti-corruption platform or a lack of party affiliation is quite likely. Marina Silva would, thus far, appear to be in the first category. And, if he succeeds in turning the economy around, Finance Minister Henrique Meirelles could garner strength from his lack of party affiliation. But the impact on the wider region will be less profound. The allegations of bribery involving key allies will undoubtedly cause a political headache for Argentina’s Macri. However, the extent of corruption under the previous administration and the likely indictment of former Argentine President Cristina Fernández this year mean that the fallout from the Lava Jato case in the October mid-terms will be limited. In Colombia and Peru, it is simply too early to tell. In Colombia, coalitions have yet to be formed, and the fact that the two main parties—the U Party and the Democratic Centre—have been linked to the scandal means the mudslinging can flow both ways. In Peru, the next presidential election is more than four years away. However, unless President Kuczynski’s anti-corruption drive manages to restore the public’s faith in the political class—and chances are that it won’t—an anti-establishment candidate could well ride the wave of popular anger to power in 2021.

R. Kirk Sherr, member of the Energy Advisor board and president of Clearview Strategy Group: Recent Odebrecht marketing documents highlight awards the company received as ‘evidence of the many benefits for the parties involved.’ Clearly, ‘parties’ also included both political parties and individuals across the region. Certainly, more names will be added to political obituaries as a result of collaboration following an international meeting of anti-corruption government officials in Brasília on Feb. 16. In Mexico, the Odebrecht scandal feeds directly into the long-running narrative of high-level corruption by the PRI. The names of companies and individuals involved in Mexico have not yet been released, so it is not clear what the damage may be. But, new scandals will bolster front-runner Andres Manuel López Obrador’s candidacy and further diminish PRI hopes for the 2018 presidential elections. In Brazil, political fortunes for the 2018 presidential elections at this point depend more on revelations from the attorney general’s office than from any campaign planning. Broadly speaking, it seems that platforms including a serious effort to strengthen judicial systems and regulatory agencies should be welcomed by voters—if a candidate is qualified to deliver the message. Regionally, candidates across the political spectrum have been discredited. This leaves open a large swath in the middle for reform-minded politicians positioned to make a strong case against impunity and for the rule of law. Not unlike recent experience in the United States, upcoming elections in the region are ripe for well-positioned political outsiders and politicians perceived to be the most honest.

Peter Hakim, member of the Advisor board and president emeritus of the Inter-American Dialogue: The Odebrecht virus has spread across Latin America, carrying its poison to at least a dozen nations. The Brazil-based Odebrecht empire has exchanged nearly a billion dollars in bribes for high-profit, publicly funded contracts, but Brazil and Odebrecht are not the only culprits in this regional drama. In country after country, top political leaders (including presidents), their parties and business associates welcomed Odebrecht’s generosity and became co-conspirators. The Odebrecht virus found ample breeding grounds everywhere. Aside from Brazil, with its combative press and aggressive judiciary, no country discovered the Odebrecht scandal on its own. It is a terribly discouraging sign about Latin America’s ability and resolve to curb corruption that so few news sources, government officials, political or business leaders, or civil society groups spoke up about the Odebrecht scandal; its epidemic proportions were revealed by a U.S. investigation. Brazil had the needed information, but continues to claim it cannot share it under the conditions of the plea agreements by which the crimes were exposed. It is early to judge to longer-term political consequences of the Odebrecht scandals. In Brazil, the three largest parties have all suffered highly damaging setbacks. Virtually all of their visible contenders for the presidency in the 2018 elections—including past candidates, governors, senators and cabinet ministers—have been implicated in criminal transgressions. Ironically, as other top contenders stand accused, former President Lula da Silva, despite multiple charges against him, is now the one leading most electoral polls. The Odebrecht virus has also begun to affect the politics elsewhere, turning corruption into an evermore central issue and raising questions about the honesty and effectiveness of political leaders and governments of every stripe—and judging them on how decisively they deal with corruption and its carriers. Political outsiders should get a boost in upcoming national and local elections. However, how it will play out is unpredictable; witness Lula’s increasing poll numbers. And corruption will be competing for attention with other high-voltage issues, like the troubled state of the region’s economies, growing crime and violence, and the new U.S. administration’s policy directions. 

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor

 

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