OE Watch Commentary: The title of this commentary is named as such as it exemplifies how Brazilian construction company Odebrecht has adversely affected the Peruvian economy following the fallout of the company’s international construction scandal. Although Brazil is bearing the largest brunt of its own misconduct, Peru’s economy is also feeling the effects. This is because construction projects with contracts worth billions of dollars have been halted in the wake of the investigation, and in the meantime, Peru grapples with how to respond to a scandal engulfing the highest ranks of its political class.
Because of the gravity of this case, experts assert that Peru could potentially serve as a case study to how corruption of this nature can affect a developing nation. “The entire country has come to a halt, leaving Peru’s construction sector paralyzed” said Hugo Alache, the spokesperson for the Association of Odebrecht construction, in the excerpted article from La Republica. In the article, Alache also states that at least 147 companies went bankrupt due to the scandal. The excerpted article from El País discusses how the scandal also affected the Gasoduto del Sur (Southern Gas Pipeline), a 620-mile long gas pipeline and the largest infrastructure project ever built in Peru.
Odebrecht admitted to paying $29 million in bribes to public officials in Peru between 2005 and 2014 in exchange for $12.5 billion in contracts as discussed in the excerpted article from El Comercio. However, it has denied that all of its Peruvian projects were tainted by corruption. Economists estimate that halted projects and null contracts shaved as much as 1.5 percentage points off Peru’s GDP last year. Economists estimate the investigations will cost Peru at least another half point to a point this year. Thanks in large part to strong mineral prices, Peru’s economy is still poised for growth in 2018, but because of the Odebrecht affair, it is not expected to approach the 5 percent annual GDP hike that economists say is needed to reduce poverty in the country. At the same time, because of the Odebrecht-related investigations, roughly 150,000 jobs have been lost over the past 12 months and dozens of companies are on the brink of bankruptcy. The excerpted article from La Región notes how even Peruvian President Pedro Pablo Kuczynski declared that the “Odebrecht scandal put a brake on economic growth.” Since the after effects of this scandal are slowing coming to light, only time will tell how the Odebrecht affair will affect Peru’s economy in the long term. End OE Watch Commentary (Fiegel)