MS Risk Blog

Operation Car Wash and The Future of Latin Americas Political Landscape

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A dominant theme in the Latin American press for a while now has been the corruption probes that have instigated the downfall of quite a few members of the Latin American financial and political ruling class. The saga started initially as a money laundering investigation in Brazil in 2014. Operation Car-Wash has since ballooned into a multinational corruption probe that has contributed to the impeachment of a President, to the jailing of billionaires, helped stall the worlds ninth-largest economy and led to a $3.5 billion corporate fine, a world record in a graft case. At the center of attention is Odebrecht, Latin Americas largest construction company whose former CEO has been sentenced to nineteen years in prison last year. New developments are coming out every day as indicted executives and politicians are spilling the beans amid plea bargaining and spiraling media coverage. February was no exception. In Argentina the head of the National Intelligence Agency, Gustavo Arribas, a close ally to President Macri, is under investigation for taking bribes. In Peru former President Alejandro Toledo is alleged to have received $20 million in kickbacks in return for green-lighting Odebrechts bid to build sections of the Interoceanic Highway, which now links Brazil with Perus Pacific ports. Peru has issued an international arrest warrant for Toledo. In Panama thousands of people have taken to the streets in protest over a bribe paid by Odebrecht to former President Ricardo Martinelli in exchange for public contracts. US authorities say Odebrecht paid $59m in bribes 2010 and 2014. Interpol has issued a Red Notice for two of Martinellis sons. Guatemala, which saw its ex-President Otto Perez Molina jailed for corruption, faced the arrest of a Supreme Court Judge in February as part of a nation-wide anti-corruption drive. Odebrechts activities are heavily scrutinized in the Central-American country. Venezuelan authorities raided the Caracas offices of Odebrecht, as prosecutors deepened a probe into the Brazilian construction firm that has admitted paying some $98 million in bribes to obtain government contracts in Venezuela. Amid the fall from grace of many members of the once powerful and rich ruling elite, it remains to be seen where justice starts and politics eventually end. Accusations are rife, however in some countries it takes place during election time. In Ecuador, where the lead opposition candidate is offering a sharp break with ten years of leftist rule, it is not hard to imagine a huge political influence of the continent-wide corruption scandal. Put into the mix Trumpian isolationism, Chinese and Russian bids for influence and the ongoing effects of a massive commodities downturn, the future of the Latin American political landscape might again become volatile.