OLYMPICS-CONSTRUCTION/PETROBRAS Brazil corruption probe threatens Rio Olympics preparations

Record ID: 145558

  • Title: OLYMPICS-CONSTRUCTION/PETROBRAS Brazil corruption probe threatens Rio Olympics preparations
  • Date: 31st July 2015
  • Summary: RIO DE JANEIRO, BRAZIL (FILE) (REUTERS) CLOSE-UP OF THE PETROBRAS LOGO ON THE EXTERIOR OF THE PETROBRAS HEADQUARTERS IN RIO DE JANEIRO RIO DE JANEIRO STATE, BRAZIL (FILE) (REUTERS) VARIOUS OF AN OFFSHORE OIL PLATFORM CURITIBA, BRAZIL (FILE - 2015) (REUTERS) EXTERIOR OF THE BRAZILIAN FEDERAL POLICE HEADQUARTERS IN CURITIBA VARIOUS OF FEDERAL POLICE BINDERS ON THE LAVA JATO
  • Embargoed: 15th August 2015 13:00
  • Keywords:
  • Location: Brazil
  • Country: Brazil
  • Topics: General
  • Reuters ID: LVAE887S0OIZC1NQXHXQTYMZ5C20
  • Aspect Ratio: 16:9
  • Story Text: Brazil's largest-ever corruption scandal threatens to slow down preparations for the Olympic Games in Rio de Janeiro next year as it engulfs construction companies responsible for the lion's share of projects worth around $12 billion.
    Prosecutors investigating the scandal at state-run oil firm Petrobras have implicated more than 20 companies, including five that are working on Olympics venues and infrastructure.
    The investigation, dubbed "Operation Lavo Jato," or "Operation Car Wash", has pushed the companies into a tight spot as their credit lines dry up and top executives are in jail awaiting trial.
    Scrambling to limit the fallout, Rio's city government is at times being forced to act like a bank, lending companies money to prevent a slowdown in construction, a senior city government source told Reuters.
    Of the five firms, Odebrecht SA, Latin America's largest engineering and construction company, is involved in over half of all Olympics projects by value.
    In June federal police arrested Odebrecht's chief executive, Marcelo Odebrecht, along with several other top construction executives.
    The other four firms working on Olympics projects include OAS SA, Andrade Gutierrez SA, Queiroz Galvao SA, and Carioca Christiani Nielsen Engenharia SA.
    But Rio de Janeiro city hall's coordinating secretary, Pedro Paulo Teixeira, on Thursday (July 30) told Reuters the fallout here has been minimal and that Olympics projects remain on schedule and on budget.
    "We don't have Lava Jato ("Operation Car Wash") here. The projects are on schedule, the projects are on the projected price point as per the contract. There is no story here about projects costing double what was in the contract. And here we have a relationship with the companies; but it's obvious that there are problems with Lava Jato, and there are problems with the contracts that there had been with Petrobras," Teixeira said.
    All payments from Petrobras to the companies have been suspended, so those working on the Rio Olympics face a cash squeeze with the opening ceremony just a year away.
    Prosecutors say construction firms overcharged Petrobras for years and that excess cash was used to bribe politicians.
    Though Olympics officials say the scandal has not yet resulted in delays, preparations in Rio are well behind where they were at the same point in London before it hosted the Olympics in 2012.
    The city looks like a giant building site with firms working on an extended metro, light railway, re-built port area, new highways and dozens of venues.
    "The city of Rio de Janeiro is following the projects, including the companies that are involved. So, the delivery of these projects is on schedule and our relationship is based on delivering these projects. So there is no impact of any kind on these projects as far as meeting the timeframes and costs that were agreed on with these companies for the 2016 Rio Olympics," added Teixeira.
    OAS, one of Brazil's biggest construction firms, filed for bankruptcy protection in March after its credit lines dried up.
    It is part of the consortium building a group of Olympics venues at Deodoro in northeast Rio, where 11 sports including rugby, shooting and BMX riding will be held.
    OAS said the project has not been affected.
    Odebrecht did not respond to requests for comment and Carioca Engenharia declined to comment.
    Andrade Gutierrez, OAS and Queiroz Galvao said their projects were progressing normally and City Hall said construction was being delivered on time.
    So far the level of criticism of preparations for the Olympics has been less than the wave of protests and negative press that marked the run-up to the soccer World Cup in Brazil last year. That tournament was in the end hailed as a success.
    Still, with one year to go there remains a lot to be done and how the different levels of government manage the fallout of the Petrobras scandal will be crucial to getting the work delivered on time.
  • Copyright Holder: FILE REUTERS (CAN SELL)
  • Copyright Notice: (c) Copyright Thomson Reuters 2015. Open For Restrictions - http://about.reuters.com/fulllegal.asp
  • Usage Terms/Restrictions: None
Register