Fausta's Blog

American and Latin American Politics, Society, and Culture

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Peru: Odebrecht pipeline contract cancelled UPDATE: Odebrecht expelled

As you may recall, Peru demanded cash from Odebrecht ahead of any plea deal talks.

Now the country is cancelling a contract with Odebrecht to build a $7-billion natural-gas pipeline:

Mines and Energy Minister Gonzalo Tamayo said on Monday the Southern Peruvian Gas Pipeline consortium, which is majority-owned by Odebrecht, failed to meet Monday’s deadline to secure financing and would be officially told on Tuesday that the contract will be rescinded.

Mr. Tamayo said the consortium would also be assessed a $262-million penalty for not completing the contract to build the 700-mile-long pipeline to transport cheap natural gas from the Amazon to towns across the southern highlands and on to the Pacific. Odebrecht has a 55% stake in the project. Spain’s Enagas has 25%, and Peru’s Graña y Montero has 20%.

Odebrecht has admitted to paying $29 million in bribes in Peru.

In other Odebrecht news, theBrazilian Supreme Court Justice Teori Zavascki, who

was scheduled to start reviewing testimony in coming weeks from 77 executives and employees of the Brazilian construction group Odebrecht, which last month signed a leniency agreement with U.S., Brazilian and Swiss authorities

died in an airplane crash last Thursday. President Michel Temer will name his replacement, who in turn “can either keep the process moving or bring it to a halt,” according to the Wall Street Journal.

UPDATE
Peru Moves to Oust Brazilian Construction Company Odebrecht Over Bribes. Peru is the second country to bar the company after Odebrecht admitted to paying hundreds of millions of dollars to win contracts

Last week, Colombia said it was working to remove Odebrecht from the country after the firm admitted paying $11 million to secure road and other projects.

Ecuador and Panama have also barred Odebrecht from signing contracts for new public works pending the completion of their probes.
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Brazil: Temer to veto relief bill for big spenders

Brazilian presidents can veto parts of bills, so Temer’s putting his foot down:
Brazil’s President Temer to Veto Relief for Indebted States. Mr. Temer plans to negotiate early next year a new bill that would include some of the austerity measures that were cut

Mr. Temer plans to veto the part of the bill outlining what states will have to do in return for renegotiating the debt, while signing the part on the new debt terms, according to the finance ministry. The administration will negotiate early next year a proposal that would include some of the austerity measures that were cut, the ministry said.
. . .
The bill to be vetoed by the president amounted to a giveaway to free-spending states, according to Jankiel Santos, an economist at Haitong Banco de Investimento do Brasil.

Congress can override his veto. Let’s hope they don’t.

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Venezuela will be expelled from Mercosur

over its human rights record,
Venezuela Removed From Trade Group Over Human-Rights Record. The decision comes as the country’s economy is ravaged by food shortages and runaway inflation

The debate over Venezuela’s role in the trade bloc comes as new conservative, market-friendly governments in South America are at odds with Mr. Maduro’s socialist policies and crackdown on opposition dissenters. Mercosur members Brazil and Argentina led a recent effort to block Venezuela from taking its turn as the trade group’s rotating leader.

Mercosur’s full members are are Argentina, Brazil, Paraguay, Uruguay and Venezuela. Bolivia, Chile, Peru, Colombia, Ecuador and Suriname are associate countries.

The handwriting has been on the wall for months. Caracas Chronicles:

Barring an unlikely 180-degree turn by either the four founding countries (Argentina, Brazil, Paraguay and Uruguay) or the Bolivarian Republic, MERCOSUR will strip the B.R. of V of any voting rights in the organization (it would still have a voice) over its refusal to adopt the group’s legal framework. And neither side is in a mood to back down.

The Foreign Ministers of Uruguay and Paraguay agreed that unless Venezuela changes its mind, the decision reached by the four other members back in September will go forward.

. . .

The impasse in MERCOSUR is not new: since it was admitted to the bloc back in 2012, Venezuela has been a divisive presence in the organization. The country has refused to accept any responsibilities or adapt its institutional framework in anyway while expecting to reap all the benefits.

At the same time, Caracas has tried to shift the group’s trade-centered  raison d’etre into a more political one. Venezuela got away with it in part thanks to the loyalty of Cristina Fernandez de Kirchner and Dilma Rousseff, but after the election of Mauricio Macri in Argentina and the long impeachment process in Brazil, Mercosur became a deeply lonely place for the Bolivarian republic.

This step is the right thing to do. I don’t expect that Maduro will change his ways; to the contrary.

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Brazil: A Trump effect?

Trump Victory Adds Pressure on Brazil for Reforms, Executives Say (emphasis added)

Donald Trump’s U.S. election victory and the ensuing market volatility should encourage Brazilian policymakers to push ahead with ambitious economic reforms that help cushion the country from global turmoil, business executives and bankers said Tuesday.

A lack of decisive action to nudge Congress into approving broad pension, labor and spending cap legislation over the next months could imperil President Michel Temer’s effort to pull Brazil out of its deepest recession in eight decades, executives told Reuters at a New York event sponsored by Banco Bradesco SA.

One of them, who declined to be identified because of the sensitivity of the issue, said Trump’s surprise victory has shown that “more than ever, the fate of Brazil depends on Brazil, which means it is up to us to fix our economy and lure capital.”

Ponder that for a moment,

Trump’s surprise victory has shown that “more than ever, the fate of Brazil depends on Brazil, which means it is up to us to fix our economy and lure capital.”

That would be the best thing to come out of this election.

In other news, Post-Olympic Rio de Janeiro faces mounting unrest as austerity bites. Falling oil prices and lack of investment are pushing the state to the brink of bankruptcy

The party’s over: Rio de Janeiro’s time as the host city for the Olympic Games is a distant memory, while at the state level it can no longer rely on revenue from its offshore oil wells. To make matters worse, ongoing investigations into widespread corruption have frightened foreign investors away. Unemployment in the state of Rio de Janeiro has risen from 3.5% in 2014 to 6.7%, almost twice the national average.

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Brazil: Cunha out, Lula charged, Temer wants to privatize

Three headlines from Brazil this week,

1. Brazilian politician who led Rousseff impeachment is expelled from office. Eduardo Cunha, former speaker of the lower house, loses his seat and is barred from politics for eight years amid perjury and corruption claims

Cunha’s overwhelming defeat – by 450 votes to 10 with nine abstentions – strips him of parliamentary immunity and may be followed by criminal charges for his involvement in thebribery and kickback scandal at state-oil company Petrobras. He has also been banned from politics for eight years, a punishment more severe than that of Rousseff, who was ejected from office but maintains her political rights.

2. Federal prosecutors in Brazil have asked a judge to file corruption charges against former President Luiz Inacio Lula da Silva. (emphasis added)

They accused him of being the “boss” of a huge corruption scheme that cost the state oil company, Petrobras, an estimated $12.6bn (£9.5bn) in losses.

Prosecutors had been investigating whether Lula and his wife failed to declare ownership of a luxury flat.

He has denied owning the penthouse and says the case is politically motivated.

A criminal conviction would bar him from running for president in 2018.

3. Brazil launches privatization plan to rescue economy

The government will sell operating licenses for airports in the cities of Porto Alegre, Salvador, Florianopolis and Fortaleza by the first quarter of 2017. It also plans to sell rights to operate federal roads in the center-west and south regions later next year.

Center-right President Michel Temer has vowed to shift economic policy away from the interventionist policies of his predecessor, Dilma Rousseff, that marred investors’ confidence in the once-booming economy.
. . .
The program includes the concession of railway projects that have already been built as well as the long-delayed auction of rights in oil fields and hydroelectric plants in the first and second half of 2017.

The government will also privatize six power distributors owned by state-run power holding company Eletrobras in the north and northeastern regions.

Who knows? All of this may point to real change, which the country needs.

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Brazil: Senate votes to try Dilma for impeachment

At the WSJ:
Brazil Senate Votes in Favor of Dilma Rousseff Impeachment Trial. President will have to step down until trial ends; vice president will assume her post

Ms. Rousseff is being tried on charges that she illegally moved money between state-controlled entities to make her government’s budget deficit appear smaller than it really was. She denies wrongdoing and accuses her opponents of effectively staging a coup d’état.

Michel Temer is ready to take office. His party, the [Brazilian Democratic Movement Party] PMDB promotes (my translation),

labor and social security reforms, smaller government, reducing the interventionism that marked the PT’s administrations [under Lula and Dilma], and stimulating the private sector’s participation, especially in infrastructure.

The economy is in free fall: Brazil’s Economic Rise and Fall in Charts Underlines Temer’s Tough Task

Mr. Temer’s success or failure will depend on his ability to overcome three major crises—corruption, political dysfunction and Brazil’s worst recession in generations—that are deeply interconnected. Temer would permanently assume the presidency only if the Senate trial ends on a guilty verdict (see this post).

Related:
Lava-Jato

Memeorandum thread.



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The Carnival of Latin America and the Caribbean

ARGENTINA
Newton’s Third Law at work:
For every action Argentina reiterates claim to Falklands, there is an equal and opposite reaction Falklands MPs reject Argentina’s claim to islands

Argentina Said to Revise Nuclear Pact With China to Favor U.S.

BAHAMAS
An Island in the Bahamas Where Pigs Swim Free. On Big Major Cay, tourists and pigs play together on the sand and in the water.

BOLIVIA
China’s Sinosteel Signs Contract for Mill at Bolivia Iron-Ore Mine

BRAZIL
Brazil’s Vice President Michel Temer Aims Higher. Having led his party out of President Dilma Rousseff’s embattled government, former ally turns foe and angles for presidency

Brazil Investigator Alleges Connection Between Murder and Corruption Scandal. Judge Sergio Moro alleges money siphoned from Petrobras may have been used to cover up death of Celso Daniel

In January 2002, Mr. Daniel, the former mayor of Santo André, a suburb of São Paulo, was found shot to death a few days after being kidnapped. Six men were convicted and sentenced to prison, but the case has been reopened and closed several times since.

Mr. Moro on Friday alleged funds siphoned from the state-owned oil company at the center of the complex web of bribery and coverups, Petróleo Brasileiro SA, or Petrobras, could have been used to pay hush money related to Mr. Daniel’s murder.

Brazil Court Crimps Judge’s Probe. Sergio Moro’s aggressive probe of a bid-rigging-and-bribery scheme at state oil company Petrobras has put him in open conflict with President Dilma Rousseff—and made him a star to her many detractors.

CHILE
Bolivia Suing Chile at The Hague over Water Dispute

COLOMBIA
Thousands protest government handling of peace process in Colombia

Colombia unsure about hostage numbers before talks with ELN rebels

CUBA
Cuba After Obama Left

Obama’s Cuban Disgrace

This Is Not the Path to Cuban Freedom

In Cuba, image is king – whatever horrors lurk beneath it

Hypocrisy update of the day: Castro regime seeks reparations for slave trade

ECUADOR
Kiwi drug accused Scott Elliott speaks of ‘dreadful situation’ in Ecuadorian jail

JAMAICA
Jamaica, Beyond the Beach. The nation is recasting itself as a glamour and eco-tourism destination, but its African-inflected culture is what lulls you.

MEXICO
Argentine Experts Question Report on Missing Mexico Students

NICARAGUA
Miami Fugitive on Run for 20 Years Found in Nicaragua

PARAGUAY
Can Paraguay Escape Decades of Despotism, Ineptitude, and Corruption? Despite promising one of the biggest turnaround stories in the southern hemisphere, President Horacio Cartes has more work to do.

PERU
The drug mule’s makeover: Incredible transformation of ‘Peru Two’ Brit as she shows off new blonde hair and smarter, slimmer look in first interview since leaving jail for smuggling £1.5million of cocaine

PUERTO RICO
Why Puerto Rico’s super restructuring is bad policy

VENEZUELA
Venezuela’s Economy, As Told by A Hot Dog. Like the Famous Venezuelan Hot Dog Pepito, the Chavista-made Economic Crisis Comes in Layers



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