Odebrecht looks to avoid messy Peruvian divorce

Brazilian construction company Odebrecht’s decade of activity in Peru is coming to a bitter end as the group sells its Peruvian assets to provide for any fine related to the so-called ‘Car Wash’ scandal. However, the process has not been smooth because Odebrecht’s interests in the country are worth billions of dollars, and the Peruvian government wants to make sure that any sale complies with transparency standards and guarantees the best outcome for the Peruvian state.

Odebrecht won projects worth about $12bn in Peru over the past decade, but the company’s Peruvian dealings have been the subject of intense scrutiny since it acknowledged paying $29m in bribes to secure public works contracts in the country between 2005 and 2014.

Funding shortfall

The future of some of the company’s landmark projects in Peru now hangs in the balance. The government has already scrapped Odebrecht’s contract for the development of the Southern Peru Pipeline, a massive $7bn project to transport natural gas from the Anta province to the south coast, because the company’s consortium failed to secure the necessary funding to continue the works. At first, it seemed as if Odebrecht had reached an agreement with Canadian pension fund Brookfield Asset Management to sell its 55% stake in the project. But the deal did not materialise and Peru’s private investment promotion agency, ProInversión, is now in charge of restructuring the project. Work is 30% complete, and a new tender was initially expected in 2018, although that target now seems unlikely to be met.

On the other hand, Brookfield did team up with France’s Suez group to acquire the Olmos irrigation concession in the northern Lambayeque region, a project that Odebrecht wrapped up in 2014. Odebrecht also sold the 456-megawatt Chaglla hydropower plant to a Chinese consortium led by state-owned China Three Gorge for about $1.4bn, according to local press reports, and is negotiating a way out of its remaining Peruvian concerns.

Yet Odebrecht must tread carefully. An emergency decree approved in February set stringent rules to ensure companies involved in corruption cases sell their interests locally, lest the capital needed to ensure the continuity of the attached contracts and pay future fines and indemnification charges leave the country.