Delta Out of Rio Projects Amid Allegations

By Ben Tavener, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – An investigation by the Polícia Federal (Federal Police) has found links between Brazilian construction giant Delta Construção, who walked out on the Transcarioca Bus Rapid Transit (BRT) consortium last week, and the now infamous Carlinhos Cachoeira (Waterfall) – the businessman at the center of a corruption scandal which could implicate a large network of businessmen and politicians in the country.

The company also left the consortium providing modernization work to the Maracanã Stadium, key to Rio’s hosting of the FIFA World Cup in 2014, less than a week earlier.

The BRT project on which Delta – Brazil’s sixth largest building company – was working, is a 24-mile-long (39km) “express corridor” that will link Rio’s Galeão International Airport with Barra da Tijuca in the Zona Oeste (West Zone).

Delta had been awarded a 42 percent stake, equivalent to R$789 million (US$418 million), in the R$1.5 billion project which has now been assumed by consortium partner Andrade Gutierrez.

Following an investigation, the Federal Police announced it had found evidence linking Delta with the now infamous Carlos Ramos, known as Carlinhos Cachoeira.

Folha de São Paulo newspaper reported that the police investigation had found that Delta boss Fernando Cavendish was orienting one of the company’s directors, Cláudio Abreu, who was fired by Delta after it emerged he was working with Ramos. The investigation appears to prove the company’s dealings with Ramos go far deeper than previously thought. Delta is not currently commenting as the investigation is ongoing.

Ramos was arrested in February as part of Operation Monte Carlo, suspected of involvement in a vast network of organized crime and corruption.

Rio Mayor Sérgio Cabral – said to be a friend of Fernando Cavendish, who has since left the company’s board of directors – has ordered contracts between Delta and Rio City Hall be checked, and has said that he had no knowledge of any link between Delta and Carlinhos Cachoeira.

Carlos Caicedo, Latin America expert at Exclusive Analysis, says that contract stability is now subject to higher risk “due to the rapid increase in the number of infrastructure projects in the period leading up to these two major sporting events, and also due to improved scrutiny.”

Brazilian oil giant Petrobras has reportedly announced that it intends to rescind Delta contracts agreed to build two energy complexes in Rio due to marked delays.

However, Mr. Caicedo says the real reason was likely to be “reputation risk mitigation” and that Delta subcontractors were at risk: “The announcement coincided with a congressional investigation into corruption and bribery by Delta. This is having ramifications on the viability of other contracts for public works allocated to Delta,” he said.

Contracts awarded to Delta by Rio State in the past five years are said to total R$1.5 billion (US$790 million). Brazilian commentators had suggested Delta’s withdrawal from the Maracanã project was due to debts accrued through illegal gambling, and that payments for the project’s supplies and operations had failed to be made.

However, the company has since said the move was a “strategic business decision” and that other projects that the company is undertaking would be continuing as planned.