Odebrecht Lawsuit Overthrows Senior Government Officials in Peru

RIO DE JANEIRO, BRAZIL – The domino effect of the Odebrecht case this week affected top Peruvian government officials. All Ministers in President Martín Vizcarra’s cabinet submitted their resignations on Thursday, following a political crisis that began Tuesday morning with the resignation of the Minister of Energy and Mines.

The controversy erupted a week ago when the Brazilian construction company brought an international lawsuit against the Peruvian state for the cancellation of a project to build a gas pipeline in the south of the country, which the government halted in 2017 for allegedly being tainted by corruption. Seven days later, four of the 19 ministries – Energy and Mines, Justice, Transport and Communications, and Education – had their respective heads replaced.

Vizcarra inaugurated his four new Ministers on Thursday evening; they join a government in political crisis due to the Odebrecht scandal. The International Center for Settlement of Investment Disputes (ICSID), a World Bank arbitration body that deals with commercial disputes, has not yet accepted the lawsuit brought by the construction company, which claims compensation of US$1.2 billion (R$5.2 billion).

Another company involved in the South Peruvian gas pipeline project was Spanish company Enagás, which joined Odebrecht in appealing to ICSID against Peru. The project, approved during the Ollanta Humala government, has been halted since 2017 without having secured the required financing, and Odebrecht, which was in the eye of the hurricane of the Lava Jato scandal, was unable to sell its share of the investment.

Odebrecht’s directors signed a cooperation agreement with the Peruvian courts in February 2019, in exchange for the company being allowed to continue its operations in the country. In the document, the construction company concedes that it paid bribes and engaged in illegal negotiations to secure four concessions, but it did not acknowledge this same liability for the work on the gas pipeline. The text did not include any clause preventing the company from suing Peru before ICSID, which led to criticism of the Peruvian executive and the special Prosecutor in the Lava Jato case, Jorge Ramírez, who negotiated the terms of this plea bargain.

In the midst of controversy over the construction company’s conduct, a television program disclosed last Sunday that the Minister of Energy and Mines, Juan Carlos Liu, had worked as a private consultant for Odebrecht while already serving as an advisor to the ministry, between 2010 and 2014. He took office in October, and in his declaration of patrimony, he failed to mention the services provided to the Brazilian construction company.

As an advisor to the Ministry, Juan Carlos Liu prepared a study in 2013 recommending the financing model for the Southern Gas Pipeline, the concession that is now the object of controversy between the construction company and the Peruvian government. He further disclosed that in January, through an agreement with the Prosecutor in charge of the Lava Jato case, he met with Odebrecht executives who wanted to know about the future of the gas pipeline, today called the Integrated Gas Transportation System.

The detractors of the plea bargain between the Brazilian construction company and the Prosecutor’s Office in charge of the Lava Jato case, i.e. politicians in opposition to the government – such as the Fujimorist Força Popular (Popular Power) party and the Aprista party (American Popular Revolutionary Alliance) – claimed the Prosecutor had greater concern for the interests of the Brazilian transnational corporation than for the interests of the country.

Faced with the media coverage and allegations against the Ministers, the recently reinstated Prosecutor General Daniel Soria removed Prosecutor Ramírez from his post on Wednesday. Deputy Prosecutor Silvana Carrión will take his place. On Thursday morning, it was announced that Ana Teresa Revilla, Minister of Justice, presented her resignation to President Vizcarra, as did the Minister of Transport and Communications, Edmer Trujillo, one of the closest to the head of state. Trujillo is investigated for millionaire illegal payments made in the last days of his administration as mayor of the city of Moquegua when Vizcarra was regional governor.

“The political crisis was triggered by the disclosure of data that are not entirely accurate. The decision [of the prosecutor’s discharge] is not mine, but rather of the prosecutor general. I didn’t order the prosecutor general’s meeting with the Odebrecht executives, but rather the December meeting with Minister Liu,” Minister Revilla told Radioprogramas station in the evening.

In an interview with the IDL-Reporteros website, former prosecutor Jorge Ramírez said that Odebrecht suggested Peru extend the statute of limitations to exercise its right to arbitration before the ICSID, while they reached an agreement on the sale of part of the Pipeline. However, neither the Minister of Economy, María Antonieta Alva, nor Prime Minister Vicente Zeballos came up with a solution. The deadline expired, and the company requested arbitration under pressure from its creditors.

Since early October, the Vizcarra administration has ruled through emergency decrees because the President dissolved Congress, using a constitutional provision permitting a vote of confidence. The new Congress, elected in January, is expected to take office in March and to resume the political reform blocked by the members of the dissolved Congress, which had a Fujimorist and Aprista majority.

Among the cabinet members who left office on Thursday, it is unclear what led to the replacement of the Minister of Education, Flor Pablo, whose administration has not undergone any upheaval. It is likely to have been a compromise to some political sector after Vizcarra’s meetings with the new congressional benches.

Several of Peru’s leading politicians face tax investigations due to the Odebrecht scandal, including former presidents Alejandro Toledo, Pedro Pablo Kuczynski and Ollanta Humala, along with his wife. Former Lima Mayor Susana Villarán and former presidential candidate Keiko Fujimori were also implicated in the investigations. Toledo is the subject of an extradition request, Kuczynski is under house arrest, and Fujimori is serving time in pre-trial detention. Another ex-president, Alan García, committed suicide in April 2019 when a prosecutor and a group of police officers were preparing to arrest him as a result of investigations into the bribes paid by Odebrecht.

Source: El País