Odebrecht scandal casts shadow over Panama poll

Juan José Rodríguez
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Panama's President Juan Carlos Varela is prohibited from running for a second-term, but the outgoing president has been harshly criticized for not canceling state contracts with Odebrecht

Panama's President Juan Carlos Varela is prohibited from running for a second-term, but the outgoing president has been harshly criticized for not canceling state contracts with Odebrecht (AFP Photo/Luis ACOSTA)

Panama City (AFP) - Seated next to dozens of workers in helmets and yellow jackets, Panama's President Juan Carlos Varela posed last month for a shared selfie after inaugurating the Central American country's latest project by Odebrecht -- the Brazilian firm whose millions in bribes have cast a cloud over Sunday's election.

Walkie-talkie in hand, Varela gave the order to roll out the trains on Metro Line 2 -- an elevated monorail system for Panama City built by the Brazilian giant along with Spain's FCC.

Varela is prohibited from running for a second-term, but the outgoing president has been harshly criticized for not canceling state contracts with Odebrecht, which has admitted to paying at least $59 million in bribes in Panama between 2010 and 2014.

"The Odebrecht issue is going to be a hot potato for anyone who comes into government. It's going to be a problem that won't go away easily," said Magaly Castillo, head of a citizen's pro-justice group.

The Brazilian company is a prominent constructor in the Central American country, undertaking 17 megaprojects since 2005, ranging from roads and highways to hydroelectric and urban renovation, garnering an estimated $10 billion.

"We have been paying a significant price premium in all of these megaprojects," said Annette Planells, of the Independent Movement (Movin), one of several groups pressing for changes in Panama's public procurement laws.

The law was changed but an amendment made disqualification over corruption dependent on a prior conviction in Panama's courts. Odebrecht -- bannned in Colombia and Mexico from tendering for state contracts -- can continue prospecting for business in Panama.

- 'Not so easy' -

The main candidates in Sunday's presidential elections have come out in favor of a reform enabling disqualification of companies accused of corruption.

However, the thousands of jobs generated by the multinational and a compensation agreement reached between Odebrecht and the justice department does not make this so easy, experts say.

Odebrecht has already agreed to pay the government 220 million dollars in reparations over 12 years and cooperate with anti-corruption investigators, as part of an agreement reached with Brazilian and Panamanian prosecutors.

The agreement provides immunity from prosecution for Odebrecht executives in Panama in return for full cooperation with investigators -- including naming politicians and officials on the take.

"Disqualification is a very complex issue that many candidates in the campaign are latching on to, but there's no easy solution from the legal point of view," said Olga de Obaldia, executive director of the Panamanian chapter of Transparency International.

"You're not going to reverse a country-to-country agreement at a stroke of the pen," De Obaldia told AFP.

Some analysts fear that if disqualified, Odebrecht would simply not pay the fine by claiming lack of cash flow.

"What would be in danger would be the 200 million dollar fine," she said.

- Corruption 'like tango' -

Odebrecht is at the center of Latin America's biggest corruption scandal that has rocked governments and political parties in Brazil, Peru, Colombia and other countries, sending former presidents and senior officials to jail.

Some 80 people have been accused in Panama of facilitating the Brazilian firm's corruption on a massive scale, among them the sons of former president Ricardo Martinelli.

They are accused of raking in $56 million from Odebrecht to smooth the firm's way through Panamanian red tape, according to prosecutors.

Several of Martenelli's former ministers have also been arrested in connection with the probe. While no-one has yet been brought to trial, prosecutors believe the tentacles of the scandal reach into the last three Panamanian governments.

Meanwhile, the new passenger terminal at Panama's Tocumen International airport has just been inaugurated.

Odebrecht built that too. And it plans to go on building in Panama.

"Odebrecht didn't invent corruption but used it, expanded it and took advantage of it at levels never before known in Latin America," said Francesco Bustamante, a former economist at the Inter-American Development Bank.

"Would corruption end if it was prevented from tendering for contracts in Panama?

"No! Because corruption is like tango -- it takes two to dance."