Lava Jato Scandal Rocks Brazil

Lava Jato Scandal Rocks Brazil

On March 2014 an operation led by the Federal Police unveiled a far-reaching corruption scandal in Brazil, the so-called lava jato (car wash scheme), which involved money laundering and embezzlement. The name of the operation was chosen after the police discovered that those involved in the embezzlement network used gas stations to move the cash around. The amount of money involved in this case is around R$ 10 billion ($3.2 Billion). The corruption scheme is still currently under investigation with some of the main figures already in prison and the state reacquiring the money that was diverted by construction companies and politicians during the years that the scheme was in place. This scheme involved several Brazilian politicians (including former president of the Senate Renan Calheiros), the state owned oil company Petrobras, as well as the construction companies OAS and Odebrecht. OAS and Odebrecht were responsible for the construction of the majority of the Brazilian stadiums used for the World Cup. Their presence on the list of investigated companies resulted in the freezing of bank accounts. Because of financial problems caused by the investigation the OAS Group was forced to sell most of its business enterprises including corporate rights to the Dunes Arena in Natal and Fonte Nova Arena in Salvador in order to pay the debts accrued by the company. In 2007 when Brazil was announced as the host of the 2014 FIFA World Cup, the costs of renovating stadiums that did not meet FIFA standards were to be mostly covered by private companies. But Brazil decided to have twelve host cities across the country, when FIFA’s requirement is only eight cities in order to reduce possible costs. The participation of only four constructing companies; Odebrecht, OAS, Camargo Correa and Andrade Gutierrez for the new infrastructure for the host cities, and the fact that these same companies are also involved in the construction for the Rio Summer Olympic Games shows a special relationship between these companies and the government. The companies in questioned managed to enrich themselves using tax money that was diverted from the state to finance the World Cup and Olympic projects. This connection only became public knowledge when the federal police uncovered the lava jato money-laundering scheme in 2014. The funding for the construction of the stadiums was supposed to be divided in three different ways: public, public-private, and private. The misuse of funds during the construction of the stadiums became apparent when the construction deadlines were not met. As StadiumDB points out in their report, public money ended up being used in all three cases, with long-term loans coming from BNDES, Brazil’s development bank. In the case of Arena das Dunas (constructed by OAS in a public-private partnership deal with the state of Rio Grande do Norte), 80% of the money came from a BNDES loan. While the state of Rio Grande do Norte owns the stadium, OAS controls the use of the stadium for a period of 30 years, but they are set to sell the landholding rights to cover their debts. Although the competition was a success in terms of sport performance, it was a disaster in matters of its costs and legacy. The bill for the construction of the World Cup 2014 stadiums was R$ 9 billion ($2.8 billion), which is 50% more than predicted in an initial report in 2010. It appears that the protestors that demanded more transparency and questioned the financial legacy of the tournament were right in that the perceived financial benefits of the competition did not help to improve the basic needs of citizens on issues such as health-care and education. By Thomas Farines -

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On March 2014 an operation led by the Federal Police unveiled a far-reaching corruption scandal in Brazil, the so-called lava jato scandal (car wash scheme), which involved money laundering and embezzlement. The name of the operation was chosen after the police discovered that those involved in the embezzlement network used gas stations to move the cash around. The amount of money involved in this case is around R$ 10 billion ($3.2 Billion). The corruption scheme is still currently under investigation with some of the main figures already in prison and the state reacquiring the money that was diverted by construction companies and politicians during the years that the scheme was in place.

This scheme involved several Brazilian politicians (including former president of the Senate Renan Calheiros), the state owned oil company Petrobras, as well as the construction companies OAS and Odebrecht. OAS and Odebrecht were responsible for the construction of the majority of the Brazilian stadiums used for the World Cup. Their presence on the list of investigated companies resulted in the freezing of bank accounts. Because of financial problems caused by the investigation the OAS Group was forced to sell most of its business enterprises including corporate rights to the Dunes Arena in Natal and Fonte Nova Arena in Salvador in order to pay the debts accrued by the company.

In 2007 when Brazil was announced as the host of the 2014 FIFA World Cup, the costs of renovating stadiums that did not meet FIFA standards were to be mostly covered by private companies. But Brazil decided to have twelve host cities across the country, when FIFA’s requirement is only eight cities in order to reduce possible costs.

The participation of only four constructing companies; Odebrecht, OAS, Camargo Correa and Andrade Gutierrez for the new infrastructure for the host cities, and the fact that these same companies are also involved in the construction for the Rio Summer Olympic Games shows a special relationship between these companies and the government. The companies in questioned managed to enrich themselves using tax money that was diverted from the state to finance the World Cup and Olympic projects. This connection only became public knowledge when the federal police uncovered the lava jato money-laundering scheme in 2014.

The funding for the construction of the stadiums was supposed to be divided in three different ways: public, public-private, and private. The misuse of funds during the construction of the stadiums became apparent when the construction deadlines were not met. As StadiumDB points out in their report, public money ended up being used in all three cases, with long-term loans coming from BNDES, Brazil’s development bank. In the case of Arena das Dunas (constructed by OAS in a public-private partnership deal with the state of Rio Grande do Norte), 80% of the money came from a BNDES loan. While the state of Rio Grande do Norte owns the stadium, OAS controls the use of the stadium for a period of 30 years, but they are set to sell the landholding rights to cover their debts.

Although the competition was a success in terms of sport performance, it was a disaster in matters of its costs and legacy. The bill for the construction of the World Cup 2014 stadiums was R$ 9 billion ($2.8 billion), which is 50% more than predicted in an initial report in 2010. It appears that the protestors that demanded more transparency and questioned the financial legacy of the tournament were right in that the perceived financial benefits of the competition did not help to improve the basic needs of citizens on issues such as health-care and education.

By Thomas Farines

COMMENTS

WORDPRESS: 1
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    Realmente é uma vergonha o que acontece no Brasil ultimamente , politicos corruptos

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