Brazil Arrests Hurt Olympic Games

Arrest of Odebrecht CEO, Ecuador organizes Chevron protests, LatAm ad outlook.

BY LATINVEX STAFF

Last week’s arrest of the CEOs of Odebrecht and Andrade Gutierrez, Brazil’s top construction firms, are expected to impact works related to the Olympic Games in Rio de Janeiro next year, IHS warns.

Marcelo Odebrecht, the head of Latin America's largest engineering and construction company Odebrecht SA, and Otavio Marques Azevedo, CEO of Andrade Gutierrez, Brazil's second-largest builder, were arrested Friday as part of an investigation into a massive corruption scheme at Brazilian state oil producer Petrobras.

“The arrests are likely to have undesired repercussions for several projects related to the 2016 Olympic Games,” Carlos Caicedo, Senior Principal Analyst for Latin America at IHS, said in a commentary.

The two companies are responsible for the development of a new line of the Rio de Janeiro metro system, a new light railway known as VLT Carioca, and works at the Olympic Village.

The warning from Moody’s – which placed both companies on ratings watch – will also hurt them, he says.  

“This will also be likely to result in banks curtailing credit provision due to uncertainty generated by the legal dispute,” Caicedo says. “If the companies' cash flows are affected, it could lead to delays for the ongoing Olympic Games-related projects.”

The probes into Odebecht and Andrade Gutierrez are also expected to affect their projects abroad, IHS warns. The two companies have secured infrastructure projects in countries including Colombia, El Salvador, and Panama, as well as Cuba and Venezuela.

In Colombia, for example, companies that have international bribery convictions are prohibited from government procurement contracts. Colombian officials are now taking a closer look at Odebrecht’s major contracts there, El Tiempo reports.

Meanwhile, the arrest of 46-year-old Odebrecht, who has personal ties to former President Luiz Inacio Lula de Silva, could bring the scandal closer to the political heart of the ruling Worker's Party, according to Reuters.

Epoca magazine says that Odebrecht could provide damaging testimony against Lula and current President Dilma Rousseff.

The bribe scandal has already resulted in indictments against more than 100 people and implicated dozens of lawmakers, most of them from the ruling Workers' Party, according to Reuters.

ECUADOR STAGES US PROTESTS AGAINST CHEVRON

The government of Ecuador organized protests that took place outside the building where a legal dispute between the South American nation and oil giant Chevron was being hashed out, the Washington Free Beacon reports

A top official at the South American nation’s foreign ministry recruited expatriates in the United States to join an April rally outside of proceedings of the International Arbitration Tribunal, according to documents obtained by the publication.

An after-action report filed by Davila Aveiga Grace Patricia, who is listed as the chief of staff of the country’s Ministry of Foreign Affairs and Human Mobility, shows that various Ecuadorian agencies were collaborating to put a public face on the protests, the Washington Free Beacon says.

“It is certainly grossly inappropriate for a government to be organizing protests before an international tribunal like this,” Jose Cárdenas, a former senior State Department and USAID official, told the publication.

In 2011, an Ecuadorian court in Lago Agrio ruled that Chevron had to pay $19 billion in environmental damages for pollution by Texaco when it operated in the country between 1964 and 1990

In March last year, US Federal Judge Lewis Kaplan ruled that the Ecuador verdict was tainted by fraud. “The decision in the Lago Agrio case was obtained by corrupt means,” he said. “The defendants here may not be allowed to benefit from that in any way.”

And last month, Brazil’s Federal Prosecutor’s Office issued a recommendation to the country’s Superior Court of Justice that the $9.5 billion fraudulent Ecuadorian judgment against Chevron Corporation not be recognized for enforcement. 

A new book by Paul Barrett, an assistant managing editor at Bloomberg Businessweek, chronicles the fraud against Chevron. Brad Pitt’s production company Plan B Entertainment edged out George Clooney’s Smokehouse Pictures to win the film rights to the book, Law of the Jungle, according to Fortune.

LATIN AMERICA: STILL GLOBAL AD GROWTH LEADER

Latin America remains the key driver of advertising growth worldwide despite a slowdown, according to ZenithOptimedia’s latest Advertising Expenditure Forecasts released this week.

As a result of an economic slowdown in Latin America, ZenithOptimedia has reduced its forecasts for growth in Latin American adspend by three percentage points in 2015, from 11.4 percent to 8.4 percent.

However that still remains the highest estimated increase of any region this year outside of Fast Track Asia. By comparison, North American ad growth will likely only be 3.6 percent, while advanced Asia will see an 3.5 percent increase and Western & Central Europe an expansion of 3.1 percent.

Only Fast-track Asia (China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand and Vietnam) will outperform Latin American ad growth this year, with an estimated 9.4 percent increase, ZenithOptimedia says.

Meanwhile, Latin America  will remain a key driver of global adspend growth during the next three years as well, the ad agency forecasts. It still expects double-digit annual growth rates from Argentina, Uruguay and Venezuela, with Costa Rica, Mexico and Panama close behind, growing at 8 percent-9 percent a year between 2014 and 2017. 

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