Bankruptcies caused by Petrobras scandal halts Brazilian infrastructure projects

Brazil’s transportation minister acknowledged this week that the fall-out from the Petrobras "Car Wash" scandal and measures to cut state spending had halted work on a number of large-scale infrastructure projects and that they were unlikely to resume in the near future.

Antonio Carlos Rodrigues told the federal government’s Senate Infrastructure Committee: "You can’t put up a smokescreen or hide what’s happening. Everything that’s happening has a significant impact on transportation."

OAS has nearly $1.8bn in global bonds outstanding and an additional $1bn of debt to Brazilian banks

The Petrobras scandal was brought to light last December when police arrested 35 individuals who were believed to have taken part in scheme whereby construction firms bribed Petrobras executives to win inflated contracts.

The executives of the state-owned company are alleged to have passed a cut to politicians within the ruling Workers Party. 

Companies caught up

Among those detained were executives from some of Brazil’s largest construction companies, including José Adelmário Pinheiro Filho, the president of OAS, and executives from construction and civil engineering firms Camargo Correa, Engevix, Galvao Engineering, Alumini Engenharia, Mendes Jr, and UTC Engenharia.

Altogether, Petrobras suspended 23 construction and engineering firms from bidding on its future contracts. Three of those have since filed for bankruptcy.

In January, a Brazilian court accepted Alumini Engenharia’s request for protection. Alumini has denied allegations against it, and no charges have been brought against the company or its managers.

Two months later, Galvao Engenharia filed as well, alleging that Petrobras owed it $156m. At the end of March, OAS, the third largest construction firm in Brazil followed suit. The move has been expected since January, when the company missed a bond payment. 

OAS has nearly $1.8bn in global bonds outstanding and an additional $1bn of debt to Brazilian banks.

On 17 April, construction and energy contractor Schahin Group requested protection for 28 of its subsidiaries. 

The company’s statement said that the filing covered $2.1bn of liabilities, and that "the closure of national and international credit markets" had made "it impossible to finance the activities of the companies."

It added that it would abandon its activities in the field of engineering and construction to focus on the oil and gas area. 

Projects hit

As an example of a scheme affected, Rodrigues cited a highway under construction in the central Brazilian states of Tocantins and Goias, which is being carried out by Galvao Engenharia. 

This firm was awaiting the release of a $134-million loan from the National Bank for Economic and Social Development, however Rodrigues said the company’s access to public credit had been suspended.

Other projects will only be delayed. Among these is the 2.8km Anita Garibaldi Laguna bridge (pictured), the third longest in Brazil. It will be delivered in early July rather than May, as planned. The scheme is 98% finished.

The fiscal adjustment is intended to reduce public debt and prevent a second decrease in Brazil’s credit rating. Last month, S&P’s rating for the country fell from BBB to BBB-minus.

The country’s finances have been put under pressure by a  lower than expected budget surplus. 

Rodrigues said his ministry was unsure of the size of its 2015 budget as it had not yet been told what cuts would be carried out as part of the government’s austerity plan.

Photograph: The 2.8km Laguna Bridge project has been delayed two months (Source: Ponte de Laguna)

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