Brazilian bank halts schemes worth $13.5bn as Lava Jato scandal spreads overseas

Brazil’s national development bank has frozen $13.5bn of funds for 47 overseas projects, including those in Angola, Mozambique, Cuba and the Dominican Republic, as yet more corruption charges are brought against politicians and executives arising from the Lava Jato corruption probe.

The suspensions affect contracts awarded to Brazil’s biggest construction companies including Odebrecht, OAS, Queiroz Galvão, Camargo Corrêa and Andrade Gutierrez.

The National Bank for Economic and Social Development of Brazil (BNDES) said yesterday it will now audit each of the 47 schemes to check that they meet its financial standards.

Among the projects affected is the Moamba Major dam in Mozambique, for which the bank was supplying $320m, about 70% of its total cost of $466m, and the Port Mariel project in Cuba.

The vast probe begun by prosecuting judge Sergio Moro in March 2014 showed that construction companies formed a cartel in 2003 to overcharge state oil firm Petrobras for building contracts, and then paid some of the illicit cash to Petrobras executives and politicians from several parties.

So far nearly 200 executives and former politicians have been charged in the Petrobras probe, and more than 80 have been found guilty.

Yesterday a former Brazilian senator, Gim Argello, was sentenced to 19 years in prison for corruption, money laundering and obstruction of justice.

Argello was arrested in April on evidence that he took more than $2m in bribes to ensure executives at major construction companies would not be summoned by an investigative congressional committee in 2014. Argello was the vice president of the committee.

Among those facing fresh charges as a result of the investigation of BNDES contracts are former Brazilian President Luiz Inacio Lula da Silva and 10 others.

Federal prosecutors on Monday charged Lula, businessman Marcelo Odebrecht and the others with "corruption, money laundering and influence peddling".

The Brazilian legal website Jota reported yesterday that federal police and the Ministry of Industry and Trade Development had opened an inquiry into the loans.

According to prosecutors, Lula worked with BNDES to obtain loans for engineering works that Odebrecht carried out in Angola, for which he was paid a fee – a charge that the former president’s defence team rejects.

Marcelo Odebrecht has already been sentenced to 19 years in prison after being convicted of paying more than $30m in bribes to Petrobras executives. In August 2015, five former executives of construction firm OAS were sentenced to between 11 and 16 years in prison for corruption.

The Lava Jato, or "carwash" investigation gained its name because of the use of money transfer service at the Posto da Torre petrol station in Brasília to dispose of illicit funds.

Image: The BNDES, based in Rio de Janeiro, is one of the world’s largest national development institution (BNDES)

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