(Bloomberg Opinion) -- As much as pouring cement and building towers, Brazilian construction dynasty Odebrecht was famed for its political panache. “I get down in the mud with the pigs but come out the other side clean in my white suit,” Norberto Odebrecht, founder of the legacy contractor, liked to boast back in the 1970s and 1980s. The catchphrase was shorthand for what became a patently Brazilian way of doing business – the art of buying influence and coming away unsoiled, or at least unincarcerated – among porcine politicians and bribe-truffling officials.
In half a century and over three generations, the family firm from northeast Brazil grew into a multinational engineering colossus, hurling up grand public works from the Andes to Angola. Shady pacts with political grifters and bagmen were just part of the deal behind the build-up and seemingly nothing a little Brazilian bonhomie and contract skimming couldn’t tidy up. Until it didn’t.
“Odebrecht” is now synonymous with quid pro quo and payola. The company’s remarkable trajectory from corporate Cinderella to paragon of dubious practices is in many ways a tale of Latin America’s biggest nation writ small. The fallen Brazilian giant and the wider scam it headlined have inspired enterprising journalists, a generation of avenging prosecutors, a Netflix series (The Mechanism) and a Brazilian feature film. But not until Brazilian author and business journalist Malu Gaspar’s recently released “A Organização,” or “The Organization,” has the Odebrecht imbroglio been told in all its glory and shame — a fitting year-end doorstopper for what turned out to be a tumultuous and ugly decade.
Running 640 pages, with dozens more of footnotes and annexes, and a cast befitting the Romanov dynasty, Gaspar’s narrative methodically reconstructs the company’s rise from regional contractor to continental colossus to the 13th federal criminal court of Curitiba, where Latin America’s biggest corruption probe, the Carwash case, was adjudicated.
This is more than an inside look at corporate triumph brought low by hubris and business ethics gone astray. Rather, Gaspar’s narrative is a glimpse of how for all its democratic aspirations and encomiums to the rule of law, the second richest country in the hemisphere still falls back on the rule of privilege, clan and cronyism.
For most Brazilians, this story line is repugnant but unsurprising. While many cheered and fought for the return of constitutional democracy, few fell for the lullaby that political integrity and meritocratic capitalism would rise like grace notes from the ballot box. They knew something I didn’t.
Having watched, reported and, frankly, reveled as Brazil shook off two decades of military rule, beat hyperinflation, squired millions of poor into the middle class, and then brought a whole class of crooked untouchables to account, I believed that Latin America’s signature underperformer had turned a civilizing corner. Gaspar’s account of Odebrecht’s plumb line from corporate exemplar to ignominy suggests a messier backstory.
The model dates to colonial times, when parentage and personal allegiances trumped the dispassionate state, and no rule was so rigid that intimacy couldn’t circumvent. “For our enemies, the law, to our friends, everything,” goes the old Brazilian saw.
Confined first to the margins of Brazil’s clubby construction moguls, Odebrecht had a ready disclaimer for the company’s early travails. “I didn’t have political support,” grandpa Norberto complained.
Gaspar tells how the company founder, his son Emilio and then grandson Marcelo set out to compensate for that inadmissible lacuna by getting to know and ingratiate Brazil’s sitting authorities, whether in epaulettes or civilian threads. The company’s gospel? “What works is what’s right.” To anyone who might blanch at such brazenness, the patriarch had a boilerplate comeback: “There’s the ethics of conscience and the ethics of responsibility,” he explained. Translation: To the “responsible” contractor, jobs, profit and success trumped honesty.
The formfitting ethos paid off. From a sweetheart deal on Brazil’s nuclear power plants in the 1970s to no-bid contracts in Venezuela’s Bolivarian Republic to the pre-fixed Petrobras tenders of the roaring 2000s, Odebrecht scooped up job after job. Annual revenues multiplied 13 times, and the number of employees more than quadrupled to 168,000 from 2002 to 2014. No matter that the bribes, construction delays and inefficiencies doubled government procurement spending. Odebrecht prospered, never quite soiling its linens.
The aggressive third-generation chief executive Marcelo Odebrecht expanded the red-and-white corporate logo to 26 countries and made it an icon of Brazilian soft power. Not even the growing shadow of the Carwash prosecutors shook his smug conviction that Odebrecht was “too big to jail.”
Yet by 2017, 77 company executives had signed plea agreements with Carwash prosecutors for offenses ranging from money laundering to spiriting cash bribes (occasionally tucked inside long underwear) to political operators. Marcelo Odebrecht was behind bars serving a 19-year sentence and showing the strain. “You know why I went so far?” he revealed to his cellmates. “Because I thought the system was airtight.”
The spreading scandal helped bring down one Brazilian president, put the iconic former leader Luiz Inacio Lula da Silva behind bars and helped to elect the bilious right-winger Jair Bolsonaro. The trail of bribes went beyond Brazil, provoking political whiplash in Panama, Guatemala and Ecuador. Four consecutive Peruvian presidents fell into disgrace over Odebrecht spoils, and recently the stain reached Mexico. Odebrecht S.A. and its petrochemical arm Braskem S.A. signed a $3.5 billion settlement with the U.S. Department of Justice, the U.S.’s largest foreign bribery case on record.
The collapse also sparked a filament of hope that Brazil was changing, and the days of a culture built on the promiscuity of power and money were numbered. Yet old habits do not break easily. Even the cleansing logic of the Carwash probe, which put the law above personal codes, succumbed as righteous investigators overreached, occasionally trampling the law in pursuit of villains.
A broader challenge to an ethical reset is the apparent corporate head fake to good behavior. In a recent unpublished survey, Sergio Lazzarini, who teaches at the Sao Paulo business school, Insper, found that 62% of 26 contractors caught in corruption cases also donated to philanthropy. More remarkably, 83% of companies who signed plea bargaining agreements also donated – an indication of how much corporate giving is merely virtuous chaff thrown off to cover up malfeasance.
“It’s fashionable for businesses to talk about compliance,” Lazzarini told me. “You draw up rules, make your employees sign on and take a course. But at the end of the day, can we really expect the same company owners who engaged in corruption to implement anti-corruption measures?” A more salutary move, he said, would be to demand that companies caught in corruption schemes purge their compromised controlling partners in favor of new ownership. “Brazil has yet to do that.”
Cid Alledi Filho knows the drill. A Brazilian professor of business ethics and sustainability, he has lately grown frustrated at the obstacles to change. “I talk to managers and presidents of companies all the time. I sense they have a genuine desire to do the right thing, but they worry that the competition will not play clean and so put them at a disadvantage,” Alledi said.With creditors clamoring, 13 subsidiaries in receivership and a family feud metastasizing, Odebrecht’s brass have taken note. Sort of: It stretches credulity to imagine, as the corporate spinmeisters did, that rebranding the company as Novonor will help. Coming clean and playing straight may be their only choice. Whether the business can survive by becoming “a nun in the red light zone,” as one old guard mogul put it to Gaspar, is another matter.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”
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