Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case

The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case AbstractIn 2016, the Brazilian construction firm Odebrecht was fined $2.6 billion by the US Department of Justice. It was the largest corruption case ever prosecuted under the US Foreign Corrupt Practices Act. Our examination of judicial documents and media reports on this case provides new insights on the workings of corruption in the infrastructure sector. Odebrecht paid bribes for two reasons: to tailor the terms of the auction in its favor, as well as to obtain favorable terms in contract renegotiations. In projects where Odebrecht paid bribes, costs increased by 70.8 percent on average, compared with 5.6 percent for projects with no bribes. We also find that bribes and profits made from bribing were smaller than documented in most previous studies, in the range of one to two percent of the cost of a project. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case

The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case

Journal of Economic Perspectives—Volume 35, Number 2—Spring 2021—Pages 171–190 The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case Nicolás Campos, Eduardo Engel, Ronald D. Fischer, and Alexander Galetovic n 2010, the Swiss business school IMD chose Odebrecht, a Brazilian conglom n 2010, the Swiss business school IMD chose Odebrecht, a Brazilian conglom-- erate, as the world’ erate, as the world’s best family business. Odebrecht was chosen for the s best family business. Odebrecht was chosen for the I I excellent per excellent performance of its companies, formance of its companies, its continuous its continuous growth, and its social growth, and its social and environmental responsibility and environmental responsibility. Sales had quintupled between 2005 and 2009, . Sales had quintupled between 2005 and 2009, and Odebrecht had become Latin America’ and Odebrecht had become Latin America’s largest engineering and construction s largest engineering and construction company company and and ranked ranked 18th 18th worldwide worldwide among among international international contractors contractors ( (Engineering News-Record Magazine 2009). 2009). By 2015, however, Odebrecht chief executive Marcelo Odebrecht had been arrested on corruption charges. Nine months later he was sentenced to more than 19 years in prison. The Odebrecht case, as it came to be known, involved bribe payments in ten countries in Latin America and two countries in Africa. Deltan Dallagnol, lead prosecutor in Brazil, commented (as reported by Pressly 2018): “The Odebrecht case leaves you speechless. This case implicated almost one-third of Brazil’s senators and almost half of all Brazil’s governors. A single company paid bribes to 415 politicians and 26 political parties in Brazil. It makes the Watergate ■ ■ Ni Nic co ollá ás C s Ca am mp po os s, R , Re es se ea ar rc ch he er...
Loading next page...
 
/lp/american-economic-association/the-ways-of-corruption-in-infrastructure-lessons-from-the-odebrecht-phsuc9i077

References

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
American Economic Association
Copyright
Copyright © 2021 © American Economic Association
ISSN
0895-3309
DOI
10.1257/jep.35.2.171
Publisher site
See Article on Publisher Site

Abstract

AbstractIn 2016, the Brazilian construction firm Odebrecht was fined $2.6 billion by the US Department of Justice. It was the largest corruption case ever prosecuted under the US Foreign Corrupt Practices Act. Our examination of judicial documents and media reports on this case provides new insights on the workings of corruption in the infrastructure sector. Odebrecht paid bribes for two reasons: to tailor the terms of the auction in its favor, as well as to obtain favorable terms in contract renegotiations. In projects where Odebrecht paid bribes, costs increased by 70.8 percent on average, compared with 5.6 percent for projects with no bribes. We also find that bribes and profits made from bribing were smaller than documented in most previous studies, in the range of one to two percent of the cost of a project.

Journal

Journal of Economic PerspectivesAmerican Economic Association

Published: May 1, 2021

There are no references for this article.