The biggest corruption scandal in Latin America’s history - YouTube

This is Comperj.

The biggest petrochemical complex in Brazil.

It’s located in Itaboraí, a small city in the state of Rio de Janeiro.

The multibillion dollar project launched in 2008 and the plan was to open in 2011.

Thousands of Brazilians moved there to work.

But it’s 2018, and Comperj never opened.

Construction of the complex stopped in 2015, after it became a symbol of the largest corruption

scandal in Brazil’s history -- Operation Car Wash.

Hundreds of prominent Brazilians including CEOs, members of Congress and even a former

President have been implicated.

Some of Brazil’s largest companies lost billions of dollars and the country slid further

into recession.

Four years since it broke, the scandal is still rippling through Brazil, leaving places

like Itaboraí devastated in its wake.

Itaboraí was the perfect place for one of Brazil’s most ambitious energy projects.

It had the space for 2 refineries and a petrochemical plant - spanning 45 square kilometers.

It’s also close to Brazil’s newly discovered natural gas fields off the coast of Rio and

Sao Paulo.

When the project launched, it was estimated that Comperj would generate 200,000 direct

and indirect jobs in the area.

Itaboraí became a boomtown.

In 2010, 50,000 people moved there, 160 new businesses opened, and Itaboraí’s population

grew by over 16%.

But 1,200 kilometers away, police broke a case that would doom Comperj.

In 2012, they had this gas station, in Brasilia, under surveillance.

They suspected it was being used to launder money.

Criminals would bring in illegal cash, report it as gas station earnings, and then funnel

the cash to someone else - making the money hard to trace back.

The police arrested a known money-launderer, Alberto Youssef, and offered him a plea deal

in exchange for the source of the money.

But he warned his lawyers: “If I speak, the Republic is going to fall”.

Youssef testified that he was laundering money, not for criminals, but for top executives

at Petrobras, Brazil’s state-owned oil company.

Petrobras was the largest oil company in Latin America.

It also owned Comperj.

The police launched a massive investigation -- Operation Car Wash -- and soon discovered

Petrobras was at the center of an intricate corruption scheme.

The company used its projects to enrich criminals, engineering companies, and Brazilian government

officials.

Here’s how it worked in the Comperj project:

When Petrobras needed to build the complex, it started a bidding process for the job.

Typically, engineering firms would compete for the contract, driving down the price for

Petrobras.

But a group of these companies got together and formed an agreement.

Instead of competing against each other, they cooperated to fix prices and take turns accepting

projects.

Odebrecht, the biggest firm and ring leader of this cartel, won some of the major contracts

to build Comperj.

This allowed Odebrecht to overcharge Petrobras, and profit immensely.

The original cost for Comperj was about $6 billion. By 2015 Petrobras has paid at

least $14 billion.

Odebrecht then money laundered some of its profits through outside businesses, like the

gas station before paying bribes to Petrobras executives and politicians.

Petrobras executives would take the bribes as incentive to keep giving contracts exclusively to the

cartel.

Politicians took the bribes in exchange for their influence over Petrobras.

Like Rio de Janeiro’s state governor, Sergio Cabral, who received more than $800,000 to

give Comperj contracts to a firm in the cartel.

This also became an important funding source for their reelection campaigns.

"Brazil's Petrobras, one of the world's biggest oil companies in a heap of trouble."

"The company's in the midst of an escalating corruption scandal."

After the scandal broke, Petrobras and the engineering companies were in trouble.

Over two dozen executives were initially arrested.

Compounded by falling oil prices, Petrobras lost half its stock value between September

2014 and January 2015

Construction on Comperj was incomplete when 13,000 workers were laid off.

Today, in Itaborai, 40,000 people are signed up for the city's employment program.

An average of 250 people line up here in search of odd jobs.

Many of these unemployed residents used to work at Comperj.

The massive layoffs at Comperj, affected the rest of the city as well.

With Brazil's economy still trying to recover from a recession, Itaborai has found it hard

to bounce back on its own.

Today, some limited construction is planned to resume at Comperj after Chinese and Brazilian

firms partnered with Petrobras.

The natural gas unit is expected to open there in 2020.

But this would only create about 5,000 jobs And the problem is, the closing of Comperj

and devastation of Itaboraí is not an isolated incident… it happened all over Brazil.

And all over Latin America.

Operation Car Wash successfully revealed systemic corruption in Brazil.

Car Wash put ex-President Luiz Inácio “Lula” da Silva in jail, contributed to the downfall

of his successor Dilma Rousseff, and a related investigation has led to her successor Michel

Temer, being charged for corruption.

The ex-CEO of Odebrecht was sentenced to 19 years in prison.

Eike Batista, once Brazil’s richest man was sentenced to 30 years.

But the same companies were funding major infrastructure projects all over Brazil.

So the scandal brought many to an abrupt stop.

This nuclear power plant in Angra dos Reis,

for instance.

Like Comperj, it was halted in 2015 because of direct involvement in the Car Wash scheme.

$60 million in bribes were paid out of the project’s funding.

By 2016 , 11 projects were reportedly stalled in Brazil alone.

It didn’t stop there.

The engineering companies involved worked all over Latin America and in 2016, 17 projects

were reportedly stalled in at least 7 countries.

Like this irrigation project in Peru.

Where 3 former presidents have been accused of taking bribes from Odebrecht.

In Colombia, this river dredging project was stopped after Odebrecht admitted to paying

$11 million in bribes.

And in Venezuela, at least 23 infrastructure projects have been suspended.

These stalled projects mean lots of layoffs.

A report estimates the Car Wash scandal wiped out 500,000 jobs in Brazil alone.

Over four years after the scandal broke, Brazil’s unemployment is still high.

Operation Car Wash is a blessing and a curse.

On one hand, it's uncovering systemic corruption that has plagued Brazil for decades.

But on the other, it's threatening Brazil's democracy.

For many, the prosecution of prominent leaders, especially Lula, who was imprisoned at a time

when he was leading in the elections polls, has revealed a bias in Brazil's judicial system.

The elections are now the most divisive in the country’s history, with many losing

faith in their political leaders.