Ethical Performance
inside intelligence for responsible business


Petrobras pays price for 8 years of corruption

May 2015

Petrobras, Brazil’s state-run oil company, has calculated that eight years of corruption have cost it $2.1bn (Brazilian R$6.2bn, £1.39bn, €1.94bn).

The corruption involved inflated contracts and other graft. Federal prosecutors said this was the largest corruption scheme ever uncovered in Brazil.

The investigators have accused prominent construction and engineering companies of paying bribes to politically appointed Petrobras executives in return for winning inflated contracts. Witnesses have testified that 3% of all large contracts between 2004 and 2012 was paid to executives and politicians.

The investigation is continuing and widening, and dozens of senior business executives and political figures are under scrutiny or in jail. Petrobras executive Paulo Roberto Costa and the dealer Alberto Youssef have just been jailed, and the Workers’ Party treasurer Joao Vaccari has been charged with money laundering.

The $2.1bn corruption cost contributed to a net $7.2bn loss for Petrobras reported in the 2014 accounts.

Another factor was a $14.8bn impairment charge reflecting the decreased value of the company’s assets resulting from the scandal.
Industry-watchers believe that now confidence could eventually be restored allowing Petrobras to develop huge recently discovered offshore oilfields.

Evan Sponagle, an energy consultant in Rio, said the declared figures represented a watershed giving banks “a reason to start lending again” to Petrobras and to Brazil’s entire oil industry, which has been tainted by the corruption inquiry.

The US-based Eurasia Group, the world’s largest political risk consultancy, said the way was clear to “bolster the company’s course correction in the longer term”.

Petrobras | South America | Corruption

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