Ecuador Tells Odebrecht: "Fix it or Clear Out!"

San Francisco Dam, Ecuador
San Francisco Dam, Ecuador
Clifford J. Schexnayder

Just a year ago, things were looking rosy for the Brazilian construction giant Odebrecht, which had just finished building a large dam in Ecuador, called San Francisco.

Now, with serious problems with its turbines and conduction tunnels shutting down the 350 MW project, Ecuador´s President Rafael Correa has given Odebrecht a final ultimatum to fix its dam or leave the country.

Odebrecht is probably the single company that has most benefited from South America´s infrastructure boom. Under a multilateral project called IIRSA, supported by the Inter-American Development Bank (IDB), Andean Development Corporation (CAF), and the Brazilian National Development Bank (BNDES), Odebrecht has obtained hundreds of millions of dollars in contracts for roads, airports, and dams, planned in the name of "regional economic integration", and in Ecuador Odebrecht has been awarded contracts for most of the country´s mega-infrastructure projects, including San Francisco Dam, which was financed with a $302 million loan from BNDES with $150 million in loan guarantees from the Multilateral Investment Guarantee Agency (MIGA).

Odebrecht even pocketed a US$20 million "prize" for completing the San Francisco Dam ahead of schedule, and the company has publicly denied responsibility for the damages, attributing them to normal wear-and-tear. But, similar problems have been spotted in another Ecuadorian dam built by Odebrecht, the Toachi Pilatón project.

Residents in the area affected by San Francisco Dam charge that the company´s construction short-cuts and shoddy equipment have dried aquifers and springs that are a vital component in the local tourism industry.

Just yesterday, Odebrecht reportedly made a new indemnification offer to the Ecuadorian government, which says it "is analyzing it". Skeptics say that Correa is taking his stand against the powerful Odebrecht for political motives, and will likely grant the company a new extension to repair its projects.

Odebrecht built the San Francisco project with the help of Alstom, which is also slated to provide turbines for the Santo Antonio Dam on Brazil´s Madeira River. The 400,000 people who live in Porto Velho, a only a few miles downstream from the planned dam site may well want to ponder the implications of Odebrecht´s cost-cutting strategies for the future safety of their city.