How the Hydro-Mafia Got Back Into Belo Monte

By: 
Zachary Hurwitz
Dilma and José Sarney talking business
Dilma and José Sarney talking business

Back in August, just as expected, a couple of beggars walked in through the exit door of the Belo Monte Dam Complex.  Clear evidence of the project's economic inviability had led Brazil's largest construction firms – Odebrecht, Camargo Corrêa, and Andrade Gutierrez – to withdraw from the project auction on April 20th. As a result, the government was forced to trot a few puppet companies into the auction to make believe that private investors were actually interested in the dam. The winners of the auction – Norte Energia, S.A., a rag-tag collection of midsize businesses – surprised everybody, except the government. The truth is that Lula had always planned to bankroll the dam by using state subsidies, even without private investors. When confirmation of the subsidies got around, Odebrecht, Camargo Corrêa, and Andrade Gutierrez begged the government to be let back into what would be the world's third-largest hydroelectric dam. And they got their wish. 

State Subsidies Helped Favored Firms Get Key Contracts


Many in Brazil say that the three companies play a central role in what's been called the country's hydro-mafia: a corporate-political network that links the three companies, former President and current President of the Senate José Sarney, his daughter and Governor of Maranhão Roseana Sarney, Eletrobras CEO and Sarney "godson" José Antonio Muniz Lopes, former Eletronorte president and current Norte Energia president Carlos Nascimento, former Ministers of Energy Silas Rondeau and Edison Lobão, and the "mother" of Belo Monte, president-elect Dilma Rousseff. In August, Eletrobras – the leading shareholder of Norte Energia – contracted the three reviled companies to participate in 50% of the construction of Belo Monte. At that point, what had been Brazil's most polemic infrastructure project became even more controversial. The three companies' renascent participation forced the consortium's upstart midsize companies to take smaller shares, and the composition of Norte Energia was all of the sudden dominated by three of the largest, most hated companies in Brazil.

It turns out that the companies are three of a dirty dozen that have enjoyed a favorite status as loan recipients from the Brazilian National Development Bank (BNDES). A report by Folha de São Paulo in early August illustrated that the bank's largest loans have gone to 12 of Brazil's largest companies, a poor financial practice that has driven the Brazilian economy towards greater concentration for years, and has flown in the face of BNDES' original mission, which was to finance the growth of small and medium-sized Brazilian companies.

The Sopranos
The Sopranos

What makes this favoritism and the companies' participation in Belo Monte such a problem is that Odebrecht, Camargo Corrêa, and Andrade Guttierez are some of the country's most corrupt companies. Each one has faced damaging liabilities over their involvement in illegal campaign financing, numerous graft scandals, and international political rows. In one such case, Ecuadorian President Rafael Correa thoroughly brandished Odebrecht in 2008 over proof that the company's poor practices had led to operation risks at the controversial San Francisco hydroelectric dam. Most recently, Odebrecht was even involved in the tragedy at Dardanelos Dam, where short-sighted vision led to the blowing up of an indigenous cemetery.

Let's call a spade a spade. With the help of the hydro-mafia, Odebrecht, Camargo Corrêa, and Andrade Gutierrez regularly skirt Brazilian legislation and lobby to weaken it in order to get their way. Yet these are the same companies that built the disastrous Balbina, Tucuruí, and Campos Novos dams, the impacts of which Brazilians will never forget.  

There's no doubt that the Brazilian government wants to keep Belo Monte in the family. Of course, Odebrecht, Camargo Corrêa, and Andrade Gutierrez couldn't be more grateful; because of today's poor economic climate, the three construction firms know they could never have invested in such a massive project if the government hadn't irresponsibly used public pensions as subsidies and committed to absorbing the lion's share of the risk, including, most recently, now utilizing the Brazilian Treasury as an additional guarantor in case the companies of Norte Energia or any other investor can't make their payments. There is no clearer signal that this project is doomed to lose money.

The three companies have a fever to build the Belo Monte Dam Complex like no other. Yet, make no mistake; with these companies' zeal come skyrocketing costs.  And given the hydro-mafia's record, expect these to be borne by the people and the species of the Xingu.