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Mexican chapter in the Odebrecht saga underscores need to bolster transparency at EDC

An op-ed by York University professor Anna Zalik and Above Ground program officer Karen Hamilton, published in The Hill Times

When allegations emerged last fall that the Mexican president’s 2012 election campaign was funded in part by a subsidiary of the Brazilian construction giant Odebrecht, the news barely made headlines in Canada. But this recent development in the far-reaching Odebrecht corruption scandal should give us pause, because it raises crucial questions about the anti-corruption and disclosure policies of our export credit agency, Export Development Canada (EDC).

In December 2012, EDC loaned $300 million USD to Braskem, an Odebrecht subsidiary, for construction of a petrochemical complex in Veracruz, Mexico. Earlier that year, Braskem allegedly paid over $3 million USD in bribes towards President Peña Nieto’s election campaign. Last fall, leaked transcripts of a meeting between the former head of Braskem and investors revealed that Braskem representatives “accompanied” the Peña Nieto campaign “full-time” in 2012. Bribes from Braskem were reportedly paid to an offshore company linked to Emilio Lozoya, a senior campaign official who later became head of Pemex, Mexico’s state-owned oil company.

Though Lozoya denies the allegations, Odebrecht officials have admitted to making or causing to be made $10.5 million USD in bribes in Mexico. In total, they have confessed to $788 million USD in bribes paid to government officials and political parties in various countries, mainly in Latin America, between 2001 and 2016. The bribes, sometimes made through Odebrecht subsidiaries, were used to secure major public works contracts.

Now that the link between Braskem and the Peña Nieto campaign has come to light, will EDC launch an investigation into its own relationship with Braskem or consider retracting its support for the petrochemical plant?

We may never know. As a Crown corporation accountable to Canadians, EDC should operate transparently. But while the agency has anti-corruption policies requiring that it “take appropriate measures” to deter bribery in connection to its business dealings, it provides scant information about what those measures are and how it applies its policies to assess client eligibility.

Consider, for instance, Petrobras — another EDC client with ties to the Odebrecht scandal. Odebrecht and Braskem have pled guilty to paying bribes to secure contracts with Petrobras, Brazil’s state-owned oil company. Brazilian prosecutors reportedly began investigating Petrobras in mid-2013. Yet in December 2013 EDC approved at least $235 million USD in financing for Petrobras.

When asked by Above Ground in 2015 how it assessed Petrobras’ eligibility for support, EDC stated that its enabling legislation, the Export Development Act, bars it from “commenting on business undertaken with specific companies.” When a client is suspected of corruption, EDC “undertakes its own inquiry.” Under EDC’s internal guidelines, even a client convicted of bribery can be eligible for support if EDC “considers that such party has taken appropriate measures to deter further bribery.”

More recently, EDC was questioned by media over a deal involving Bombardier, which has benefitted from billions of dollars in EDC support in recent years. In 2014 EDC backed the sale of a Bombardier luxury jet to a company owned by the powerful Gupta family in South Africa — even though a government inquiry had determined the year before that the family had abused its political influence for personal gain. Last month The Globe and Mail revealed sweeping new allegations of corruption in Bombardier’s own dealings overseas, and high-ranking Bombardier employees remain under investigation in Sweden for possible collusion and bribery in Azerbaijan.

Even as EDC engages in markets with serious corruption problems and with clients accused of bribery, it has full discretion in applying its anti-corruption policies, and is subject to minimal requirements for public disclosure. That’s a problem.

In its review this year of the Export Development Act, the government must turn a critical eye to this issue. The review, conducted by the trade minister every ten years, provides a crucial opportunity to enhance the transparency of EDC’s due diligence practices. Only once those practices are subject to scrutiny can Canadians assess whether our export credit agency is taking robust action to avoid supporting businesses involved in bribery or other abuses.

Anna Zalik is a professor in the Faculty of Environmental Studies at York University. Her research and teaching centres on global environmental politics and the extractive industry.

Karen Hamilton is a program officer at Above Ground, a Canadian human rights and corporate accountability project.