As countries grow economically, they often invest in huge public works projects. Grand infrastructure undertakings, such as Germany’s Autobahn, Japan’s bullet trains, and the United States’ Hoover Dam, showcase a country’s mastery of technology; they become a symbol of a country’s ascendance as a world power.
Over the past ten years, the BRICS—Brazil, Russia, India, China, and South Africa—have built hundreds of such projects. The industrial parks, highways, overpasses, pipelines, dams, and sporting venues came to symbolize their rise. But as these governments emphasized speedy, showy results, they paid less attention to quality and underestimated the costs involved. Opaque procurement processes allowed corruption to thrive and standards to fall.
The results have not just tarnished the reputations of these new economic powers; they have also cost lives. And they call into question the group’s most recent creation, the New Development Bank. Originally funded with $50 billion, most of it from China, its advocates hoped that the bank—meant as an alternative to the World Bank and the regional development banks—would provide quicker access to funds for infrastructure. But it is likely, given the failure of these countries to deliver accountability in overseeing their domestic infrastructure projects, that the New Development Bank will repeat the same costly mistakes.
THE ROADS TAKEN
Goldman Sachs analyst Jim O’Neill first grouped Brazil, Russia, India, and China together in 2001, when he argued that they were the countries that would most likely produce rapid economic growth over the next decade (South Africa joined in 2010). But today another phenomenon binds the BRICS together: in every one of them, corruption scandals have hit state-funded infrastructure companies and the projects they’ve overseen.
In Brazil, a massive corruption scandal involving the semi-state petroleum company Petrobras and the country’s top construction companies has thrown the nation Odebrecht, Camargo Corrêa, OAS, and Andrade Gutierrez—developed an elaborate plan to collude in bribing and overcharging Petrobras for procurement and construction contracts to the tune of $3 billion. They were able to get away with it because the bidding processes for the projects were closed from public scrutiny; national laws mandated that local companies provide anywhere between 37 to 55 percent of content for investments in Brazil’s off-shore, pre-salt oil deposits; and because those four companies were the only ones large enough to bid for many of the projects. The proceeds of their ill-gotten gains found their way into the pockets of at least 200 politicians across 18 parties, including $1.5 million to allegedly finance the political campaign of Michel Temer, the former vice president and now the interim president, who replaced Dilma Rousseff as she undergoes impeachment hearings.
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