Brazil’s Odebrecht at risk of disqualification in Panama after alleged non-compliance with airport contract

RIO DE JANEIRO, BRAZIL – The Brazilian multinational company Odebrecht, which has been dirtied by multiple corruption scandals, lost a contract to expand Panama’s main airport on Tuesday for “non-compliance” and risks being disqualified from participating in state tenders.

“The general manager of Tocumen International Airport, Raffoul Arab, confirmed that Tocumen has terminated the contract to the company CNO (Constructora Norberto Odebrecht) for non-compliance with the obligations agreed in the contract for the execution of the airport expansion program,” a statement said.

After terminating the contract, says the airport, “the contractor CNO S.A. was also disqualified for non-compliance, which prevents it from participating in tenders and from contracting with the Panamanian government”, according to the law. Tocumen Airport is administered by the Panamanian government.

Sources familiar with the case told AFP that the process must first go through the Administrative Tribunal of Public Contracting for the disqualification to be finalized. There is also the possibility of arbitration.

Odebrecht won a public tender with the Panamanian government to construct a second terminal, of 116,000 square meters, at Tocumen airport, for US$679 million. The works, whose cost increased to US$917 million, began in 2012 and were to be completed by September 30.

However, according to the Airport administration, the Brazilian company has breached the contract “to guarantee the completion of the work.”

ODEBRECHT: CANCELLATION LACKS LEGAL GROUNDS

The arguments put forward by the Tocumen administration were rejected by Odebrecht in a communiqué where the company states that “the contract continues to be legally in force.”

According to the company, the cancellation of the contract “lacks legal basis and factual support” because the project is 99.9% complete, and the substantial delivery of the work took place in February 2020.

Odebrecht considers “that it has not breached the contract and remains at the construction site to conclude the last few pending points,” adds the note.

In addition, the company assures that Tocumen Airport maintains “a delay in payments” that has impacted the execution of the work and warns that it will assert “its rights” before the corresponding instances.

The Brazilian multinational has been one of the leading contractors in the Central American country. Since 2005 it has executed some twenty projects, including roads, highways, boardwalks, subway lines, hydroelectric plants, or urban renovations for more than 10 billion dollars.

However, Panama is one of the countries affected by the construction company’s corruption scandal, accused of paying millions of dollars in bribes in Latin America to win contracts. The scandals have led civil society groups to call for the company to be disqualified from contracting with the State.

According to accusations by the Prosecutor General’s Office, the Odebrecht scheme in Panama has implicated former President Ricardo Martinelli (2009-2014) and two of his sons and former President Juan Carlos Varela (2014-2019).

Odebrecht agreed to pay the Central American country a fine of US$220 million over 12 years and to cooperate with the court as part of an agreement reached between the Brazilian and Panamanian prosecutors’ offices.

Source: AFP