The Owners of Rio

Maracanã stadium
Teaser Image Caption
Das traditionsreiche Stadion Maracanã wurde für eine Milliardensumme von zwei der grössten Bauunternehmen Brasiliens renoviert. Die Baumogule schufen ein System aus kartellähnlichen Absprachen, manipulierten Ausschreibungen und überhöhten Kostenrechnungen

The rights violations generated by different interventions into the city and the state and which are responsible for a deliberate "gentrification," are prime examples for the failure of governments to defend public interests – because they are subordinate to private mandates. Amid the dozens of construction projects and megaprojects, Rio de Janeiro is part of a rigged game in which those who win – a lot – are companies and politicians. The losers are the people. The economic powers that be – in addition to dealing the cards – are the owners of the deck, dictating the rules of the game and gambling with the public's money.

The first finding is that the game is being played by a few big players. The ones that stand out are the conglomerates, or the "four sisters": Odebrecht, Andrade Gutierrez, Camargo Correa, and OAS. If we select 20 of the largest undertakings in Rio – mostly in the urban mobility sector – we find that these firms have a hand in all the projects.

In Rio de Janeiro other business groups also benefit from this policy: Group X of entrepreneur Ike Batista, who is now in financial ruins; the Globo Organization (TV and broadcasting); other contractors in the real estate industry such as Queiroz Galvão; Brookfield; Cyrela; Rossi; Carvalho Hosken; John Strong; Carioca Nielsen; and Delta. Various projects for the 2014 World Cup and the Olympics (organized by the group Rio 2016) include improving the monitoring of the city with cameras and other technical devices; a Center for Waste Treatment; construction work for flood control in specific areas of the city; projects for the improvement of homes in Rio slums; in addition to the construction of leisure equipment in parks and other facilities to practice sports.

In the table, one can see the direct and indirect presence of these companies. The contractor's control of a project is indicated by the letter C and/or through the execution of the construction work for the project in question, indicated by the letter O – the data includes activities starting back in the 1990s.
 

Enterprise Odebrecht OAS Camargo Correa Andrade GuitierrezUrban mobilityLinha Amarela (road construction) L/B  Metrô Rio (underground)BL/BB Nova Dutra (road construction)  LLVia Loagos (road construction)  LLPonte Rio-Niterói (bridge)  LLBarcas S/A (ferry service)  LLVLT (tram to Rio cityBBBBSuperVia (railway track)B   Arco Metropolitano (road construction)BBBBTransolímpica (road construction)L/BL/BL/BL/BTranscarioca (road construction) B BRio-Teresópolis (road construction) L  Permetral/Via Binário (road construction)BB  Stadiums and Sport VenuesEstádio Maracanã (stadium)L/B  BVila Olímpico (Olympic Parc)L/B  L/BPorto Maravilha (harbour redevelpment)L/BL/B  Estádio Engenhao (stadium)BB  Construction in Slum AreasPAC Manguinhos   BPAC Complexo do AlemãoB   Teleférico do Complexo do Alemão
(cable car to the favela)L/BB   

 

In addition to this overt presence, which suggests a rotation among them during the execution of the work and/or the control of projects around town, it also draws attention the fact that they are working together on road work projects, such as the Metropolitan Ring Road and the Transolímpica, linking the west of the city to Barra da Tijuca – a place of real estate speculation – and to Avenida Brazil, an area north of the city with immense traffic flow. In this case, this is the Rio Olympic Consortium, formed by Odebrecht, Invepar empresas (OAS) – which also controls the Rio Metro – and CCR (Andrade Gutierrez and Camargo Correa), which still controls the Via Dutra, Via Lagos, Rio-Niteroi Bridge, and Ferries SA. The "four sisters" are equally present in the VLT Carioca Consortium, responsible for the construction work of the VLT in downtown Rio. In the case of Transcarioca, construction work is shared between them – Andrade Gutierrez is in charge of the stretch from Barra to Penha; the stretch between Penha and the International Airport is under the control of OAS.

Although they clearly hold a monopoly, they also appear as competing in public biddings. Acting together in the New Port Consortium and responsible for the construction and services in the port area of Rio, Odebrecht and OAS recently competed in the bid to manage the Maracanã Stadium, which was renovated at a cost of billions. This is the same Odebrecht that is in alliance with Andrade Gutierrez. The bid, which was won by Odebrecht and IMX, is being questioned by the Public Prosecutor's Office in Rio. There are two main issues. One is that IMX was responsible for the feasibility study of the project and, therefore, had privileged access to information that was not available to the others who were bidding. Another issue is that it is not appropriate for the state government to authorize the commercial exploitation of Maracanã, since the revenue from just the stadium management would ensure the financial feasibility of the project. Since the authorization was given, it is the government's responsibility – argues the Public Prosecutor's Office – to raise the value of the award from the current US$2.2 million to something close to US$30 million per year.

The "Four Sisters" - Owners of the Deck

The newspaper Folha de São Paulo, in an article from March 18, 2010, entitled "PAC bidding in RJ has evidence of arrangement between rivals," points to strong evidence of irregularities in the construction bids of the Growth Acceleration Program (PAC) in the slums of Complexo do Alemão, Manguinhos, and Rocinha, involving the conglomerates Odebrecht, Andrade Gutierrez, and Queiroz Galvão – the respective winners of the bids in each of these communities. It was proven that a document requested by Odebrecht to enable the bid of the PAC for Complexo do Alemão was also used by two other contractors in the bids for Manguinhos and Rocinha.

The dominance of the "four sisters" is so obvious that it raises suspicion about possible cartels, which is marked by administrative violations that are subject to fines and imprisonment, according to the Brazilian System of Competition Defense. These signs are apparent in the bids for major construction projects in Rio de Janeiro.

Other indications of this dominance are abuses perpetrated by companies that win the bids, which raise their prices well above the original bid value. The case of Maracanã is emblematic – the project budget doubled during the execution of the work. Public money feeds a concentration of economic power, which, in turn, is fed by more public money. There is also a clear interest from other parties as well as the political allies of these actors. Over the past decade, the "four sisters" poured €154 million into election campaigns. A recent study[1] on campaign contributions to candidates for the House of Representatives in 2006 and public works contracts shows that for every Brazilian real donated, the contractor received on average 6.5 times the value in the form of public works contracts. Considering the billions in value of the 20 projects listed here, the return rate for the contractors in the case of Rio de Janeiro is certainly much more extensive.

From a political-institutional perspective, the PMDB, the primary party allied to the government, appears as the responsible party for the management of the city and state of Rio de Janeiro. The current governor of Rio de Janeiro and the state government parties allied with him were financed in the last election by companies that benefited from the preparation management for the World Cup and Olympics. The entrepreneur Eike Batista alone donated €231,000 to campaigns and four conglomerates together spent €2.3 million. All together, more than €3.2 million was transferred to parties allied with the current governor.

 

[1] Researchers analyzed campaign donations to PT candidates to the House of Representatives in 2006. Taylor Boas, F. Daniel Hidalgo, and Neal Richardson, The Spoils of Victory: Campaign Donations and Government Contracts in Brazil (California 2011).
 

Translated by Marli Tolosa.