Odebrecht Engenharia e Construcao, the biggest builder in Latin America, says there is no such thing as a “free market” when it comes to exporting its services because international competitors also benefit from subsidized lending.
Odebrecht’s projects outside of Brazil have received more financing from Brazil’s state development bank than any other company. The details of the loans were revealed last week when the bank, under pressure to open its books, published details of $11.9 billion in loans for export of services since 2007, 70 percent of which were for Odebrecht projects.
Brazilian companies rely on loans from the state development bank, known as BNDES, because they must compete with suppliers from France to China that are backed by subsidized loans from state lenders in the $543 billion market for export services, said Jayme Fonseca, financial director for the Odebrecht Infraestrutura America Latina subsidiary. Brazil has a 2.4 percent share of that market, with most of the contracts in poorer nations like Cuba, Angola and Peru where there is no major local competition, he said.
“BNDES is helping Brazilian companies against the other foreign companies,” Fonseca said in an interview at Odebrecht’s offices in Sao Paulo. “There is no such thing as a free market.”
He said Odebrecht is not on the hook for the loans, which are granted to foreign governments in exchange for using Brazilian suppliers to complete the projects. The BNDES loans have financed projects ranging from highways in Angola to Cuba’s Mariel port where Odebrect is the main contractor.
Prosecutors last month opened a preliminary inquiry into whether ex-President Luiz Inacio Lula da Silva used his connections to persuade BNDES to provide loans for parent company Odebrecht SA’s projects in other countries including Cuba, where BNDES rates were as low as 4.4 percent. Lula, BNDES and Odebrecht have denied wrongdoing.
The loans for export of services are aimed at generating jobs for Brazilian workers, as well as foreign currency for Brazil’s balance of payments by exporting services in exchange for dollar payments, Fonseca said.
In 2014, 2,783 Brazilian companies borrowed from BNDES to export products and services for Odebrecht contracts outside of Brazil.