Corruption, Law & Justice

Odebrecht fallout: GyM loses Lima Expressway contract

Odebrecht fallout: GyM loses Lima Expressway contract

An immediate fallout today from the Odebrecht corruption investigations, being held this week in Brazil, is the loss by Peru’s leading construction firm, Graña y Montero (GyM), of the contract to build the $200 million extension of Lima’s Expressway south of Barranco.

Mayor Jorge Muñoz announced this morning that the contract signed by the city with GyM will be terminated, as a result of details given by Jorge Barata, former superintendent of Odebrecht in Lima.

According to Barata, Odebrecht gave a $14 million bribe during Alan Garcia’s administration to win the bid to build Lima’s Metro line 1, which is better known as the electric train.  Barata said that Graña y Montero knew about the bribe and also put up $3 mn, between the time Line 1 was launched and the contract was signed for Line 2 in 2011. The Line 1 section was completed in 2012 and runs 34 kms between Villa El Salvador in south Lima to Bayovar, in the east of the city.

Muñoz said it was believed there was a possibility that bribes had been paid for the central government’s Metro contract but there had been no confirmation until Barata gave the details yesterday.

“We will seek alternatives,” Muñoz said, regarding the Expressway project.

Just three weeks ago, Muñoz relaunched the Expressway project by ratifying a contract originally signed in 2013 by the city of Lima and GyM’s subsidiary, Concesionaria Via Expresa Sur.   The 40-year, $200mn contract was to design, build, operate and maintain the new extension of the Expressway —a seven-kilometer strech from Barranco to San Juan de Miraflores and Km 12 of the PanAmerican highway.  The project includes negotiating the expropriation of 700 real estate properties that were built after the Expressway was designed in the 1970s.

This morning, GyM shares (GRAM) opened on the New York stock exchange with a 10.17% fall, recovering slightly by mid-morning.  Four years ago, GyM shares on the NYSE were worth $18.23.  By 2017, the Odebrecht corruption scandals shaking companies and governments across South America,  forced the resignation of GyM’s leading executives — chairman José Graña Miró Quesada, Mario Alvarado Pflucker and Hernando Graña Acuña— and today the share value hovers around $3.5 .

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