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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Brazilian Corruption Charges Could Impact Mexico’s Oil Boom

Last year, Brazilian construction firm Odebrecht pleaded guilty to bribing officials in 12 countries to secure high-paying contracts. The firm agreed to a payment of at least $3.5 billion, the largest penalty in history for a foreign bribery case. Now, months later, the scandal continues to escalate as new allegations pop up.

The latest addition to the scandal is Mexican state oil company Pemex, which has now been swept up in the widespread accusations of corruption. While Pemex officials have already been called for testimony in Odebrecht-related investigations back in April, this week the plot thickened. On Saturday accusations surfaced that Emilio Lozoya, the former chief executive of Pemex, accepted $10 million in bribes from Odebrecht in exchange for sending the company lucrative contracts.

The bribes allegedly started rolling in in March 2012, when Lozoya began his reign at Pemex, until he left the post in 2016. As of right now the allegations have not been proven and Lozoya has categorically denied all charges, but documentation from Brazil providing solid evidence of the payouts is due to arrive in the hands of Mexican investigators in the coming days.

Even more concerning, in 2012 Lozoya was also head of the international affairs office for current Mexican president, then-candidate Enrique Peña Nieto’s presidential campaign. As Peña Nieto is no stranger to corruption allegations himself, his closeness to the scandal has caused a stir in Mexico and many accuse the president of being fully aware of Lozoya’s nefarious dealings with Odebrecht. Related: Qatar Aims To Ease Its Reliance On LNG Exports

Lozoya will head to court next week for questioning about the scandal and his alleged involvement, which he has already denounced as “false” and “malicious”. Peña Nieto’s PR team has offered similar denials.

According to numbers published in the the U.S. court ruling against Odebrecht last November, the Brazilian company paid around $788 million in bribes dealing with 100 projects in 12 different countries including Mexico, Argentina, Colombia, and Venezuela between 2001 and 2016. During this period, Pemex had a contract with Braskem for ethane supply and three more contracts with Odebrecht, two for a $2.1 billion construction project at the Tula refinery in the Mexican state of Hidalgo, and the last for the development of a waste management project at the Salamanca refinery in central Mexico.

This money trail and the brazen accusations of corruption reflect quite badly on Pemex and on President Peña Nieto. Some critics are saying that it could go so far as to impact Mexico’s political and economic allies, including the critical North American Free Trade Agreement.

If so, this could come as a huge blow to Pemex, which is currently undergoing incredible financial gains and developing a slew of new projects. Many were predicting that Mexico’s current oil boom, largely prompted by the new allowance of private explorations and drilling in Mexican waters, would begin a new era of trust and cooperation with the U.S. Now, that could all be in jeopardy.

By Haley Zaremba for Oilprice.com

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