National Bank Blocks Odebrecht's Access to US$ 500 million for Construction Work Abroad

02/10/2017 - 10h56

Odebrecht is expecting to receive a grand sum of US$ 500 million from the BNDES (National Bank for Economic and Social Development) for construction work the firm carried out abroad.

Foreign governments are concerned that the delay in payment may also result in delays in construction work.

According to data from September of last year, the amount is equivalent to roughly a third of the company's cash flow.

The money cannot be accessed because, since May of last year, the National Bank has blocked withdraws from 25 lines of credit connected to contracts abroad carried out by 5 separate construction firms - all of which are being investigated in the Lava Jato operation.

The bank will only unfreeze the money if Odebrecht complies with a series of demands that were not included in the original agreement, such as the signing of a new commitment letter. Affected contracts include deals between Brazil and the following countries: Argentina, Cuba, Venezuela, Guatemala, Honduras, the Dominican Republic, Angola, Mozambique and Ghana.

In order to qualify for the loans, these countries agreed to hire Brazilian firms to carry out construction work. As soon as the work would get completed and the foreign government acknowledged this, the BNDES would pay the firms in Brazil.

Odebrecht, which is trying to restructure its projects after getting caught up in the Lava Jato operation, is the firm that was most harmed by the frozen funds. Around US$ 7 billion in transactions involving the 25 projects were blocked.

Of the US$ 7 billion, US$ 3.9 billion were connected to construction work that Odebrecht was in charge of. BNDES negotiators and Odebrecht executives are trying to reach a settlement.

Translated by THOMAS MATHEWSON

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