Brazil’s Operation Car Wash continues to widen and the political fallout is growing.
Investors and infrastructure participants around the world are watching to see what impact Brazil’s Operation Car Wash scandal will have on the country’s construction sector and its prospects for growth. To find out how Brazil’s construction companies are responding – and recovering – from the scandal, KPMG’s Endo Mauricio sat down with Artur Coutinho, CEO of Construtora Camargo Corrêa, one of Brazil’s largest international construction companies
Endo Mauricio (EM): What impact has the Operation Car Wash scandal had on Brazil’s construction industry?
Artur Coutinho (AC): Clearly, there has already been a far-reaching impact on companies across Brazil, but most notably in the engineering and construction industry. This, tied to the restricted financial scenario currently at play in Brazil, is making the recovery process very difficult for many companies. And investigations are still pending so I suspect the sector still has a long road ahead in terms of repercussions and new developments.
EM: There has been significant backlash from Brazilians and from investors. Are you surprised by the negative sentiment?
AC: Not at all. We all know that fair competition brings and assures better quality products and services, improves productivity and creates more capable professionals. And Brazilians want to be served by a modern, efficient and low-cost infrastructure industry. I firmly believe that only an ethical, fair and sustainable business environment can bring benefits to the economy and society.
EM: How has Construtora Camargo Corrêa responded to the scandal?
AC: I am proud to say that we were a pioneer among Brazil’s major construction companies and we worked hard to wipe the slate clean and exit the Car Wash operation by adopting a courageous posture of collaborating with investigators and working to create a business environment that is grounded in ethics, technical competence and transparency.
EM: What does that mean in practice for your company?
AC: A lot of our efforts are focused on ensuring that our company culture, policies and procedures are aligned with Brazil’s new Anticorruption Laws which were recently updated to bring them in line with the best in the world including the US and the UK. By combining a keen focus on professional training with a dedication to creating an ethical and responsible culture – for us and our suppliers and partners – we believe that we are emerging from the scandal stronger and more prepared to compete in a fair and transparent manner than ever before.
EM: Has transparency been elevated as a result?
AC: For many years, Construtora Camargo Corrêa has maintained a strong audit and internal controls capability. But in June 2015, we created a new Vice President position for corporate governance and compliance which includes audit and risk management. The elevated role has helped us to strengthen many programs, particularly professional training. On top of in-class training, we have also rolled out e-learning tools to ensure we reach 100 percent of our employees. We have been very clear that those old practices are irregular and counter to our Code of Conduct and we take a zero tolerance position on this type of wrongdoing.
EM: What has Brazil’s government and industry sector done to improve transparency in infrastructure procurement since the scandal?
AC: I think the implementation of modern Anticorruption Laws that are comparable to the US and UK was a major move towards enhancing the business environment in Brazil. And at the industry level, we have been participating in programs to expand sector awareness and adherence to a rigorous ethical and conduct code. But ultimately, the relationship between the public and private sector needs to be fundamentally redefined and corruption needs to be combated permanently. That is the only way we will facilitate long-term planning and efficiency in our investments while also providing greater transparency and predictability.
EM: Do you think the hard lessons have been learned?
AC: Very high-profile executives and companies are paying a very high price for the bad practices they adopted in the past and I am sure they will never want to pay that high a price again. I think that – with other public and private entities now adopting the same high level of transparency and collaboration – we can build a market based on ethics and technical competence which will surely have a long-term positive impact.
EM: Will Brazil’s construction industry rebound from this scandal?
AC: The fact remains that Brazilian competence in engineering and construction is well proven in all areas of construction. Our company has been in business for more than 75 years and operates in 20 countries around the world, so we have an impressive legacy of large projects across energy generation, roads, subways, ports and airports. We firmly believe that – as the business environment changes – we will emerge much stronger.
EM: Will the scandal impact the way Brazil invests into infrastructure over the longer-term?
AC: We recognize that there is an enormous and historic need for infrastructure in all areas of the country. But when the government resumes investment, they will need to ensure that infrastructure projects are contracted in a way that guarantees regulatory stability, long-term planning and efficient investment.
EM: What will it take to turn the corner on Operation Car Wash?
AC: We clearly have a long road still ahead. But if we want to create an ethical, fair and sustainable business environment, corporate compliance programs are not enough. We will also need a drastic reformulation of the way construction and engineering projects are contracted. We strongly believe in Brazil and are confident that the country – and its construction companies – will move past this issue, stronger and more competitive than before.
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