Workers Party deals drove rise and fall of OAS, Brazil builders

Tue Jul 12, 2016 6:34am EDT
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By Guillermo Parra-Bernal and Tatiana Bautzer

SAO PAULO (Reuters) - On Christmas Day 2014, in an empty São Paulo office building, four senior executives at engineering firm Grupo OAS SA set in motion a corporate bankruptcy that is helping reshape Brazil Inc.

Over the previous decade, Brazil's ruling Workers Party had built national champions using cheap state credit and contracts with state firms.

Those policies transformed OAS into Brazil's fourth-largest builder and made founder Cesar Mata Pires a billionaire.

But OAS’ chief executive José Aldemário Pinheiro had been arrested weeks before the meeting as part of a wide-ranging judicial investigation into millions of dollars paid by engineering and building firms to politicians in return for contracts with state companies.

Cut off from bank lending and new state deals once it was named in the "Operation Car Wash" investigation, OAS decided on Christmas Day to default on a $16 million interest payment, according to a person at the meeting.

A request for bankruptcy protection ensued, and OAS became the first of Brazil's major engineering groups to launch a major downsizing plan. So far, the company has cut 30,000 jobs as it shed assets and reorganized its business to become less reliant on state money, executives say.

The saga of OAS’ restructuring highlights the way some of Brazil's engineering groups are having to reinvent the way they do business in the aftermath of Operation Car Wash, which laid bare a system of illegal favors between politicians and business elites.

"We can't afford any mistakes," OAS' chief financial officer, Josedir Barreto, said in an interview in May. "We have to prove that we can do infrastructure work in a transparent and correct way."   Continued...

An aerial view shows the Arena das Dunas stadium, which will host matches for the 2014 soccer World Cup, in Natal, Brazil, January 22, 2014. REUTERS/Sergio Moraes/File photo