As we discussed in “The Loot of Mexican State Oil Company Pemex, and How it was Done,” the organized crime syndicate kleptocracy uses what’s called “white elephant projects” to systematic loot state coffers and launder and hide the money.
Through state capture, criminal interests exert undue influence over state leaders, officials and procurement processes. This has had devastating repercussions for national development. Approval of white elephant projects has channeled windfalls to criminal syndicates, according to ITFS Chairman Sam Koim in the “Griffith Law Journal.”
Foreign aid from countries such as the U.S. plays a large role in large-scale theft of public funds. Globally, it’s estimated that such corruption drains the developing world of up to $1 trillion annually.
Without the complicity of banks and financial institutions, it’s impossible to commit economic crimes, such as fraud and money laundering, says the Papua New Guinea Investigation Task-Force Sweep (ITFS).
The world is peppered with white elephant projects, such as power stations that lie idle, bridges to nowhere and dams that have displaced villages only to produce uneconomic energy.
Yacyretá, on the border between Argentina and Paraguay, is one of the largest hydropower projects in Latin America. But because of cost overruns totaling $1.9 billion, according to the Paraguayan authorities, the power it generates has to be subsidized by the government.
Another example, the Bataan nuclear reactor in the Philippines. Built at a cost of more than $2 billion, it sits on an active fault line and has never produced a single unit of electricity.
This also includes domestic projects such as the California train to nowhere. The state has been forced to cancel the massive bullet train project after having spent and wasted many billions of dollars. The state owes the Federal Government three and a half billion dollars.
Economic crises and events, like the coronavirus, create an open season for white elephant projects and kleptocratic looting “stimulus” bazookas a la Hank Paulson and sidekick Ben Bernanke.
During the banking crisis of 2008, for example, the Reyno de Navarra Arena in Spain was impressive and imposing. A giant white cube covered in 933 smaller illuminating cubes. But today, the nearby streets are silent and wire fences surround the unused public building.
The building project was approved back in 2008 as a response to the economic crisis, part of a €4.5 billion plan by the community of Pamplona. The scheme was modeled on Plan E, the series of ill-advised measures put in place by the Socialist government of José Luis Rodríguez Zapatero to use public money to attempt to boost Spain’s economic activity.
Another Spanish white elephant was Ciudad Real’s empty airport, which became an enduring symbol of Spain’s economic crisis. Saddled with debts of nearly €529 million, the airport closed in 2012 after just three years of operating.
The 2016 Summer Olympics in Rio de Janerio, Brazil, was a free for all for corruptos and looters. Even hardened Brazil watchers were cringing as details emerged of the thieving that marked the run-up to the first ever Summer Games held in South America.
While ordinary Brazilians were suffering through the country’s deepest recession on record, Rio state and city’s leaders treated the Olympic buildup as a personal cash machine. It was a corruption “trampoline,” as prosecutor Fabiana Schneider put it.
At the head of the feeding frenzy was Rio state governor Sergio Cabral, who was sentenced in June 2017 to 14 years prison for taking kickbacks from construction companies working in the city.
Although he left office in 2014, the Games were awarded in 2009, meaning he had a steering hand in numerous projects, including refurbishment of the iconic Maracana football stadium, where the opening and closing ceremonies were held in 2016. The metro extension West toward Olympic Park was poorly executed with little oversight on bidding.
Prosecutors say Brazil’s Olympics leadership planned what amounted to major robbery from the start, by bribing the International Olympic Committee to choose Rio over Chicago, Madrid and Tokyo.
The corruption probe into Operation Car Wash revealed a political system rotten to the core. Prosecutors allege former mayor of Rio Eduardo Paes received 4 million euros for “facilitating contracts related to the Olympic Games.”
Roberto Marinho, a community leader in Morro da Providencia, Rio’s oldest favela, asked, “What was the true (Olympics) legacy? Lots of money for developers and construction companies, and for their colonels, the politicians.
“Where are the basic services in this city? Security is in chaos, the idea of social development has been abandoned,” Marinho said. “The only legacy is the millions that were pocketed.
Theresa Williamson of pressure group Rio On Watch said, “The No. 1 request from residents in Alemao was sewage: They got a cable car. The No. 1 request in Manguinhos was sewage: They got a library and public housing. Rochina, same thing: sewage. They got a sports complex, a pedestrian bridge and some public housing. The real need from residents was clear.”
Rio’s billing tribunal accused the construction companies responsible for the work of overcharging by 59 million euros. The cable car in Alemao has been out of service for several years and may never restart, because the state cannot afford the 700,000 euro monthly operating cost. This cable car was designed solely to allow small numbers of people to traverse over the favela (slum) as part of an ill-conceived tourism scheme.
The Rio Aquatic Centre was designed as a temporary facility that could be disassembled and built into new community swimming centers in Madureira Park and the Campo Grande area.
The 15,000 capacity venue was unveiled in 2015 as the model of “nomadic architecture” techniques. The center was the $50-million jewel in the crown of Rio 2016’s projected $14.2 billion expense budget.
Today, it’s decaying and exposed to the elements.
Maracana was at least a functioning, if old, football stadium before its $600 million renovation. I attended a game there back in 2007. At least it had personality and seemed to sustain itself.
“The Maracana is the biggest symbol of the way the games were managed,” Mauricio Santoro, a political scientist at Rio de Janeiro State University, said. “The vast majority of people in Rio will never go to the golf course, or the Olympic venues. But the Maracana is different. It’s the jewel of the crown.”
But in the post-Olympic period, the Maracana was vandalized and is also decaying.
Rio’s $25 million Olympic golf course boondoggle.