Government Seen as Dragging its Feet on Odebrecht Prosecutions
Corruption in general and the Odebrecht case in particular continue to dog both the ruling PLD and the political system. The image of Danilo Medina´s government has deteriorated, and recent events suggest that the top level of the PLD has begun to fracture. The justice system has been unable to convince the public that it’s acting efficiently or impartially; it’s moving so slowly that it looks trapped and compromised by political power. For the government and the PLD, this looks like a long nightmare, which threatens to go on and on.
The judge who heard the agreement negotiated by the Attorney General and Odebrecht rejected it, arguing that the actions admitted by Odebrecht were far too serious to be addressed by such a deal, which stipulated only a fine and judicial cooperation, and exempted criminal and other legal sanctions. The judge's decision was a blow to the prosecution and the government, and reinforced the perception that the Attorney General’s office is collaborating with Odebrecht, in an attempt to minimize the effect of Odebrecht’s confessions on both the PLD and the government.
A senior Odebrecht official reportedly confessed that the company made payments to the Dominican Republic for electoral purposes, through accounts under the control of Joao Santana, one of Medina's top electoral advisors, who was also sentenced in Brazil in the Lava Jato court cases. Medina himself had to come forward to deny that his campaign received Odebrecht funds.
The government has also undertaken a major media offensive in defense of the Punta Catalina coal plants, being built by an Odebrecht-led consortium. At $2 billion, it is huge for the DR. It has been the subject of many questions, and has faced serious financing problems. The citizen’s movement protesting corruption is demanding an immediate termination of this and all other Odebrecht contracts.
In February, inflation reached 0.42%, a relatively high rate compared to the monthly average of 2016 (0.14%), but lower than in December 2016 (0.9%) and January 2017 (0.62%). Inflation y/y reached 3.34%, within the target range of the monetary program. We might see a rate increase soon.
Tensions in the FX market have been rising, and complaints from the business sector and public over banks´ rationing of foreign currency continue. Though authorities have blamed uncertainty related to U.S. trade and migration policies, we think pressures from the Central Bank on trading agents, especially banks, over currency prices is the key factor.
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