Mexico hit by spreading fallout of Odebrecht scandal

Mexico is the latest country caught up in the swirling scandal over Brazilian construction firm Odebrecht's multi-million-dollar bribes -- and while heads are unlikely to roll, the political and economic fallout could get ugly, analysts warn.

The scandal, which has already felled a string of big names in Latin American politics and business, arrived at Mexican President Enrique Pena Nieto's doorstep this week when allegations emerged that the former chief executive of state oil company Pemex, Emilio Lozoya -- a close ally -- took $10 million in bribes from Odebrecht to award the firm juicy contracts.

The payouts allegedly started in March 2012, when Lozoya was head of the international affairs office for then-candidate Pena Nieto's presidential campaign.

That proximity to the president has raised eyebrows in Mexico, where Pena Nieto is already deeply unpopular over a series of scandals involving his inner circle and top figures in the ruling Institutional Revolutionary Party (PRI).

Lozoya, who headed Pemex from 2012 to 2016, is appearing before prosecutors Thursday to answer questions about the accusations -- which he denies as "false" and "malicious."

Pena Nieto's office likewise denied his campaign took bribes from Odebrecht, calling such suspicions "absurd."

But the scandal threatens to deepen perceptions that the Mexican government is festering with corruption, less than a year out from presidential elections.

"The accusations against Lozoya will reinforce the already widespread discontent against President Pena Nieto's administration, which is largely driven by voter perception that corruption is rampant," said political analyst Carlos Petersen of consulting firm Eurasia Group.

"The PRI will have a hard time crafting a campaign strategy that allows them to be competitive," he said in a research note.

The likely beneficiary, he predicted: the firebrand left-wing populist Andres Manuel Lopez Obrador.

The former Mexico City mayor, who leads the race in early polling, is seen as a breath of fresh air by many weary voters. His opponents see him as a threat to political and economic stability, and call him the Mexican equivalent of Venezuela's increasingly autocratic President Nicolas Maduro.

- Secret rendezvous -

The source behind the bribery claim is Luis Alberto de Meneses Weyll, the former head of Odebrecht in Mexico and a key state witness Brazil's own investigation.

According to investigation documents obtained by Brazilian newspaper Globo, Weyll told prosecutors he started bribing Lozoya with a $4-million payment at the height of the 2012 campaign.

"I had noticed Emilio Lozoya had achieved a distinguished position in the PRI... whose candidate was favored to win," he reportedly told prosecutors.

"Lozoya was one of the leaders of the campaign committee, so I knew he would probably be an influential person in the new administration."

Lozoya maintains he has never met Weyll. But the latter gave a detailed account of their interactions, including a supposed secret meeting at a Mexico City cafe.

Just after Pena Nieto took office, Odebrecht won a $100-million tender for a Pemex oil refinery.

Mexico canceled the contract last year over "irregularities," after Odebrecht admitted to systematically paying hundreds of millions of dollars in bribes to win juicy contracts in 12 countries, including Mexico.

That has shaken Latin America, where ex-presidents and top officials have been jailed in countries including Brazil, Peru and Colombia.

- Economy vulnerable -

But analysts say it is unlikely Lozoya will ever face jail time.

Mexico has been hit by a series of explosive corruption scandals in recent years, extending all the way up to the president's wife -- who bought a $7-million mansion from a major government contractor in an alleged sweetheart deal.

But the investigations never hit too close to the president's inner circle.

"The perception (among Mexicans) based on experience is that in one case after another, the authorities say, 'We're investigating,' and then nothing happens," said Max Kayser, head of anti-corruption programs at the Mexican Competitiveness Institute.

But even if no one is ever punished in Mexico for taking Odebrecht bribes, the scandal could still hit the ruling class where it hurts: the economy.

"What this case says to the world is, 'If I'm a company and I want to invest in Mexico, the only way to do that effectively is if I have a top official's phone number," Kayser told AFP.

That perception could damage the government's much-vaunted campaign to attract foreign investment -- and even its current negotiations with the United States and Canada on revamping the North American Free Trade Agreement, he said.