Brazil Launches Investigation into $10 Billion road Tender Cartel
brazilian authorities are investigating allegations of widespread cartel activity impacting over $10 billion in public tenders for road engineering and services between 2021 and 2024.
On December 10, the Administrative Council for Economic Defense (CADE) initiated an administrative process to examine potential economic violations in tenders for engineering works and services undertaken by federal, regional, and local public administration bodies spanning the years 2016 to 2024. The probe stems from findings within the Cerebro Project, triggered by a complaint from the Court of Accounts of the Union (TCU) regarding suspicious activities by companies bidding on contracts with the National Department of Transport Infrastructure (DNIT) and the Development Company of the São Francisco and parnaÃba Valleys (Codevasf).
This evidence later fueled Operation New Direction, a collaborative effort at the end of 2024 involving CADE, the Comptroller General of the Union (CGU), and the Federal Highway Police (PRF). “The operation was crucial in gathering preliminary evidence to support the formal investigation,” a senior official stated.
Investigators are focusing on strategies allegedly employed to establish a cartel, including the creation of participation account companies. These entities are suspected of subcontracting with competitors to favor the winning bidder,utilizing tactics such as hedging proposals and suppressing competing bids. This practice effectively stifles competition and artificially inflates costs.
The administrative process currently targets sixteen companies and fifteen individuals. The road engineering and services sector is characterized by ample budgetary allocations, with individual tenders frequently exceeding millions of reais. Estimates suggest that tenders potentially affected by cartel activity between 2021 and 2024 totaled 10 billion reais – roughly $2 billion USD based on current exchange rates.
The accused parties now have the opportunity to present their defenses, specify desired evidence, and designate up to three witnesses to support their case.
If found guilty, the CADE Administrative Court could impose penalties reaching up to 20% of a company’s gross turnover.Individuals face potential fines ranging from 50,000 to 2 billion reais. According to data from the organisation for Economic Co-operation and Development (OECD), cartels typically add a 20% premium to market prices, resulting in billions of reais in annual losses for both the state and consumers. Beyond administrative penalties, cartel participation is also considered a criminal offense.
CADE’s action underscores its commitment to fostering competition and safeguarding the public interest in public tenders. “This investigation reinforces our dedication to ensuring fair and competitive bidding processes,” one analyst noted.
Details regarding the administrative process are available under case number 08700.013148/2025-95.
Why: Brazilian authorities launched an investigation into alleged cartel activity in public tenders for road engineering and services. The investigation was prompted by suspicious bidding activities identified by the Court of Accounts of the Union (TCU) and further substantiated by Operation New direction.
Who: The investigation targets sixteen companies and fifteen individuals. Key agencies involved include CADE, the Comptroller General of the Union (CGU), and the Federal Highway Police (PRF).
What: The alleged cartel activity involved the use of “participation account companies” to manipulate bids, suppress competition, and artificially inflate costs in tenders totaling approximately $2 billion USD (10 billion reais) between 2021 and 2024.
How did it end?: As of December 10, 2024, the investigation is ongoing. The accused parties have been given the opportunity to present their defenses. If found guilty, companies could face fines up to
