Last year Ecuador's VP was arrested for corruption...yes the VICE PRESIDENT. He was receiving bribes from the Brazilian construction company Odebrecht. This company government officials from 14 different countries to secure public construction contracts. They even have a department in charge of managing this bribes. Only in Ecuador, in the last 10 years, Odebrecht paid $33.5 million in bribes to government officials. The company made $116 million in profit, as a result of these bribes.
This company was spending money on bribes to secure public construction contracts. But, even when millions of dollars were spent, this investment did not increase the total economic profit. By being hired, Odebrecht received the profit from the project that any another firm would have received if selected. This is just a matter of transfer, of which firm is hired and receives the profit of the project. However, the fact that Odebrecht spent so much money on bribes to obtain these contracts is an example of rent-seeking. These $33.5+m are resources that were spent by Odebrech but they do not increase welfare (the value of the project or the economic profit). In fact, it can be said that it even decreased welfare, as many of these projects were not completed. Odebrecht engaged in this rent-seeking behavior (bribes) to secure their place on the market. But, this $33.5+m spent on bribes, and the loss from unfinished projects represent a DWL that resulted from Odebrecht's rent-seeking behavior. They are resources that could have been spent more effectively elsewhere. Maybe Odebrecht could have used this money to improve their construction proposal and be hired in a legal manner.
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