OREANDA-NEWS. The chief executives and other top brass at Brazil's biggest construction firms, Odebrecht and Andrade Gutierrez, were arrested this morning in the latest phase of a federal police sweep related to ongoing investigations into corruption at Brazil's state-controlled Petrobras.

The firms are among around two dozen implicated in a major kickback and bribery scheme that has rocked Brazil since the scandal broke late last year.

Today?s dramatic arrests could accelerate the opening of the Brazilian market to more foreign competition.

The companies have long thrived on strict local content rules that require Petrobras and other firms to source a percentage of goods and services on the Brazilian market. Those rules are becoming more difficult to fulfill as local contractors come under deepening financial and corporate pressure, opening lucrative opportunities for foreign contractors to take their place. Petrobras recently awarded a contract worth an estimated \$720mn for gas compression modules to two Asian firms after the deal with a local contractor implicated in the corruption case was revoked.

Arrests warrants for Marcelo Odebrecht, the chief executive of Odebrecht, and Otavio Azevedo, his counterpart at Andrade Gutierrez, were among 12 executed today by federal police in various Brazilian cities. Odebrecht executives M?rcio Farias, Rog?rio Ara?jo and Alexandrino Alencar, and Andrade Gutierrez executives Paulo Dalmaso and Elton Negr?o were also taken into custody.

The executives are accused of cartel formation, bidding fraud, corruption, misappropriation of public funds and money laundering, among other offences.

Federal police say the companies made bribery payments from accounts in Switzerland, Panama and Monaco, corroborating claims made by other imprisoned executives.

"The presidents of the companies knew everything. There is concrete evidence showing that they had contact or direct participation in acts that led to cartel formation," federal prosecutor Carlos Fernando Lima said today.

The corporate offices of both firms were also searched as part of the operation.

Odebrecht confirmed that searches had been performed at its S?o Paulo and Rio de Janeiro offices and that arrest warrants were executed.

"As is public knowledge, Odebrecht believes that these warrants are unnecessary, since the company and its executives…have always been available to the authorities to cooperate with the investigation," the company said.

Andrade Gutierrez says it is providing all the necessary support to its executives and is cooperating with the investigation.

"Andrade Gutierrez reiterates, as it has since the start of the investigation, which does not have or have had any relation to the facts investigated, and hopes to clear up all the questions of Justice as soon as possible."

Petrobras would not comment on the arrests, but highlighted that both firms were among the around two dozen companies temporarily banned from bidding on Petrobras projects.

In November 2014, federal police arrested around 25 top executives from Brazil's biggest engineering and construction firm as part of the so-called Lava Jato investigation. At the same time, the offices of both Odebrecht and Andrade Gutierrez were searched, but no arrests were made.

Both firms were implicated by Paulo Roberto Costa, the former downstream director of Petrobras, whose confession, part of a plea deal with federal prosecutors, helped police crack open a multi-billion-dollar kickback scheme at Petrobras.

Costa said he received around \$23mn in bribes paid from Odebrecht to secret accounts in Switzerland. Other executives that have cut plea deals with prosecutors have also claimed Odebrecht and Andrade Gutierrez led a cartel that inflated Petrobras contracts knowing a certain percentage would be siphoned to the account of Petrobras executives, Brazil's ruling Workers' party (PT) and allied parties.

Odebrecht and Andrade Gutierrez control projects in a wide range of industries around the world. Both have major contracts with Petrobras for upstream and downstream construction projects, and are major players in infrastructure development throughout Latin America.

Odebrecht controls Brazilian petrochemicals giant Braskem with a 38pc stake. Petrobras holds 36pc and the remaining shares are publicly listed. The firm is also a leading contractor for projects associated with the 2016 Olympic Games in Rio de Janeiro.

Because of their size and scope, the companies are considered too big to fail, but their bottom lines will likely be dented by the legal costs of the scandal.

Both firms have close ties with the PT, and today's arrests are a major blow for President Dilma Rousseff and her popular predecessor Luiz In?cio Lula da Silva.

The arrests cast a shadow over Rousseff's recent announcement of a \$64bn infrastructure program covering roadways, railways, seaports and airports, areas where both firms have a dominant presence.