Brazil's Galvao goes bust following Petrobras scandal

Petrobras headquarters in Rio de Janeiro. Photo: February 2015 Image copyright Getty Images
Image caption Petrobras has 87,000 employees and is seen as a pillar of Brazil's economy

One of Brazil's biggest engineering companies, Galvao Engenharia, has filed for bankruptcy protection in the wake of the Petrobras scandal.

The state-run oil company has cut off payments to Galvao.

Grupo Galvao, the firm's parent company, said it was never involved in the alleged corruption scheme.

A cartel of engineering and construction firms allegedly overcharged Petrobras for work and used the excess for bribes.

The oil giant is now at the centre of a multi-billion dollar investigation.

Galvao, a civil engineering and building company, said it was owed millions of dollars by Petrobras.

Brazil's sixth-largest construction firm, Galvao will now have 60 days to present a recovery plan.

It says it is owed more than $150m by Petrobras for services and work already undertaken.

Analysis: Daniel Gallas, South America business correspondent

Galvao Engenharia's call for bankruptcy protection is bad news for the Brazilian economy - which is already close to stagnation or even recession, as some fear.

Many of Brazil's top construction companies are implicated in the Petrobras scandal.

These are companies that are building roads, ports and other infrastructure projects that Brazil's economy desperately needs to grow again.

Just six months ago, Galvao won a tender to build a road between the states of Goias and Tocantins. With the scandal and call for bankruptcy, that project has stalled.

If other construction groups follow suit, Brazil might experience further delays to its infrastructure projects.

Dozens of senior politicians and business leaders have been implicated in the Petrobras scandal.

The crisis at government-controlled Petrobras has undermined the authority and popularity of President Dilma Rousseff, who has seen calls for her impeachment.

Thousand of workers and dozens of small companies are feeling the impact of the scandal as employees are laid off and contracts go unfulfilled.

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