Are efforts to combat corruption in Latin America failing? Four experts share their insights.

BY LATIN AMERICA ADVISOR
Inter-American Dialogue

Mexico and Argentina lead Transparency International's list of the countries in Latin America whose citizens perceive their nations as most corrupt. Seventy-two percent of Argentines and 71 percent of Mexicans believe corruption in their countries has grown over the past year, according to the study, which ranked Venezuela a close third. Why are perceptions of corruption comparatively high in these countries? In which countries are governments undertaking real actions to root out corruption, and where are such efforts lacking? How is corruption affecting the business and investment climate in Latin American countries? 

Miguel Schloss, president of Surinvest Ltd. in Chile and former executive director of Transparency International: While corruption in Latin America varies widely between countries, much of the region ranks poorly in international terms-far behind OECD and East Asia, and marginally better than the former Soviet Union and Sub-Saharan countries. Moreover, it's hard to see much tangible progress in the last decade, judging by all major sources of corruption perception indicators-in spite of active anti-corruption advocacy, new laws and a regional convention. This strongly suggests that fighting corruption cannot be approached piecemeal by adopting new laws, creating another commission, carrying out miscellaneous projects or launching another 'campaign,' as has been the practice in much of the region. A more strategic and rigorous approach is needed, addressing each country's underlying causes and weaknesses in key institutions, policies and practices. Of its many guises, legal corruption is becoming particularly pernicious-for example, when special-interest groups shape law or policies to their advantage through exchange of favors to politicians-particularly in populist regimes where corruption has led to control of entire states, through the phenomenon dubbed 'state capture.' At its core, good governance starts with elections and higher levels of transparency. Elections cannot be effective unless they are free and clean, complemented by real freedom of expression and a free press. Transparency with impunity will not bring forth justice or make governments accountable. Broader governance reforms require progress in rule of law to make any real, lasting impact. In much of Latin America, progress on these counts has been mixed. Reshaping the fight against corruption into smarter strategies that tackle the absence of transparency, excessive discretionary powers in the public and private sphere, lack of controls and the rule of law will strengthen accountability with consequent improved conditions for development in the region.

Ruben Olmos, managing partner at Global Nexus LLC in Washington: Latin America has accomplished great things over the last decade, including lowering poverty, improving income distribution and building a more robust democratic system. Corruption, in contrast, has worsened. Corruption is hard to measure given its complexity and types. However, surveys such as the ones conducted by Transparency International suggest that though some Latin American countries are becoming more corrupt, others are improving. Regional corruption has increased over the years given excessive government regulations and big bureaucracies. The more complex the government is, the more opportunities you have to offer bribes. Organized crime is another important pillar of corruption. While some countries like Colombia and Peru have managed to destroy the power of drug cartels, in Mexico and some countries in Central and South America, organized crime has grown and become more consolidated, fueled by the incredible profits of drug trafficking and distribution. Across the region, organized crime operates with varying degrees of impunity. Underpaid government employees who supervise immigration, policing, transportation, utilities and other functions are all vulnerable to criminals' bribes. In Argentina, corruption has also affected higher levels of government. A decade ago former President Carlos Menem was under house arrest on suspicion of involvement in an arms-trading scandal. For businessmen, Latin America represents both an opportunity and a challenge. On the one hand, ample resources, a growing middle class and connectivity present opportunities to global companies. But investors must deal with increasing corruption, and not just when trying to sell goods and services to government, but also to obtain permits or inspect new facilities. In Mexico, the Peña Nieto administration has announced a new effort to tackle corruption. The plan includes the elimination of the current comptroller's office and the creation of a new independent Anti-Corruption Commission, which will have legislative oversight. These efforts and the crusade against organized crime should be the beginning of a sustained effort to end this endemic problem.

Juan Cruz Díaz, managing director of Cefeidas Group in Buenos Aires: If we look at Transparency International's corruption perception map, the majority of Latin American citizens perceive their countries as corrupt. Economic problems, institutional weaknesses and social and political mobilization all influence the variation in these perceptions of corruption every year. The literature about the value of perception-based corruption measurement is vast and contentious. However, there is no doubt that TI's report and its indexes are very influential and an indication of serious institutional problems. In many cases, the results serve as a basis for institutional change. The widespread perception of corruption in Latin America has a long history of affecting the quality of business in the region. Companies and investors use several sources to assess the business climate, including indexes (like the TI corruption perception index), ratings, rankings and other official and non-official statistics. The challenge for companies is how to evaluate all of these sources. Reaching conclusions from non-contextual data can be highly misleading. Therefore, it is crucial for a company to have deep, first-hand local knowledge of the numerous dimensions of the social, regulatory, political and business climate and the in-country dynamics. While Mexico and Argentina have historically ranked poorly in this regard-and clearly there is a need for improvements to measures tackling corruption-they are not alone (Brazil, for example, will probably feel the impact of the recent protests in the next TI report). Latin American governments should work together to develop an anti-corruption initiative aimed at strengthening institutional quality in the region. Currently, the issue of corruption is not sufficiently addressed in existing regional organizations. The Foreign Corrupt Practices Act in the United States, the U.K. Bribery Act and other initiatives in the European Union and at the OECD level serve as good examples of measures that have achieved positive results across the globe. I believe there is an opportunity and a need for Latin America to move forward decisively with a region-wide, anti-corruption initiative that could mark a new stage in the consolidation of democracy and its institutions. 

Raúl Benítez Manaut, researcher at the Center for Interdisciplinary Research in Science and Humanities at the National Autonomous University of Mexico (UNAM): Corruption has more fans, players and money involved than even soccer. Across Brazil, thousands of protesters took to the streets against graft. In that country, a powerful cabinet member from the previous government, José Dirceu, was sentenced to 10 years in prison in connection with the so-called Mensalão scandal. It was just within the past 25 years that a Brazilian legislator who had been charged with corruption was convicted. According to some estimates, corruption amounts to 3 percent of the country's gross domestic product. Meanwhile in Mexico, the country's most powerful woman, Elba Esther Gordillo, leader of the hemisphere's largest union, was jailed for 'unexplainable' enrichment. Mexico's government also wants to seize a large number of luxury homes and bank accounts. Also in Mexico, former Tabasco Gov. Andrés Granier is in prison, accused of stealing the whole budget of the state's health department. These cases in Latin America's largest countries show the weaknesses of fragile democracies, which politicians, businesspeople and corrupt contractors are destroying. Such cases are very common in most countries, regardless of the party in power or the government's ideology. These cases also show the weakness of judicial systems, prevailing impunity and a lack of transparency in the management of resources. Corruption is an evil that can doom democracies that have taken much work to build.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor.