Former Odebrecht CEO Marcelo Odebrecht

Corruption in Latin America

Corruption has a long history in Latin America. With the advance of globalization and the transition to democracy at the end of the last century, it was assumed that if the region were to enter the global economy successfully and hold its head up among Western democracies, it would have to learn to conform to the rules of the game.

Reform efforts got a big push from Transparency International, an NGO headquartered in Germany. Those endeavors, which were directed mainly at the private sector, have been complemented by rules in the same spirit enacted by the World Trade Organization (WTO), the Organisation for Economic Co-operation and Development (OECD), and the G20. Even the Bretton Woods institutions (the International Monetary Fund and the International Bank for Reconstruction and Development), which for decades had been reluctant to make corruption an issue in their lending on the grounds that it was a matter of internal politics, began in the 1990s to push for greater transparency.

Still, corruption is the second-most worrisome problem for the people of the region, right behind citizen security. In Transparency International’s latest Corruption Perceptions Index, the Americas as a whole (including the United States and Canada) averaged a score of 44 out of 100. A score below 50 indicates that governments are not making a genuine effort to reduce corruption. Clearly, there is a lot of work to do.

This gargantuan case of corruption also had a silver lining in that it demonstrated the strength of the country’s judiciary and its capacity to defend the rule of law

Brazil, by far the largest economy in Latin America, has been stymied for years in its efforts to join the OECD by a lack of transparency in its budgeting process. The Petrobras scandal has put membership out of reach for the time being. To some observers, this gargantuan case of corruption also had a silver lining in that it demonstrated the strength of the country’s judiciary and its capacity to defend the rule of law. The CEO of Odebrecht, the giant construction firm that appears to have served as “bagman” for the money siphoned from the state oil company to political parties and politicians, was even sentenced to prison. Now, however, the scandal is spreading across South America like a vast pandemic.

Operation Car Wash, as the inquiry into the Petrobras scandal is known, removed Brazilian President Dilma Rousseff from office. Her successor is still dealing with the fallout. Accusations that a subsidiary of Odebrecht made illegal contributions to the political campaigns of all the parties in Chile has complicated matters for President Michele Bachelet and contributed to the paralysis of her government. Through a plea bargain Odebrecht and the Brazilian petrochemical company Braskem struck with the U.S. Justice Department, we now know about payments Odebrecht made to politicians in other Latin American countries. As of this writing, Odebrecht payments are said to have been made to officials in Peru, Ecuador, Colombia, Venezuela and Mexico. Those bribes constituted a violation of the U.S. Foreign Corrupt Practices Act. Odebrecht negotiated a deal, pleading guilty and agreeing to pay up to $4.5 billion in penalties to the U.S., Switzerland and Brazil.

What is to be done? The easiest place to start is national legislation making clear rules about contributions to political parties. An even more significant step would be to support independent judiciaries and not undermine them, as so often has been the case. It will be a long struggle and success is not guaranteed. The task of Latin American governments will not be made easier by the rising tide of nationalism in the U.S. and Europe, which is undercutting many of the international rules that the Latin Americans are being asked to follow.

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