Corruption in Latin America

David Arellano-Gault

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429014635
• Edition: 1
• Topic: Business
• Subtopic: Corporate Governance
• Index: Business

In Corruption in Latin America the reader is presented with an alternative starting point for understanding corruption in this key region. The author asserts that corruption is a stable and rational social and organizational mechanism. Seen through this lens, we can begin to understand why it persists, and how to implement strategies to control corruption effectively.

Beginning with an in-depth, nuanced examination of the concept of corruption, the author establishes the theoretical basis for viewing corruption as a social construct. An analysis of the experiences of four countries in the region – Argentina, Brazil, Guatemala and Mexico – provides the reader with concrete data from which they can understand how and why these behaviors are reproduced, validated, and tolerated in everyday settings between governments and citizens, governments and firms, and firms and clients. Once we see corruption as the socially sanctioned norm for getting business done, we can begin to produce and propose effective solutions to reduce corruption in Latin America by designing and implementing instruments that transform this dynamic.

This rigorous and original approach will challenge the reader's assumptions about corruption, and will appeal to students of corporate governance, international business, public management, and business ethics.

SECTION II

Latin American Anticorruption Strategies

Introduction to Section II

This section studies four cases of organizational and institutional efforts in Latin America. It is a region characterized by high levels of corruption and problems of inequality and poverty that are often related to extremely poor quality, clientelistic, and populist governments.

Corruption in Latin America has a long history: diverse analysts establish that the colonial logic, which is highly extractive and also creates a highly stratified society (Warf, 2019, p. 21), forms the basis of the creation of a political system that is highly dependent on clientelistic logics and strong personalities, which tend to dominate the political spectrum. It is a region which, in various countries in the 20th century, experienced military regimes which arrived via coups d’état, yet underwent a major process of liberalization and democratization at the end of the century. However, despite this process of strengthening democracy, corruption remains a serious problem for these societies. As mentioned earlier in the Chapter 1, the Corruption Perceptions Index (CPI) is an imperfect measure, yet useful in many ways, at least to provide a general idea of the situation many people believe applies in these countries. According to data from the CPI (2017), no Latin American country has an index above 80%, that is, where countries with a very low perception of corruption are located. The closest ones are Chile (67%), Uruguay (70%) and Costa Rica (59%), while those furthest away include Argentina (39%), Brazil (37%), and Mexico (29%) (International Transparency, 2017).

Latin America therefore faces an enormous challenge to address the high levels of corruption. Two variables are critical, according to what has been discussed in previous chapters: the first is precisely the low quality of governments and their limited ability to solve complex social problems such as inequality, poverty, and corruption itself. The second, as we saw in the first two chapters of the book, is that corruption in every society can be linked in different ways to entrenched, enduring social practices. Specifically, such practices involve the exchange of favors and influences that enable people to solve the most diverse problems they face with various types of authorities and organizations. Solving these problems takes place by bending the rules and turning around the often-motley illogical rules that are established by the state and private bureaucracies. Through the exchange of favors and influences, the actual treatment received by a person may be different from what is formally established: he/she does not have to follow the steps or processes, wait in line, or fully comply with the formally established requirements. The network of acquaintances and influences that can be used are extremely useful and often effective for people to solve their problems. It comes at a high social cost, involving reproducing a scheme that legitimizes the violation of formal rules, processes, and forms of order. Legitimation, as we saw in Chapter 2, is based on a justification. Otherwise, things do not work, and without those contacts, people would be unlikely to solve their problems. It is a vicious circle: without this exchange of influences, without connections, problems are not solved, but this implies bending the rules, which are probably designed to be difficult to follow, thereby generating a high degree of uncertainty in people who therefore need to resort to their networks of acquaintances to bend the rules. Bending the rules and creating a parallel world of informal relationships becomes a necessity. As we have seen, it even becomes a valued capacity that certain people develop better than others. The more connections and networks, the more problems can be solved. And the exchange of favors is constituted and crystallized, as a broad, socially extended grid, where those with the most influence are those who move best in this informal world of solutions and paths which, in practice, in everyday life, enable things to work.

There is a high social cost, of course: that of pretending that there is a formal world of important, necessary rules and norms, which must be followed, yet which, at the same time, are disobeyed and bent, precisely so that everyday reality is possible, works, and is socially accepted and legitimized.

In Latin America, these social exchange mechanisms have different names and logics, intensities, and capacities. Jeitinho in Brazil, pituto in Chile, sociolismo in Cuba, and palanca in Mexico are examples of the various mechanisms for the exchange of favors that exist in countries in the region. Although the extent and strength of these mechanisms, their indispensability, and their legitimacy vary widely from country to country, their presence is widely known by the Latin American population.

The dilemma of controlling corruption in the region must be understood in this double dynamic: that of incapable or poor-quality governments, and that of a series of societies that have constructed an extremely stable political and social fabric, from below, through practices and effective exchanges in everyday life. In its different forms and in different ways, corruption in these countries has very stable and widespread social and political support.

There is no stable or single or effective recipe. This is where the strategies of what we have called the “anticorruption industry” appear to be ineffective, at least in many countries of the region. Due to their economic and population size, Brazil, Mexico, and Argentina feature prominently in corruption levels. This is not to mention the current humanitarian disaster in Venezuela. Countries such as Peru, Honduras, and Guatemala have launched major efforts in recent years, in response to a view of corruption that has spun out of control and is clearly systemic, political, and socially sustained. Chile, Uruguay, and Costa Rica are cited as examples of Latin American countries that have managed to control corruption. Their strategies, history, size, culture, and context are usually mentioned to justify their results. But in fact, there is little understanding of why they can be considered countries outside the predominantly high corruption levels in the region. In any case, the aim of this second section of the book is to show that the strategies being tried are diverse and numerous, and that many of them are truly international innovations such as the CICIG in Guatemala and the National Anticorruption System in Mexico.

It has therefore been decided to study four cases: Argentina, Brazil, Mexico, and Guatemala. Argentina because it is the Latin American country that has a traditional anticorruption agency that has managed to survive the most diverse attacks and boycotts since 1999. The case of Brazil was selected not only because it is a country of great size and importance, but because, compared with others in the region, it has a clear institutional framework for controlling corruption, which is decentralized and has multiple organizational overlaps. It is also based on a strong civil service tradition. The case of Mexico was chosen for its daring and, at the same time, desperate attempt to control its rampant political and economic corruption with cultural bases, through an ambitious but elephantine National Anticorruption System. The system tries to connect an enormous amount of powers and organizations, at the federal and national level, as a means of reversing an ancient and resilient culture of corruption. And finally, Guatemala is studied, with its daring new anticorruption agency: a hybrid between an international organization and one with the capacity to act in the national sphere. This organization has been built, unlike the Mexican case (elephantine and redundant), as a more focused organization, with highly specific and sophisticated research capacities. It has strategically decided not to promise to reduce, far less eliminate, all corruption in the country, but rather to control it, to make it less important in the logic of the Guatemalan political system through a focused strategy.

These are obviously four very different cases. But they all have a specificity that makes it possible to observe the panorama and especially the challenges of controlling systemic, socially sustained, and politically functional corruption. This specificity can be regarded as the common thread. That thread is the need to build a legitimate, politically viable, and sustainable mechanism that can affect and change the very social and political dynamic that makes corruption a socially acceptable and politically useful practice. How can such a mechanism be built, with political legitimacy, if the political system itself must create and sustain it? And if society itself will see its dynamics of exchanges of favors, connections, and acquaintances affected. This common thread led to the study of these four cases, because in all of them, there is an attempt to solve the dilemma differently. Argentina has a traditional anticorruption agency that was almost immediately attacked by the very political system that created it. Mexico refused to create an agency that would suffer the same fate, given the perennial social and political logic of corruption the country experiences, instead creating an extremely risky innovation. Guatemala created a hybrid organization (international and national) giving it the best of both worlds: because it is international, it can in principle escape the pressure exerted by internal political agents on Argentina’s anticorruption agency, but with a national capacity for research and accompaniment. It also boasts an enormous technical capacity to investigate cases. The Brazilian case is not an agency or a system, but a long, continuous effort to control corruption based on the decentralized professionalization of various agencies from the executive, legislative, and judicial branches that often end up coordinating under a functional rather than a predesigned logic. Despite this, Brazil also discusses how to coordinate efforts through a national strategy, since the effects the political system is experiencing as a result of the success in Brazil to dismantle corruption networks are already significant.

As an introduction to the four cases studied in this second section of the book, the following text will briefly outline the anticorruption agencies, their logics, and problems.

Anticorruption Agencies

Anticorruption agencies (ACAs) are usually organizations created by national governments granting them multiple, ambitious mandates. ACAs generally combine legal powers of investigation and prosecution with other preventive and political advice to the cabinet or the president. These institutions vary enormously as to how they perform these functions, and as to their resources and budgetary, technical, and legal capacities. In some cases, they focus on initiating research based on complaints received or evidence identified by the organization itself. If there is a case that warrants being tried, the matter is usually referred to the Office of the Prosecutor or a similar organization (Dionisie & Checchi, 2008).

Anticorruption measures began to be introduced into countries in the region in the late 1990s, under pressure from international organizations such as the Council of Europe, the OECD, the World Bank and, above all, the European Union. (Dionisie & Checchi, 2008). It seems important then to discuss, albeit briefly, these ACAs, given that in the cases that have been selected for analysis in this book, ACAs serve as a benchmark: either to continue this strategy (Argentina), not to follow it and look for options (Mexico), create an innovation (Guatemala), or continue on a more decentralized path (Brazil).

What Is an Anticorruption Agency?

An anticorruption agency is basically created to implement national anticorruption strategies or programs. These strategies can emphasize various combinations of preventive and repressive measures as well as being a response to pressures or recommendations resulting from the ratification of international instruments. There are several instruments of this type, the best known of which being designed by the United Nations, the European Union, or the OECD. In any case, ACAs are assumed to be organizations with various specialized capacities and competences: in research, prevention, monitoring, using sophisticated techniques, statistics, and indicators (Dionisie & Checchi, 2008). Likewise, some of these agencies have expanded their functions to include transparency, education, and accountability agendas.

Several options and models have been experienced, as summarized in the following table.

TABLE I.II.1 Types of Anticorruption agency models

Multi-purpose agencies with the power to enforce the law and preventive functions	Agencies, departments and/or units of application of the law	Prevention, policy development and coordination institutions
Strictly speaking, it would be equivalent to an “anticorruption agency”.	This model adopts different forms of specialization in the field of research and processing or a combination of the two.	This is the most diverse model, comprising a variety of institutions with varying degrees of independence and organizational structure.
It combines a multifaceted approach in an institution. Prevention. Research. Education. “Multi-purpose agency”.	It has three important elements: Prevention. Coordination. Research functions. “Police agency”.	Additional subcategories can be identified: Services responsible for conducting and facilitating research into corruption phenomena. Reviewing and preparing the relevant legislation. Evaluating the risk of corruption.
The model has attracted the greatest visibility and has sparked discussions in the international arena.When literature and reports refer to specialized anticorruption agencies, this is this model they have in mind.	What distinguishes this model from the first is the level of independence and visibility, since it is usually placed within the existing police force or the procedural hierarchy.	Be the focal point for international cooperation and the link with civil society; controlling institutions with responsibilities related to the prevention of conflicts of interest and the declaration of assets; commissions responsible for monitoring and coordinating the implementation and updating of strategic national and local anticorruption documents.

Source: Compiled by the author using data from the OECD (2008).

What Happens with Independence in an Institution?

When we speak of an institution specializing in the fight against corruption, independence is regarded as a fundamental element. The reasons why independence criteria are so high up on the anticorruption agenda can be summed up in one sentence: “Corruption in many respects amounts to the abuse of power” (OECD, 2008, p. 24).

The question of appropriate powers to request documents, and carry out inspections and hearings are also...