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Harnessing the Anti-Corruption Wave in Latin America

October 16, 2017
Categories: Anti-corruption, Bribery, Compliance, Corruption

A recap of the September 22, 2017 Inter-American Dialogue event featuring Transparency International Chairman José Ugaz and Inter-American Dialogue President Michael Shifter

The vast corruption scandals rippling across Latin America in recent years have left people wondering whether this is a positive turning point in the fight against systemic corruption in the region. These recent scandals have gone beyond small instances of bribery and money laundering and instead include the misappropriation of public funds by political and economic elites at the expense of many, or in other words, “grand corruption.” According to José Ugaz, chairman of Transparency International, grand corruption includes three key features:

  1. Large amounts of money and resources
  2. Involvement of powerful political and economic actors
  3. Tremendous impact on human rights

Ugaz joined the Inter-American Dialogue on September 22 to discuss the topic of grand corruption in Latin America at an event titled Harnessing the Anti-Corruption Wave in Latin America. This type of corruption, says Ugaz, usually travels through organized crime and most often goes unpunished due to the power held by the actors.

One of the most prominent cases of grand corruption is the Lava Jato or Car Wash case in Brazil (read more about Operation Car Wash here). This case impacted 14 Latin American countries and several other countries around the globe with an estimated cost of 50 billion USD. Corruption is nothing new to Latin America, but is rather “historical, structural and systemic” says Ugaz. He goes on to note that corruption is embedded into the structures and institution based on the way they were formed and the way the countries were organized.

However, more recent cases, such as the Panama Papers or the Odebrecht scandal, have introduced a new element to corruption cases: the involvement of both the public and private sectors.

Regarding the reaction of justice systems, Ugaz distinguished between two anti-corruption models seen throughout the region: 1) international intervention, as was seen in Guatemala in which the United Nations created the International Commission against Impunity in Guatemala, and 2) strong domestic prosecution supported by mobilized private citizens, as currently seen in Brazil and Peru.

A major topic for discussion, Ugaz suggests, is the role and responsibility of the private sector, as it is no secret that many major corporations across Latin America participate in corrupt practices. Ugaz explains, “When you ask them why, they say it’s because this is our only way to do business here. We are victims of self-extortion. We cannot do anything to confront this.”

While acknowledging the corporate culture of corruption, Ugaz asserts the outlook on corrupt business practices is changing and notes that many Latin American businesses are successful despite not participating in corrupt practices.

One factor leading to change, according to Ugaz, is that the costs of corruption are more evident than ever and may ultimately sway businesses away from corruption.  Large companies have had their reputations destroyed, and many are forbidden to make any new deals in their own countries. “The cost they are paying because of these corruption agreements is much higher than the cost that you would have to pay if you decide that integrity is a way of business,” Ugaz explains.

As seen in the latest anti-corruption efforts, states, international organizations and individual citizens are pushing for an end to corruption. Ugaz ends the discussion with hopes of the change in culture in that “On one side, we have these big corruption scandals, but at the same time we are seeing unprecedented efforts of systems trying to deal with them.”

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