Corruption in Latin America: Is There Any

Good News?Remarks prepared for the Hudson Institute

March 5, 2018

Dr. John Polga-HecimovichUS Naval Academypolgahec@usna.edu

Brazil: Petrobras, Odebrecht, Lava Jato

Mexico and Beyond

1. Background

What is Corruption?

The improper use of public office in exchange for private gain (Sandholtz & Koetzle 2000)

1. Blurred lines between public and private spheres

2. Exchanges between parties that offer inducements and parties that receive benefits

3. Exchanges deviate from some accepted norms—they are “improper”

Causes of Corruption

• In Latin America: Spanish and Portuguese colonial models?

• More broadly, academic evidence suggests:• As economic development decreases, corruption

increases • As institutions grow weaker, corruption increases• As level of democracy decreases, corruption increases• As inequality increases, corruption increases• As bureaucratic red tape increases, corruption increases• As freedom of the press decreases, corruption increases

Effects of Corruption

• Decreases economic growth (Ugur 2014)

• Decreases confidence in political system (Seligson2006)

• Decreases trust in political parties (Canache and Allison 2005)

• Decreases political efficacy—and therefore, political participation (Bonifácio and Paulino 2015)

• Increases the cost of doing business

Corruption begets corruption

2. The State of Latin America

Corruption Perceptions Index

Americas Barometer (LAPOP)

Americas Barometer (LAPOP)

How has corruption changed over time?

How has corruption changed over time?

How has corruption changed over time?

How has corruption changed over time?

How has corruption changed over time?

3. Causes for Optimism?

Causes for Optimism?

1. Declining public tolerance for corruption; a challenge to omertà and an accountability “revolution” (Mexico, Brazil)

2. Shifts in corruption are usually slow (U.S., Sweden)

3. Rise in anti-corruption legal frameworks adopted in the region

4. International Anticorruption framework stronger than ever (OECD’s anti-bribery convention, OAS’s MESICIC)

5. Influence of international best practices can help speed up change (Rwanda, Georgia)

Lava Jato: Breakthrough and Lessons

• Achievements• Uncovered systematic

corruption at Petrobras, throughout political class, and among politicians across Latin America

• Lessons• Judicial autonomy• Pass the right laws—and

follow them

• Institutional Capacity• Coordinate efforts

CICIG: Breakthrough and Lessons

• Achievements• La Línea corruption case• Social Security Institute corruption case• Extortion rings dismantled• Impunity rate for homicides fell ~95% to ~72%

• Lessons• Long mandate and long-term funding• Prioritize rule of law efforts in foreign policy–making• Strategically coordinate independent commissions with

other aid efforts

• Reproducible?

U.S. Role?

• Limit anonymous “shell” companies, which hide the identities of true beneficial owners and permit corrupt actors to “move and hide assets, launder money, and evade law enforcement”

• End anonymous ownership of real estate in the United States

• Fund the DoJ's Office of International Affairs (OIA) budget request

• Tighten the enforcement of the Foreign Agents Registration Act

• Invest in greater U.S. government capacity to tackle international corruption by the Justice, Treasury, and State Departments

Thank youRemarks prepared for the Hudson Institute

Dr. John Polga-HecimovichUS Naval Academypolgahec@usna.edu

Future Steps

1. End impunity

2. Reform public administration (especially financial management and auditing units)

3. Promote transparency and access to information

4. Support a free press

5. Empower citizens

6. Close international loopholes

“Efficiency” of Odebrecht Bribes

Corruption and Support for Coups