The Rio 2016 Olympics in Brazil has brought global attention to an area struggling with corruption, detailed in a timely report from US law firm Miller & Chevalier.
In the firm’s recent survey of business executives in Latin American countries, a shockingly high 77% of respondents said they believe local anti-corruption laws are ineffective. More than half believe they have lost business to corrupt competitors. Of these, almost 90% have not reported the incidents to the authorities, as they have little confidence that reports will be acted upon and dealt with appropriately.
Miller & Chevalier’s 2016 Latin America Corruption Survey collected data from more than 600 business executives in 19 Latin American countries. While the three major corruption-fighting strategies – policies, procedures and trainings – have increased since 2008, perceptions of corruption remain unchanged.
Of the countries surveyed, respondents viewed Argentina, Brazil, Mexico and Venezuela as the most corrupt. Respondents said, however, that within those countries, companies in Mexico and Brazil are making the most headway in establishing anti-corruption programmes.
Note of encouragement
James Tillen, vice chair of the international department at Miller & Chevalier, said that while the headline may seem bleak, on closer inspection, the statistics in the report are actually encouraging.
He pointed to Brazil as an encouraging example of where the region is headed. The highly publicised Petrobras scandal resulted in hundreds of high-level officials being investigated and charged. The investigation, dubbed Operation Car Wash, was well documented in the media. This is crucial, Mr Tillen said, as 93% of respondents in Brazil were aware of an individual or company being prosecuted – the highest level in the region by far.
It takes enforcement action from the government to inspire confidence, and Brazil is well on its way. He added that when a system is strong enough to indict its own president, it is a good sign.
“There is risk in investing in countries known for corruption. However, those countries also tend to be the most equipped to deal with it,” he said, adding that where there is greater awareness and media attention there is also heightened accountability and an increased likelihood of anti-corruption laws being upheld.
Regional and multinational companies’ efforts to manage corruption risks in third-party relationships (typically one of the most common areas of bribery) have increased region-wide, the Miller & Chevalier report said: “More companies are implementing due diligence and incorporating contractual safeguards into their agreements with third parties.”
“I hope that people will recognise the countries that are making the effort to investigate and condemn corruption,” Mr Tillen said, “though in the short term it may contribute to a negative view, corruption investigations will have a long-term benefit as countries become increasingly able to handle it.”
Confidence in the region is low, but improving with increased media coverage and structural support from governments in Latin America. With enough time and effort, the region may yet improve its standing in the eyes of investors. A more pertinent question, however, may be whether the region can afford to lose any more time.