1. How does Peru compare to other nations with respect to corruption risks?
Peru is ranked 44th out of 197 countries on the TRACE Matrix, which measures business bribery risk, reflecting a moderate risk of intensive government interaction, regulatory burden and expectation of bribes. Although not as troubled by corruption as some of its neighboring countries (after Chile, Peru is ranked lowest risk in South America), corruption is still prevalent in certain areas of Peru’s public sector.
During electoral cycles, for example, illicit funds from drug trafficking are commonly funneled into campaigns. Some political parties have elected officials with alleged drug connections, and several candidates in the 2016 Peruvian presidential race have already been implicated in corruption scandals.
2. What does the corruption environment in Peru mean for foreign businesses?
Favoritism by government officials in awarding contracts, a complex bureaucracy and an extremely weak judiciary, all present a difficult environment for foreign companies to navigate away from bribery risks when conducting business in Peru. Since facilitation payments are not criminalized under Peru’s penal code, this is also an area that impacts foreign business, particularly for those companies subject to more restrictive regulations under the UK Bribery Act and Canada’s Corruption of Foreign Public Officials Act.
3. Which foreign business sectors are most vulnerable to corruption?
In general, public contracts are frequently questioned due to alleged corrupt practices involving the winner of the tender process. In particular, oil and gas and other large infrastructure contracts present substantial bribery risks to foreign investment in Peru. Because infrastructure projects can take years, the level of risk is compounded by the number of opportunities to receive requests for improper payments. Once a company has made a corrupt payment, they may continue to be solicited for many years – particularly in cases where companies have weak internal controls and poor compliance programs. Furthermore, if a public officer is involved in money laundering from drug-trafficking scandals, this may lead to extortionate demands in situations where the security of employees may be at risk.
4. How can foreign companies reduce their risks and protect themselves?
The fact that there are no restrictions in Peru on the type of currency and/or the place of payment of intermediary fees makes it easier for companies to bribe government officials through the use of third parties. As such, companies should be fully aware of who they are working with and conduct risk-based due diligence on all third party intermediaries. Companies can also work with TRACE Certified companies, which have completed a rigorous due-diligence process based on international standards, including training and continuous daily monitoring of international sanctions and enforcement lists. Companies should invest heavily in training local employees and intermediaries to ensure they are complying with anti-bribery laws, and are able to identify and respond to bribe demands.
5. What anti-bribery compliance support is available in Peru?
The Peruvian government has made notable efforts to combat corruption, including the creation of a National Commission to Fight Corruption and a decentralized General Attorney's Office to Combat Anti-Corruption. Additionally, organizations, such as TRACE and Transparency International can provide companies with access to resources on anti-bribery compliance and training. Companies may also refer to TRACEpublic, the first global register of beneficial ownership information, which allows companies to share and search for beneficial ownership information at no cost. The database supports the efforts of companies seeking to conduct business ethically.
6. What other information would be helpful to foreign businesses operating in Peru?
In September 2012, the Organisation for Economic Cooperation & Development (OECD) informed Peru that it had not been admitted as a member of the Anti-Bribery Convention due to insufficient anticorruption legislation. Among the OECD’s main concerns was that Peruvian legislation does not establish liability of legal persons for the bribery of foreign officials. Since then, the Peruvian government has taken steps to help it join the Convention, but Peruvian legislation and its enforcement remain inadequate. The Peruvian Criminal Code was recently amended to allow the seizure of instruments and proceeds of crimes. The main current challenge for Peru with respect to anti-bribery is how to implement direct corporate liability in bribery cases.
This Q&A article was originally produced for ExportWise.ca, Export Development Canada’s online magazine.