A staggering 74% of Latin American countries rank in the bottom half of Transparency International’s Corruption Perceptions Index. The divide between those countries that are moving up the ranks year-on-year compared to those that are plummeting is growing. LACCA talks to GCs across the region to find out why.

A staggering 74% of Latin American countries rank in the bottom half of Transparency International’s Corruption Perceptions Index. The divide between those countries that are moving up the ranks year-on-year compared to those that are plummeting is growing. LACCA talks to GCs across the region to find out why.  

The desire for wealth and power is what prompts so many individuals to get involved in corrupt practices. But corruption can lead a country into a seemingly irreversible spiral of economic, social and political problems. Latin America’s history – even its present-day state – can testify to that. “People don’t make the connection between corruption and poverty – they think they are winning when they receive a bribe, but they don’t consider that these acts are robbing the country,” says one anonymous GC. “We’ve seen what Chávez and Maduro have done to Venezuela through corruption; other countries in the region are closer to this position than people think,” he says. “Venezuela is the example to avoid.”

According to Transparency International (TI)’s latest Corruption Perceptions Index (CPI) for 2019, only five countries in Latin America ranked in the top 50% of 180 countries surveyed for their perceived levels of corruption. The CPI annually ranks countries, listing them from the least perceivably corrupt to the most. The ranking depends on a score out of 100 which takes into consideration the views of citizens, analysts, businesspeople and experts from around the world. The higher the score, the less corrupt a country is considered. Uruguay ranked the highest in the region, coming in at 21st place out of 180 countries. Its score was 71 out of 100, moving up two places since 2018.

Chile was the Latin American country with the second-best score, taking 67 out of 100 points and ranking 26th overall. It has maintained this relatively high score for the past three years. Costa Rica ranked 44th this year (with a score of 56 out of 100) making it the Latin American country with the third-lowest level of perceived corruption. Cuba ranked 60th (scoring 48 out of 100) and Argentina took 66th place with a score of 45 out of 100 – making a huge jump from its 85th place ranking in 2018. Ecuador also took a positive leap, moving from 114th place in 2018 to 93rd in the latest index.

Though 58% of Latin American countries have moved up in the rankings since 2018 to varying degrees, most of them continue to rank in the bottom half – even the bottom quarter – of the index. A bad corruption perception score can stand in the way of foreign investment, as well as having other repercussions. Corrupt countries often have low health and education rates among citizens and some, especially in Latin America, face economic instability. Venezuela, Nicaragua, Guatemala, Honduras, Paraguay, the Dominican Republic, El Salvador and Panama have all dropped in TI’s rankings since 2018.

Finding the positives

Argentina stands out for improving the most year-on-year in the CPI, going from 107th to 66th place over the past four years. From the corporate criminal liability law passed in 2017, to the national anti-corruption plan approved in 2019 (which seeks to implement initiatives from now until 2023 to combat corruption), the Argentine government has been making waves to improve its legislative stance on fighting graft. Franco Rizzo Jurdado, GC for Roche Diabetes Care Argentina, believes that in less than half a decade, Argentina has “made big efforts to substantially reduce its levels of corruption… which is reflected not only in its TI ranking but also in the laws passed and criminal prosecution of former public officials and businesspeople related to them.”

Several lawyers also find positives elsewhere in the CPI rankings that might be surprising at first glance. Brazil ranked 106th, scoring 35 out of 100, doing marginally worse in 2019 than it did in 2017 and 2018, and suggesting that Brazil is perceived to be a more corrupt state year-on-year. But the ranking does not necessarily reflect the reality. With the Lava Jato investigation forcing the region – and the world – to reconsider the issue of enforcement and proving that people cannot act with impunity anymore, some lawyers believe this heightened awareness about corruption will make Brazil cleaner in the long run, though it might not seem it now. “Brazil is facing huge issues of corruption, and we aren’t going to see an automatic change,” says Diego Ignacio Gómez M, a Latin American legal counsel. “It will take a long time to progress.”

Daniel Sibille, regional senior compliance director at Oracle, says the rankings should be taken with a pinch of salt, since anti-corruption efforts look different depending on the Latin American country in question. “The understanding of business integrity, for example, is very different among Latin American countries, with Brazil being by far the most sophisticated country in the fight against corruption,” he says. “But the ranking does not show such differences.”

Benedito Villela, Nors’ head of legal department and LLM teacher at Brazilian private university Ibmec, even goes as far to say Brazil’s low ranking might actually be a good thing. “It means that all the dirt that has ever existed under the rug is being exposed to daylight now,” he says, likening Brazil’s anti-corruption efforts to chemotherapy, which causes some damage before it improves the situation. “[Anti-corruption efforts] will sicken the patient – Brazil – before defeating the disease of corruption.”

Why do countries fall short?

Argentina and Brazil have witnessed prosecutions of high-profile individuals found guilty of corruption. From Argentina’s former president Cristina Fernandez de Kirchner facing multiple corruption charges – that she denies – to Brazil’s former governor of Rio, Sergio Cabral and former president of the Chamber of Deputies, Eduardo Cunha being prosecuted for corruption, no one has been above the law. But other countries in the region haven’t taken such a lead-by-example approach to prosecuting senior figures involved in corruption.

For example, Panama has seen several scandals – including some involving Brazil’s Odebrecht – but procedural mistakes and lenient sentences means that the public perception is that not enough has been done to address scandals; no prominent political or business leaders have been sentenced for corruption. Panama’s position continued to fall in TI’s CPI this year, as it has done in previous years. It was ranked 101st with a score of 36 out of 100 in 2019, after taking 93rd place in 2018. It tied with Peru in the latest index, though for Peru this is a slight improvement on its previous score. “Unlike in Peru, cases of corruption crumble in Panama because of a perpetual cycle – no high-profile cases ever make it all the way to sentencing because the judges involved are themselves corrupt; no jurisprudence is ever put in place, and this simply tells people that crime pays,” says one GC.

Panama’s relatively small population of four million people makes it a very manageable country, where democracy has been a working political system for decades. But corruption “has been embedded in our tradition since the country was founded… to enact any law that would help tackle corruption, it would have to go through Congress, but Congress is only looking out for itself,” says the GC.  

The bottom of the list

Central American countries fall behind the pack in this year’s rankings, along with crisis-stricken Venezuela. Honduras ranked 146th (scoring 26 out of 100), tied with Guatemala, with the former falling from 132nd place and the latter from 144th in 2018. Nicaragua takes 161st place, scoring just 22 out of 100, while Venezuela stands at 173rd (16 out of 100) after falling from 168th in 2018. Venezuela now only ranks slightly better than war-torn Afghanistan, Yemen, Syria, South Sudan and Somalia.

The figures show that the region’s poorest countries continue to fare the worst in the CPI year-on-year. El Salvador’s score dropped from 105th in 2018 to 113th in 2019, while Paraguay slipped from 132nd to 137th. Research by TI published at the end of 2019 revealed that one in five citizens in Latin America admitted to paying a bribe in the past 12 months to access public services in their country, such as housing, healthcare and education. For those in the poorest countries, the temptation to get involved in corruption can often be their only way of survival. There is a correlation, then, between corruption levels and poor economic prospects within a country. “The lack of access to basic services for the majority of the population has caused a huge gap between the majority who do not have and the few who do,” says Guatemalan law firm Carrillo & Asociados lawyer Emauel Callejas. He adds that access to things like clean water, healthcare and good education can help deter people from turning to corruption as a necessary means to survive.  

In countries run by populist leaders, levels of corruption are perceived as high partly because of the discourse these leaders provide. Venezuela is a prime example of this. “Populists do things rather superficially, to calm the population, rather than actually solving the deep-rooted problem of corruption and other social problems,” says Teresita Chavez Rodriguez, TI’s regional coordinator and advisor for the Americas.

Governments trying to make waves

Governments across the region have been taking different approaches to tackle corruption. Besides anti-corruption legislative changes that Costa RicaMexico and Peru recently implemented,BrazilBolivia and Argentina changed their laws in the past 12 months to reduce red tape. Curbing government involvement, to a certain degree, helps curb the opportunity for corruption. “The issuance of permits and licences in Brazil, a country notorious for its bureaucracy, is one of the main sources of bribery requests,” says Odilon Borges, head of legal, regulatory and compliance at Aeroportos do Sudeste do Brasil.  

But well-intentioned legislation alone is not enough. Enforcement remains a huge barrier to justice being served. “[In Guatemala] we have enough laws to make public officers accountable, as well as to fight corruption, but we need these laws to be applied and for people to see that there is punishment for those that break the rules,” says one GC. Guatemala is not alone in struggling with enforcement and the transparency that comes as a result of it. “Panama lags behind in the investigation, persecution and enforcement of corruption-related crimes,” says Arias partner Ramon Ricardo Arias. “Some commendable efforts have been done in terms of legislative reform, but enforcement tends to be negligent and slow.” He adds that investigated companies like Odebrecht, which operates in Panama but has not faced scrutiny there as it has in Brazil, Peru and elsewhere, remains “the elephant in the room” for the country due to the lack of investigations and law enforcement.

Efforts from within

Of course, corruption is not exclusive to governments. It takes two to tango, as the saying goes. Companies are equally to blame. Change is urgently required, says José Antonio Medrano, legal counsel for M&A deals at Guatemalan manufacturing company CMI, to combat the wider issue at hand. “We urgently need a cultural change as corruption is deeply-rooted. As a society, we need to change our mindsets and create appropriate conditions to disincentivise corruption,” he says. Legal and compliance teams take centre-stage for these responsibilities at their companies. “It is up to citizens to do what is right on a day-to-day basis but also for compliance professionals to spread their knowledge on the subject wherever possible,” says Daniel Lisboa, a legal and compliance head in Brazil.

In-house teams at both private and public companies must ensure good internal governance structures, while those at public companies must also ensure access to public information is readily available to all who request it. “Transparency has to be respected by everyone, including those working at companies,” says TI’s Chavez Rodriguez. Whistle-blower protection and ensuring security and good working environments for informants should also be high on a legal team’s list of priorities. “At TI, we are working on creating guidelines for whistle-blower protection – this is already a big concern in US companies, but the trend is not so widely spread in Latin America, yet,” she says. 

Whether a country is moving up the ranks or plummeting on the list, the CPI brings corruption to the forefront of the discussion. Addressing corruption is building momentum on the global stage. As Patricia Punder, senior legal manager at ICTS Provtiviti summarises, in Brazil – but also in many Latin American countries – the king is naked, metaphorically speaking. “We have stopped pushing corruption under the rug of society, and what was commonly accepted as part of life before is now being tackled head on,” she says. “We are finally starting to look corruption in the eye.”