Brazilian graft scandal reveals Latin America’s uphill battle against corruption

AEIBy Roger F. Noriega

1/19/2017

More than two years after initial revelations of corruption involving Brazil’s state-owned oil company, Petrobras, and the construction firm, Odebrecht, the scandal continues to roil the country and its trading partners in Latin America, demonstrating once again that corruption remains a fundamental challenge for the region. The corruption revealed by the investigation dubbed “Operation Car Wash” has contributed to a deep recession, implicated some of the country’s economic elite, and helped topple President Dilma Rousseff and elected leaders from across the political spectrum.

More recent revelations have shown the extent of Odebrecht’s corrupt activities abroad. The multi-billion dollar Brazilian construction company has admitted to participating in corrupt activities in at least 11 other countries, including Venezuela, Ecuador, Argentina, the Dominican Republic, Peru, Angola, Mexico, Guatemala, and Colombia. These revelations threaten to undermine the political agendas of Latin American leaders, forcing them to react and confront the realities of corruption in their own countries and governments.

In Peru, under the new leadership of President Pedro Pablo Kuczynski, anti-corruption officials are investigating the country’s three most recent ex-presidents for corruption related to Odebrecht contracts. The government of Panama has announced that it will cancel a $1 billion contract with the Brazilian firm for the construction of a hydroelectric project in response to revelations that the company paid over $59 million in bribes over a four-year period.

The scandal has also impacted Colombia as it embarks on the monumental task of implementing a peace agreement with the Fuerzas Armadas Revolucionarias de Colombia (FARC), which will require a massive expansion in the government’s presence and services. Over the weekend, Colombian authorities arrested a former senator on charges of “bribery and illicit enrichment” related to a government contract awarded to Odebrecht. This comes in the midst of other Odebrecht-related arrests in Colombia, including that of a former vice minister of transport.

Regional integration can be a great boon for economic growth in Latin America.  But as the Odebrecht scandal shows, it can also serve as a vehicle for corruption. The region’s leaders and people must invest in judicial institutions that will ferret out and punish corruption and criminality.

Latin America’s leaders can use the Odebrecht scandal as an opportunity to rally support for anti-corruption activities and the establishment of independent watchdogs, the likes of which set new standards of accountability in countries like Guatemala.

Confronting traditional organized crime is essential.  But it is no less urgent that political leaders and economic elites take on white-collar and government corruption.  If substantive actions are not taken and leaders choose to simply continue business as usual, corruption will continue constricting economic growth, undermining the rule of law, and eroding the public’s confidence in their democracies. …

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During the last several decades, the United States has invested billions of dollars in trying to help the governments of Latin America and the Caribbean deliver better lives for their citizens. This has meant helping them increase internal security by combating the illicit growing and trafficking in narcotics and the activities of terrorist groups, as well as helping them to shore up their democratic and free market institutions.

Unfortunately, in recent years, continued progress in these areas has been threatened, not least by the elections of radical populist governments in Venezuela, Bolivia, and Ecuador. These governments have instituted retrograde agendas that include the propagation of class warfare, state domination of the economy, assaults on private property, anti-Americanism, support for such international pariahs as Iran, and lackluster support for regional counter-terrorism and counter-narcotics initiatives.

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