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Latin America’s Corruption Comeuppance

By Amanda Mattingly

With Brazil’s President Michel Temer under investigation, Colombia’s President Juan Manuel Santos facing allegations, Peru’s former President Alejandro Toledo on the lam, and scores of others embroiled in bribery charges, Latin America is facing its corruption comeuppance. The corruption scandal involving Brazilian construction giant Odebrecht and its transnational bribery scheme is escalating by the day, threatening to engulf the entire region and its political establishment.

Corruption has long been common in Latin America, but what is new is the depth and breadth of the investigation into Odebrecht, which started in Brazil and now involves politicians and government officials at various levels in Brazil, Colombia, Peru, Venezuela, Mexico, and seven other countries. Investigators and special prosecutors from these countries are looking at allegations that Odebrecht paid bribes and/or made campaign contributions in exchange for multi-million dollar government contracts stretching back more than a decade. The scope of the investigations is as audacious as that of Odebrecht’s projects, which included the construction of bridges, gas pipelines, highways, metro systems, and even a replica of Rio de Janeiro’s “Christ the Redeemer” statue in Lima, Peru.

Investigations in Brazil have already resulted in the imprisonment of Odebrecht’s former CEO Marcelo Odebrecht and plea deals for a number of its Brazilian executives. Last year, Odebrecht reached a $3.5 billion settlement under the U.S. Foreign Corrupt Practices Act (FCPA) for a bribe scheme involving $800 million. Now, investigations in the region are focusing on a large contingency of political elites—many of whom are current or former elected officials—for receiving bribes, kickbacks, and donations from Odebrecht, which in turn won lucrative contracts. In many cases, these contracts came from the state-owned oil companies Petrobras in Brazil, PDVSA in Venezuela, and PEMEX in Mexico.

As the Odebrecht scandal unfolds, it is revealing that no one country, political party, or ideological persuasion has cornered the market on corruption. In Mexico, leftist leader Andrés Manuel López Obrador is using the allegations as a populist rallying cry against current President Enrique Peña Nieto of the Institutional Revolutionary Party (PRI) and former President Felipe Calderón of the National Action Party (PAN). Meanwhile, in Venezuela, leftist President Nicolás Maduro is trying to cover up the involvement of his government and that of his predecessor, the late President Hugo Chávez, with Odebrecht by arresting Brazilian journalists and researchers from Transparency International.

The cascading scandal will have far-reaching political implications in Latin America. Let’s not forget that the corruption allegations started in Brazil when authorities began investigating Petrobras in “Operation Car Wash,” which led to the ousting of former President Dilma Rousseff. She may not be the only leader ushered out of office on a raft of corruption charges—or see their party defeated in a wave of popular discontent with political elites egregiously profiting from their positions of power. In a region where the Gini coefficient measuring the gap between the rich and poor remains stubbornly high, this outcome would not be unwarranted.

Meanwhile, corporations are on notice. From the large multinationals like Odebrecht to the smaller start-ups across the region, private-sector firms are now more likely to have their illegal dealings revealed and prosecuted. And they also have an important role to play in rejecting corruption and remaking the business environment. Corruption does not have to be part of the business culture, and corporate entities should collectively refuse the idea that they need to “pay to play.” As seen in other parts of the world, it is possible to operate effectively, legally, and profitably within the regulatory context of the market. Even within Latin America, there are companies that navigate the waters successfully, implementing anti-corruption policies and protocols, eschewing corrupt business practices, and remaining compliant with Securities & Exchange Commission (SEC) and FCPA rules and regulations. Ultimately, markets that are beholden to consistent rules and regulations are more competitive and profitable, and they are considered more attractive places to do business.

The Odebrecht scandal is casting a negative shadow over Latin America, but the region is not alone. Evidence of corruption can be found to varying degrees in just about every market and country across the globe. But the good news for Latin America is that such a sweeping investigation into Odebrecht is taking place. This in itself is a huge step in the right direction. Perhaps now there is a new willingness to hold both companies and government officials accountable in their mutual complicity, and a younger, more socially conscious generation of political and business leaders will emerge to uphold campaign promises and corporate ethos, respect the rule of law, advocate for transparency in business and governance, and ultimately chip away at the culture of corruption in Latin America.

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Amanda Mattingly is a senior director at The Arkin Group and a Truman National Security Fellow  She previously served as a foreign affairs officer at the State Department. Views expressed are her own.

[Photo courtesy of Steven Damron]

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