This article is adapted from our 1st print issue of 2016. For a look at our Top 5 Corruption Busters special feature, click here.
Corruption – a longstanding obstacle to development in Latin America — was often overlooked during the commodities boom of the 2000s, as the region experienced a boost in trade and exceptional economic growth. But after a prosperous decade in which tens of millions of Latin Americans rose out of poverty, we’ve now entered a period of difficulty.
Tougher economic times have exposed a range of structural problems within our institutions – a lack of transparency, insufficient accountability, and disrespect for the law. Corruption is now seen as one of the principal challenges facing Latin America today – and citizens are demanding change.
Hundreds of thousands of people across the region have mobilized in recent months to express their outrage over dishonesty in the public and private sector. Make no mistake – this is a new era of citizen empowerment. If we do not heed their call and work to combat corruption, it will gravely undermine democracy and weaken governance in the region, as well as hinder the success of our businesses.
In order to confront corruption, we must first fully understand the scope of the problem. Ranging from complaints of corruption in FIFA to the lack of transparency in the Vatican, from a small bribe given to a police officer to the massive scandals involving million-dollar contracts, corruption is pervasive across the region in every sector of society. And the practice goes well beyond bribes – the most common form of corruption in the region – and kickbacks. Price fixing by cartels, the abuse of privileged information, conflicts of interest, accounting fraud, tax evasion, and industrial espionage are among the methods in entrepreneurial activities that are considered corruption.
We must also recognize that corruption can offer tempting short-term gains for the private sector. But while bribery may help businesses in the short run by facilitating results and speeding up growth, it is a double-edged sword. A resulting increase in operating costs and the uncertainty of attempting to estimate the cost of the next bribe compromise a company’s competitiveness in the long term.
Once we understand the extent, structure and appeal of corruption in the region, the next step is to take responsibility and actively participate in combatting the problem. Getting the private sector involved is crucial, given the predominance of underground economies in most Latin American countries, in which impunity and violation of the law are the norm. This will require adaptive, innovative private-sector leadership, with a good dose of courage. Our businesses will remain at risk if we stand on the sidelines waiting for someone else to fix the corruption epidemic.
The private sector can and should do more to discourage corruption. One concrete measure that businesses could employ is to support investigative journalism, which has proven effective in several Latin American countries in uncovering elaborate corruption schemes. Demanding that candidates and parties meet standards of transparency and accountability, as well as requiring that individuals disclose political financing details, would also reduce opportunities for corruption. Another tactic is publicly shaming those found guilty of corrupt deeds.
The most direct and successful measure to combat corruption in the private sector is to develop ad hoc anticorruption programs for businesses that are adapted and monitored continuously, and independently audited with results divulged to company stakeholders. Adopting such a program conveys a commitment to complete transparency and a clear message of zero tolerance for corruption.
Corruption increases inequality and poverty, and violates the fundamental rights of people. It is not just the billions of dollars squandered or stolen, but rather the subsequent loss of works such as potable water and sewage systems, clinics and hospitals, schools and universities, roads and bridges, ports and other resources. If properly addressed, a reduction in corruption would change the fate of millions of Latin Americans.
In a world in which the primary goal is the empowerment of individuals, our only option as entrepreneurs is to seize the extraordinary opportunity we have to help design strategies to combat the scourge of corruption with a comprehensive approach – by working in coordination with government, the media, academia and civil society. After all, eliminating corruption also ensures corporate sustainability, because less corruption gives millions of people more opportunities to achieve prosperity and development – which, in turn, generates more consumers.
Jorge Medina Méndez is an entrepreneur, investor and consultant. He is the president of Proética, the Peruvian chapter of Transparency International.