LIMA, Peru — As U.S. Vice President Mike Pence and regional heads-of-state hobnob at the Summit of the Americas here later this week, the meeting’s official theme of “democratic governance fighting corruption” could prove uncomfortable for some.
The issue of graft — including at the highest levels of government — has become white-hot in Latin America, thanks to the mushrooming Odebrecht mega-scandal, which is now increasingly ensnaring prominent members of the region’s economic and political elites.
Driven by prosecutors in its homeland of Brazil, it has emerged that Odebrecht, Latin America’s largest construction company, paid a total of roughly $800 million in bribes over the years to win huge public contracts from Mexico to Argentina.
[SEE: The 10 Most Corrupt Countries, Ranked By Perception]
Indeed, the scandal even led to the downfall last month of Peru’s President Pedro Pablo Kuczynski just three weeks before he was due to host the summit, which is held every three years and is the premier diplomatic opportunity for the U.S. to exercise regional influence. Ironically, it was the Kuczynski administration that last year proposed the Lima meeting tackle corruption.
Once viewed as a distinguished elder statesman a cut above most of Peru‘s deeply unpopular and graft-addled political class, the Princeton and Oxford-educated economist was forced to resign to avoid impeachment over allegations of influence-peddling, congressional vote-buying and potentially criminal conflicts of interest.
The summit on Friday and Saturday will instead be chaired by former Vice President Martín Vizcarra, who will now serve out the remainder of Kuczynski’s term. He will have the task of keeping the negotiations on track — a responsibility that may have become slightly less difficult now that his unpredictable U.S. counterpart, President Donald Trump will no longer be present.
The challenge could not be more urgent given the endemic venality that handicaps Latin America’s economic development — in a region where poverty still affects nearly half of all children aged up to 14 — while corroding rule of law and even undermining democracy.
In different times, the summit’s anti-corruption agenda might have been able to count on the strong support of the president of the United States. However, Trump dramatically pulled out of the event on Tuesday, citing the urgent need to address chemical attacks in Syria. Pence will attend in his place.
The Lima event would have been Trump’s first presidential trip to Latin America. Instead, it will be the first time a U.S. president has not attended the summit since it was inaugurated in 1994. Yet Trump’s absence could be a blessing in disguise , given his headline-grabbing tendency to stray off script.
The United States‘ interest in tackling graft — and its moral standing to do so — are in doubt, thanks to the unprecedented nature of the Trump presidency, including special counsel Robert Mueller’s investigation to collusion between the Trump campaign and Russia during the 2016 U.S. presidential election, and the New York real estate business tycoon’s alleged myriad conflicts of interest and accusations he is in violation of the emoluments clause of the U.S. Constitution.
Equally, Trump could hardly be less popular in Latin America. Thanks to his attacks on Latino immigrants, plans for a wall on the U.S. southern border, and reversal of the thaw in relations with Cuba, among other issues, just 16 percent of Latin Americans approve of Trump according to a recent Gallup poll.
That means that many of the other leaders at the summit will be careful to avoid being seen to be too friendly even with Pence. That lack of geopolitical and personal chemistry could represent a missed opportunity to promote U.S values including free markets, democracy and human rights — all of which are undermined in Latin America by corruption.
“Latin America will try to assert itself as the adult in the room,” says Eileen Gavin, Latin America analyst at Verisk Maplecroft, a U.K.-based risk research consultancy. “Countries like Argentina, Brazil, Mexico and Peru will be talking about what they are doing, and getting on with it, rather than having a go at Trump.”
Quantifying graft is notoriously difficult given its underground nature. Nevertheless, there are strong reasons to believe it is rampant in Latin America.
The most recent edition of the best-known study of the issue, from nonprofit Transparency International, has found that 29 percent of Latin Americans who had used one of six key public services in the past year, including the police, public schools, utilities and the courts, had paid a bribe. It also shows that 62 percent believe corruption is getting worse.
The IMF has estimated that corruption could cost 2 percent of global gross domestic product. However, that tab is likely disproportionately concentrated in emerging economies such as those across Latin America .
In Ecuador, the Odebrecht case has landed a vice president behind bars. In Colombia, it is a senator. Meanwhile, in unrelated graft cases, former presidents in El Salvador, Guatemala and Brazil have also been sentenced to jail, while other current and ex-leaders or members of their inner circle in Argentina, Chile and Panama have recently been the targets of criminal investigations.
But few countries can compete with Peru’s abject involvement in the Odebrecht case; one former president in pretrial detention and another fighting extradition from the United States, while a third, Kuczynski, has now been barred from leaving the Andean country while prosecutors dig in to his financial records.
Despite Kuczynski’s initial denials, it had emerged that he had received six-figure payments from Odebrecht, some of them for work carried out while he served a previous stint as economy minister just as the company was winning juicy infrastructure contracts from the government. According to local reports of the disgraced former president’s testimony before a closed-door congressional hearing, Kuczynski admitted being paid for “verbal” services and “contacts.”
One attendee anxious to see the summit succeed is José Miguel Vivanco, Human Rights Watch’s Americas director. “Corruption’s essence is the capacity to bribe or buy public officials, including judges and prosecutors, in other words buying impunity, including for human rights abuses,” Vivanco warns. “Corruption is toxic to human rights.”
In Latin America, the link between corruption and human rights abuses is probably most obvious in Venezuela. The “Bolivarian socialist” regime, now widely viewed as an outright dictatorship, has responded to widespread discontent over the hyperinflation and hunger caused by its policies with violent repression and locking up opponents.
According to Transparency International, Venezuela is now the most corrupt country in Latin America and the fifth most corrupt in the world. A potential confrontation between Pence and Venezuela’s President Nicolas Maduro, banned by hosts Peru from the summit for failing to hold free and fair elections, appears to have been averted after Maduro recently backed down from plans to defiantly show up in Lima anyway.
Corruption also undermines free markets, which depend on clear — and fair — rules of the game observed by everyone.
Mario Mongilardi, president of the Lima Chamber of Commerce, says the Odebrecht scandal has shone a light on how both local and foreign companies, particularly from the United States and Europe, were unfairly shut out from bidding for public contracts in the region, despite offering better quality work at lower prices than Odebrecht’s inflated rates.
One sign of how uncompetitive public contracting has become in Peru, Mongilardi says, is that the average number of bidders has fallen to just 1.7 per contract.
“The damage to our members has been enormous,” Mongilardi says. “But the biggest impact is on consumers, citizens. It used to be that most people didn’t realize how corruption was harming them. They thought it was just the government’s money. But it is our money, society’s money.”
With consumers increasingly concerned by the social, environmental and ethical footprints of the products they buy, companies are now having to worry not just about the operational risks in Latin America but also the damage to their brands.
“Just being associated with a partner that is known to be corrupt can cause tremendous reputational damage,” says Gavin. “There is a real reluctance now to invest in countries where there is a climate of corruption.”
“The extractive industries in particular are looking very carefully up and down the supply chains. Just one rotten link can be enough to cause them damage. It can really be almost anything, from slave labor to truck drivers using prostitutes. Companies can no longer just focus on the bottom line.”
Yet there is hope. Behind the scenes, officials from the different governments have been working on specific proposals to address graft, which may yet result in formal agreements at the summit. Those could include improved sharing of information by prosecutors and tax authorities between different jurisdictions, better use of information technology, and more resources for prosecutors and judges.
“Addressing corruption, not just at this summit but generally, is vital,” says Mary Zuleta, a professor of government at Bogota’s University of the Andes and a former Colombian deputy minister of justice. “It is a question of legitimacy for the state itself. When it is common knowledge that public officials are effectively stealing, then ordinary citizens question why they should pay taxes, comply with the law, or even vote. That is terribly damaging for democracy.”
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Corruption a Timely Theme for Americas Summit as Leaders Prepare to Meet originally appeared on usnews.com
