The Globalization of Corruption, Unaccountable Elites, and Electoral Democracy

Guatemalans demand prosecution of ex President Otto Perez on corruption charges

For much of the twentieth century, unaccountable governments, generally unresponsive to public demands, characterized most countries of Latin America. While from the mid-1980s, electoral democracies seemed to have put an end to the cycles of left populist authoritarian regimes and military dictatorships, authoritarian features (lack of accountability, the absence of the rule of law, etc.) have remained firmly entrenched. Corruption has continued to be an ongoing, some would argue, worsening feature of the region’s electoral democracies. The commodity boom of the 2000s and healthy economic growth rates, enabled Latin American left-leaning regimes to reduce poverty significantly and make some progress in the reduction of historically high levels of inequality. However, now that this boom and its attendant economic growth has ended, we see a rising tide of popular indignation against corrupt elites whose enormous wealth now contrasts more sharply than even with the hardships faced by citizens threatened with unemployment and dropping living standards. Corruption scandals, investigations, and attendant growing popular disgust with public officials, have occurred throughout the region. Protests against corruption have been particularly notable in Brazil where millions of citizens have taken to the streets to protest massive corruption born out of the close relationship between the federal government, Petrobrás (the state-run oil company), and Brazilian private companies. In a number of counties, governments have launched investigations and charged top officials. There are high hopes that the rising intolerance of corruption amongst Latin American people will produce the political will, strengthened institutions, and new laws that will result in substantive change.

Latin America’s Globalized (Corrupt) Conglomerates

However, while it is certainly true that public intolerance for corruption is a necessary condition for its reduction, it is probably not sufficient. The roots of corruption in Latin America extend back into history, with origins in Spanish and Portuguese colonial rule, the sale of colonial government positions, and the allocation of monopolies and oligopolies. Corruption was part of the political settlements of the populist regimes of the 1950s, 1960s, and it was given an enormous shot in the arm by the military dictatorships of the 1970s and 1980s. More recently, neoliberal economic globalization has altered its features and internationalized it in ways that make it even more intractable. Privatization of large public enterprises in the 1990s, was in most cases, a highly corrupt process in which political leaderships sold public companies to cronies. Further the sale of public companies occurred in contexts of pre-existing high levels of economic concentration. The sale of public companies produced domestic monopolies and oligopolies, increasing both the economic clout and political influence of powerful business conglomerates. As pressures to become globally competitive gained momentum, these Latin American conglomerates expanded investment beyond their national borders and brought their traditional (and corrupt) business practices with them as they did so.

The case of Brazil’s construction conglomerate, Odebrecht, now involved in corruption scandals in a number of Latin American countries is a case in point. Odebrecht, which had close ties with every Brazilian government from its foundation in 1944, was one of a few favoured recipients of lucrative government contracts. Despite its involvement with the country’s military government, it developed close ties to the PT (Workers’ Party) governments of Presidents Lula and Rousseff, becoming the PT’s biggest campaign contributor. From 2003 with the generous support of the Brazilian government, Odebrecht went global. The company received 70 percent of the US$11.9 billion provided by BNDES (the Brazilian state development bank) to fund engineering works abroad and was thereby able to gain contracts throughout Latin America—contracts closely associated with kickbacks to top politicians in various Latin American countries. The fact of competitive electoral democracies expands the arenas through which globalized companies seek to ensure sympathetic intermediaries of all political stripes.

And then there is the Drug Trade

At the same time, there is a close relationship between the political corruption in the region and organized crime and violence, particularly that involving drug trafficking. While this link was apparent in Colombia in the recent past and currently predominant in Mexico and Central America, drug traffickers operate in virtually every country of the region. The rise in demand for drugs from the US from the early 1980s prompted the expansion of the trade. Its illegality and the U.S. promoted focus on dealing with the trade by eradicating production, a strategy that entailed increasing militarization of the fight against production and trafficking, was responsible for high levels of corruption and rising violence. Faced with attempts to stop the industry, traffickers bought off government officials at all levels of government in order to maintain the trade. However, the international dimension of the problem also involves major global banks heavily involved in the laundering of drug money. Drug money has also entered a large number of legitimate private sector activities in many parts of Mexico. It feeds on poverty, recruiting those who lack alternative economic opportunities, and on the opportunities that exist for high profits when an industry is illegal. In Mexico, while authoritarian rule and the centralization of power helped to keep the most violent and corrupting aspects of the trade in check, the advent of electoral democracy provided many more points at which public officials could be corrupted.

Latin America’s Politicians are not the only Problem

Hence, Latin America’s high-level corruption (and its apparently massive scale) is not simply an artefact of corrupt and unaccountable politicians. Today, it has multifaceted sources of support, many now outside national boundaries. It is a regional and global problem probably beyond the ability of individual governments (even with the appropriate political will) to grapple with effectively. The good news is that there is a rising tide of public opposition to corruption. The worrisome reality, however, is that today the problem is so widespread that politicians are able to stymie efforts to root it out—as evidenced by the fact that the Brazilian Congress succeeded in watering down the country’s anti-corruption bill. The successful tackling of corruption requires not just a public consensus that such practice must end; it also requires an agreement among politicians across the political spectrum. At the moment, pursuit of corrupt politicians often has distinct political motivations. Further, the problem is not just one of greedy politicians; it is also one involving the behaviour of the region’s powerful (now internationalized) business conglomerates, which, it can be assumed, are not necessarily committed to ending current practices. Moreover tackling the drug trade will have to involve changes in international attitudes and commitments. In this context, reforming Latin America’s laws, improving, and strengthening institutional arrangements will probably help. However, taking such measures is no panacea. In the end, electoral democracy, on its own, does not seem to be up to the task of handling the globalized nature of corruption.