Since the inception of modern western capitalism in 16th century Italy (the roots of modern banking) and 17th century Netherlands (the formation of the modern company), Capitalist, Socialist and Communist economic structures have been prone to a myriad of schema by individuals and groups.
From the counterfeiting and 'shaving' of coins to the creation of deliberately deceitful commercial “projections”, through to the use of dirty money laundering through apparently legitimate businesses, through overtly 'creative' accounting methods, the creation of deceptive financial instruments and of course the nasty use of sociological and psychological ploys within public and private realms.
Latin America has long been cited by the West as an epicentre of financial and economic corruption, whilst all too conveniently officialdom either unable to effectively combat the sophistication of white-collar crime, or deficient in the public punishment of those (comparitively already with much) who view commerce not as a socially shared wealth-generator, but as a game for their own economic ends.
Given the maturity and complexity of the financial structures of Wall Street, the City, Paris, Frankfurt, Milan etc, from previous 'off balance sheet' instruments to the growth of 'dark pool' (barely transparent) exchanges, the goings-on in America and Europe in reality no doubt make Latin America appear tame and naïve in comparison.
This recognised, it cannot be denied that Latin America has long been identified with the big names of official corruption and criminality. From long before Batista's military-political stranglehold over a very economically divided Cuba, to the astounding career criminality of Colombia's 'drug lord' Escobar; mixing dirty money with infrastructure development programmes for the apparent social good; afflicting the lives of those across the globe whilst seen by some as a local hero.
Unfortunately, as perhaps the diametric opposite to all too rare cultures such as Old Scandinavia (wherein there was a singular group struggle to survive the environment and so form strong common bonds and common well-being), LatAm's combination of mostly good climate allowing easier basic survival, its cultural 'mish-mash' (Indigenous, European and African) and historic social stratas meant that (like the coastal Mediterranean basin) the socio-economic ties of trade were generally loose, permissive, easily broken and so open to abuse.
[NB Previous mention was made of the Portugese (very Separdic influenced) here today gone tomorrow 'trader' mindset, and its antithesis to Northern Europe's Teutonic values].
Thus the greater social 'fluidity' of LatAm and Brazil, and a near historically entrenched experiences of 'famine and feast' has formed the popular mentality, from those the bottom to those at the top.
It is then no surprise to see long-route truck-drivers off-loading part of their haul through the black-market (foodstuffs to oils to construction materials) or feigning accidents for insurance scams, and blaming the losses of on “bad roads”. Or the all too historically common story of populist leaders (themselves from the common heartland) apparently “gone bad”.
The same old stories which though need to be addressed, seem inexorable.
More worrying have been the recent corporate and political scandals wrapped in 'Lavo Jato', with money laundering through currency dealing, bribery regards the awarding of construction contracts, and the politicised control of the state oil company including asset over-valuation in its accounts and bribery payments.
Most shocking though, the near certain (not so) 'accidental death' of the Supreme Court Judge handling the case in small plane crash.
Parallels to the Italian mafia have obviously been made in the Brazilian press, and if the authorities do not continue to take a very hard line in this and other matters, the enormous potential of Brazil as seen through the 2000s and 2010s could be lost for decades.
Hence the question of Corruption has never been so prosaic as at present, at the beginnings of Brazil's new growth era.
The WEF discussion panel comprised of:
Jose Vera – President of HNC News and Chair
Dela Rubio - President of Transparency International (NGO)
Paola Beliz - President Microsoft Brazil
Torqauto Jardim - President of the Ministry of Justice Brazil
Denize Dresser – Political Analyst, Technical Institute of Mexico
Unfortunately Carmen Lucia a senior judge and President from Brazil's Supreme Court was unable to attend the panel.
[As previous, investment-auto-motives' comments appear within the square parenthesis]
“Corruption is a chronic disease that stops the development of our country. The corruption index by Transparency International includes many LatAm countries asbeing the worst in the world. From worst to better, Venezuela, Haiti and Nicaragua, Guatamala, Dominican Republic, Paraguay, Mexico, Hondures, Equador, El Slavador, Bolivia, Peru, Panama.
“Only Uraguay, Chile and Argentina have been better ranked, on par with the likes of Spain and Portugal. Four LatAm Presidents are presently in jail, others awaiting extradition to the USA, on parole or being investigated (with details given).
The question is “what can be done to break the cycle of corruption and promote social stability?”
Delia Rubio -
“I do believe we can move forward, firstly breaking with the cycle of impunity, through judges and prosecutors, and other agencies (CC in Guatamala, MaC in Honduras).
The first key point is to ensure this trend (of justice seeking) will become sustainable and 'institutional', promotion of the rule of law, and independence of judiciary and public prosecutors.
The second path is the prevention of corruption, we have access to information through collaboration in technology so that it becomes more accessible. With a partnership between corporate, civil society and governments.
As per prevention, 2 specific areas:
1. private sector individuals gaining public office standing so blurring interests (conflict)
2. the private sector funding of politics (eg the Oderbrecht story illustrating the door to corruption)
This represents the procurement of favours and commitments.
Critical has been social mobilisation on the streets, highlighting the public anger. We have to channel that social mobility, and create more practical channels for participation. Technology of course will help with social networks, but we need to create a consensus. If as now, the climate is that 'this is how private sector commerce does business' we will never end corruption. We have to review what society deems as acceptable and unacceptable, essentially the values of society.
“We have to work long-term upon eduction and examples, because it means changing the culture.
[This is all good and well, but it is long echoed rhetoric].
Paola Beliz -
“Corruption is having an enormous impact in LatAm, and requires and enormous impact through technology. We at Microsoft aim to to do more with technology, to rebuild trust and the basics of democracy. Central is the idea of control, but this may only increase bureaucracy, so technology needs to ensure transparency, and offer better services to citizens.
There are 4 ways :
- law of access to information since 2005: needs to become more open to public
- digital identification : traceability of citizens to fight fraud via blockchain technologies.
- public tenders : emergence of AI to create 'intelligent tenders' via algorithems
- partnering against corruption initiative : highlighting gov't actions, campaign finance etc
[This over-simplifies the challenges of developing and executing blockchain and other algorithmic technologies. The tech sector is publicising the revolutionary capabilities of such systems, but the journey from the likes of Bitcoin and Bitcoin Mining to broadscale public service solutions is not necessarily unidirectional or simple. Better to make basic systems work properly providing 'access for all' (including those without their own personal devices) than to focus possibly haphazardly upon next generation and beyond systems]
Chair Vera -
“Besides the issues of culture and social mobilisation, we have data about blockchain technology that demonstrated that we are still in the very early stages of what could be enormously useful. (ie inferring that such systems are still very premature for all the media hype).
“Another question is how to control activities in every field”.
[This obviously raises the issue of societal power structures, something hardly touched upon by any body since the rise of what might be decsribed as an increasingly 'panoptican society'].
Denize Dresser -
“I come from a country on that list of most corrupt countries, a critically central is the collusion of public and private sectors. The Odebrecht case highlighted the failings of the institutional architecture. To fight corruption, you need good prosecutors who are independent and autonomous, not affected by or subjugated to political interests.
“Another issue is that of transparency of public expense. In Mexico even in the democratic era, political parties find loopholes in laws to channel funds in a 'legal' way. So a scrutiny of public expense and involvement of civil society. How do you make the political classes oppose corruption when the action itself goes against their own interests? This comes from the mobilisation of civil society.
[The idea that 'civil society' will somehow oversee the inner dealings of government and political parties appears somewhat naïve and idealistic].
“The danger is that new institutions formed to fight corruption themselves become a simulation. The population must be educated about what is corruption and what is not corruption.
[Again an overtly simplistic solution. Previously the Catholic Church provided the guiding light via eons of history, ritual and the use of endangerment to the soul, per the afterlife. This was indeed a form of brainwashing, yet it provided for many a moral framework. The demise of the Church and the freeing of people's minds, has seen that influence much reduced, for good and bad].
“At the moment there is enormous social confusion about what is right and what is not right. So we need to create new social standards for the behaviour of citizens in what is today's 'transition context'; it is essential. That possibly starts with the political funding process, given the way today the parties simply “flood with money”. And in this independent voices such as the press must be protected,
“We must convince political parties that anti-corruption measures will lead to a bigger pie for all, including themselves, so reduced temptation for corruption. It is believed that in Mexico corruption absorbs 9% of financing, monies which the private sector could use otherwise.
“The corrupt politicians (and others) must be 'cut-out' of the system, so that they do not infect others within their sphere of influence.
[Much depends upon the level of corruption present in any body (commercial companies, political parties, local and central government, the police, the judiciary etc. If it is essentially institutionalised then the theory of cutting-out the rot maybe far harder than believed. Likewise, those lower down the ladder of a body may revere those at the top and so themselves become corrupted, the process typically subtle and explained as 'just the done thing'. The good people with morals and foresight to see what is going on will simply leave recognising the impossibility of problem or indeed be removed by those higher up who see them as a real or potential problem. The only way to create moral bodies is to inculcate from a young age the importance of ethics and fairness, and ensure the majority good operate without the mob behaviour so endemic to the righteous far left].
Chair Vera -
“We now call upon Torqauto Jardim. What can we do to end the corruption cycle?”
Torqauto Jardim -
“I agree with all said. I highlight another perspective about the political advocacy about public positions. From such a position I wish to discuss both private and public sectors. As long as Brazil has such enormous political size and power corruption is inevitable.
The second perspective is an economy controlled by the government, a state run economy with state owned companies with large deficits and the existence of large unions; which stopped the recent reform attempts.
A large proportion of collected taxes (53%) remains with the central government and is not distributed to the municipalities. The Legislature is then funded via central government and the political funding process likewise comes through similar means. Why such a concentration of power in the centre?
[Today's 'concentration of power appears to have arisen from a history wherein local regional and municipal governments themselves were heavily corrupt, instigating low social and financial return infrastructure projects and other people's projects through the 1970s and 1980s that benefited local business more than the broad populace. That decentralisation was re-centralised in the 1990s to gain greater accountability].
“A main concern is the manner in which certain business sectors are able to lobby central government for protectionist measures or otherwise. So we should break-up that central political powerbase.
“We also need to convince the private sector that corruption is problematic to general growth and prosperity.
“I was enthralled when talking to taxi drivers in Panama and Dominical Republic that they had a better grasp of Odebrecht corruption events than I did, able to name many of the indicted Directors.
“Last year I visited Germany, and their biggest problem was the prevalence of absence from work via the provision of medical licenses. There millions of hours of productivity was being lost to this problem. This problem starts from a young age during schoolyears when a child complains of a false health condition and the parents get an approved medical certificate to show the school. It creates a cycle of abuse, which we in Brazil must eradicate.
“I Brazil we have 17 programmes related to the refinancing of the fiscal debt, those seventeen items are an invitation to avoid taxes and so slow the repayment schedule of the fiscal debt.
[With comparatively generous welfare systems within Europe (especially versus the UK) the Germans recognise the change of their culture in recent decades and the problems created by staff disingenuously taking sick leave (this especially prevalent in local government, educational and other state run realms for all European countries given the greater innate laxity of professionalism and the culture of rights over responsibilities).
Given the size of the Brazilian state employee pay-roll and the even greater generosity of employee benefits, the productivity effects of this problem (one of innate culture) is enormous.
This 'low-level corruption' is perhaps when totalled-up as equally – possibly more - damaging to a country's development as the likes of the Petrobras and Odebrecht scandals. Since this is occurring in the core of the new middle-classes, it illustrates the still present hangover of yesteryear socialism, and Brazil's failing to get the 'cosseted classes' on board with the need for structural socio-economic change.
Perhaps its time Brasilia run a TV and radio campaign that wakes the populace up to the reality of global competition and the thus far lax reaction from many of Brazil's peoples still with a Latin “Manyana” attitude?]
Chair Vera -
“Let's reconsider why is it that Latin America has such a high level of corruptio? Is the failing of the state, the judiciary, the politicians, the private sector...can we come to a conclusion?
[The truth is that with such historical political and economic volatility, plus the infighting for power-grabbing, there is little endemic trust across the whole region at many levels. This societal insecurity, and the lack of a true socio-political centralism. Hence patterns of a new gender/race based far left vs order-orientated military originated far right repeating yet again in the Brazilian election candidates, with the centre-left and centre-right diminished.
Social cohesion has once again broken-down and so it bodes badly for anti-corruption, when small to large corruption is perhaps the most powerful real-world instrument – over morality - in ideological politics].
Della Rubio -
“I would say corruption is like tango, you need two to dance, therefore public-private sector deals are done. You should be willing to denounce or not participate in this game, but the business world typically says that some business is solely based upon such invisible (ie slush fund) deals; and justify participation by highlighting the employers responsibilities toward the workforce.
“To combat this we need more 'Integrity Pacts' wherein entire sectors state they will not enter into corrupt deals involving kick-backs etc. If we all agree, the situation will be over.
[Again naïve, since there will always be one player who recognises what they see as a golden opportunity to enter a contract without effective competition. Many inter-company agreements from cartels to alliances fail because one of the group seizes the opportunity for profit].
Denize Dresser -
“Who is it that has failed...the parties and electorial institutions. Why do our politicians act as they do? Because they can. Corruption advances (careers) until it clashes with resistance. But there is little effective resistance. In Mexico we presume this is normal behaviour. Many of the electorate simply want things from their politicians, not accountability. If we don't change this from the basis of society it will not change.
“Just as it takes two to dance a corruption tango, so it takes two to refute it. Also corrupt politicians need to be denied even the possibility of re-election.
Torqauto Jardim -
“I was revising the 10 promises not complied with in democracy
1. secret and closed system of power where all socio-politico-economic levels meet.
Lavo Jato , involved everyone, partly because of the limited media capabilities, the news relayed only about 10% of Lavo Jato. So we are able to see a percentage of what goes on in the large cities, but because of poor independent media networks, the rest of Brazil remains outside of this. This is very shocking. Of the 5,517 municipalities, two-thirds saw the money for school-lunches, education and health disappear. This is more serious than Lavo Jato, since it is destroying the future of Brazil.
“When we think of the coming decades, the involvement of civil society is key, but more so the ability of an independent press to investigate.
Poala Belize -
“We need affirmative action...we have the desire and technology.
[This nothing more than a loose catch-all of current en-vogue phraseology].
Chair Vera -
“Now to offer the floor for questions”
An audience member from Paraguay -
“Corruption used to be defined as an illegal advantage on public resources. In the USA the Supreme Court judged that the influence of a millionaire to influence politics was not corruption – I would say it is.
Denize Rubio -
“I would say it is also, but the political financing scheme is different our countries, our countries are public-private, the USA's 'open system' is only for the Presidential election, and in that the last 4 candidates chose private funding over public because of the far greater monies made available.
Torqauto Jardim -
“This is very much a cultural matter, in the USA it is the norm, here it is not.
Denize Rubio -
“Agreed, but the private financing of politics is the window-opportunity for corruption.
An audience member – The Foreign Minister of Panama -
“Corruption is defined and puniched in different ways around the world, most typically that of a company fine. In my country we use a term – 'the civil depth' of a company – which means that if a company is of systemic importance to the economy it is allowed to carry-on. My question is 'Is this legitimate? To allow a guilty company to continue?
Denize Dresser -
“One crucial word not mentioned yet is the word 'impunity'. Corruption continues when there is impunity. In Mexico 98% of those identified have not gone to jail. This impunity muct be removed through judicial power and civil society. The ex-President Salinas is still socially accepted in the elite world of gatherings...there has been no social sanction. People should be willing to effectively dismiss him, because otherwise is to condone what he has done. Only in this way will we start to create a new political culture.
Chair Vera -
“Yes this is a good idea, but first he must recognise his mistakes, pay for them and then be rehabilitated.
Another audience member: a Brazilian citizen -
“We will have an election with new of non-donations. But we know that those with the most cash are drug-dealers and churches. This is a big risk for the country, to choose from candidates that have connections to these two sides.
Torqauto Jardim -
“Well, you asked and answered at the same time. In electorial law there is a ceiling for expenses, and the breakdown of costs is pretty well known. The involvement of organised crime is usually seen by the type of habitation a candidate may have gained, outside of his/her own payscale. The churches engaged in politics is an enormous weight for us. But it seen elsewhere, such as Italy with the Vatican or the Baptists of the Southern USA, things have become better recognised. Hence the religious connection is a problem, but the real problem is with the drugs.
Chair Vera -
“To finish....in those countries where corruption is very strong it is often related to candidates populism. Hence populism and corruption are not diametrically opposed entities...and this is a problem.
Denize Rubio -
“Typically more corruption, less free press...and the more attacks against free press the more corruption. To fight against it:
- less impunity
- less indifference
- more integrity
Chair Vera -
“The President of Transparency International has made a perfect summary of the aims of this discussion.
The fact is that in countries with large poor populace, and slow or volatile economic development, run by those who typically see themselves as part of the ruling elite, exist in what they recognise as an unstable economic environment. So, many on 'both sides of the tracks' give little credence to morality or values beyond their immediate personal sphere; even that not untouched by machination for the worst of them.
Such people will typically justify their actions to themselves as either 'their opportunity' to get off the bottom social rung, or at the highest level see it as part of 'the game'. And in both worlds often do not have the courage to speak against those who drew them into corruption; for fear of castigation and social exclusion - often with little or no faith in the capabilities of the public legal system to ensure right prevails.
Plus, all too often the participants in corruption have been so subsumed by everyday group habits and behaviours, that they fail to analyse or differentiate their own actions.
The now very prevalent activity of disingenuous 'social acting' toward others outside and inside of their group, illustrates an activity in which the people themselves are so removed from the values of truth and decency. Many children learn to act as if not guilty when understood to have been naughty, but instead of truly growing up, many continue as such and their capabilities of deception become ever more sophisticated, and their self-accountability never even considered because they forever operate at the lowest moral level.
Since the GFC damage of 2008, portions of the world's populace at all social levels in both the West and LatAm have become personally ideologically split between those few who are trying to build a new future and the increased many who are simply using corrupt actions against others to serve themselves at all levels of society and across all ages.
As the saying goes...“power corrupts and absolute power corrupts absolutely”, but corruption begats corruption begats corruption, and the societal and economic effect is enormously detrimental when belief and faith – the lubricants of socio-economic cogs – deteriorate.
Brazil is undergoing its own post Lavo Jato top-down cleansing, and much of the West needs a similar process, from the (broken) middle-up and middle-down.
LatAm, led by Brazil, still has an enormous potential that much of America, Europe etc does not, hence Brexit's reach-out to the the rest of the world, and the UK's political sub-text to the royal wedding.
But for all the rhetoric of the WEF discussion, it takes strong moral leaders whose own actions speak far louder than 'preaching' words. As seen in the previously drug-infested favellas of Rio de Janeiro and elsewhere in the run-up to the Olympics, it takes a strong and hawk-eyed moral political and legal presence of which the corrupt will be fearful and the everyday person comforted and inspired by.