EURO-LATIN AMERICAN PARLIAMENTARY ASSEMBLY. Committee on Political Affairs, Security and Human Rights WORKING DOCUMENT

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1 Euro-Latin American Parliamentary Assembly Assemblée Parlementaire Euro-Latino Américaine Asamblea Parlamentaria Euro-Latinoamericana Assembleia Parlamentar Euro-Latino-Americana EURO-LATIN AMERICAN PARLIAMTARY ASSEMBLY Committee on Political Affairs, Security and Human Rights WORKING DOCUMT Transparency and corruption in the European Union and Latin America LAC Co-Rapporteur: Patricio Zambrano, Andean Parliament DT\ doc AP v01-00 United in diversity

2 Defining the concept Transparency and corruption in Latin America The last decade of the 20th Century saw an explosion in the number of academic and political studies and debates on corruption, after the international community had underestimated its social and economic costs for decades. They aimed to develop a better appreciation of the devastating effect that this issue has had on our societies. Corruption is a phenomenon that, rather than decreasing, has been on the rise and undergone major changes in recent years. In order to grasp the growing problem of corruption in Latin America, it is first necessary to attempt to define it in context. Initially, definitions of corruption were closely tied to civil servants behaviour. Joseph Nye s well-known definition is among them; he understood corruption to be: ( ) behaviour which deviates from the formal duties of a public role because of private-regarding (personal, close family, private clique) pecuniary or status gains 1. The main problem with this definition, however, is that it ignores any illegal or corrupt behaviour in the private sector, thereby concealing the fact that many acts of corruption take place as a result of mutual agreements between economic and political actors 2. Since the 1950s, one of the most widely accepted definitions of corruption has been the one provided by the NGO Transparency International. For this organisation, corruption [...] is operationally defined as the misuse of entrusted power for private gain 3 The essence of this definition is that corruption is misuse of power. With this in mind, representing specific interests is often perceived as an act of corruption. Although this interpretation is widely accepted by the international community, and has been the subject of many studies, it has been criticised for being oversimplistic and lacking depth. According to Schefczyk, representing specific interests is common in all modern democracies 4 and this definition cannot be applied to all countries. However, this explanation has been important for identifying corrupt practices which contravene legislation and affect people s welfare, and it has led to the acknowledgement that corruption limits the development of countries. For such reasons, defining this phenomenon has always been complex. Nevertheless, there is now a clearer understanding of this issue, which has arisen from the recognition that corrupt 1 Nye, Joseph., Corruption And Political Development: A Cost-Benefit Analysis, American Political Science Review, No. 51, Von Arnim, Hans Herbert. Streitgespräch Wie unabhängig ist Transparency International Deutschland?, in von Arnim, Hans Herbert (ed.), Korruption und Korruptionsbekämpfung. Beiträge auf der 8. Speyerer Demokratietagung, vom 27. und 28, Berlin, Transparency International, Corruption Perception Index Schefczyk, Michael. Paradoxe Korruption, in Jansen, Stephan A. and Priddat, Birger P. (eds.), Korruption. Unaufgeklärter Kapitalismus - multidisziplinäre Perspektiven zu Funktionen und Folgen der Corruption, Wiesbaden: VS Verlag für Sozialwissenschaften, AP v /6 DT\ doc

3 activities are closely linked to a lack of political legitimacy, serious institutional problems and inefficient policies on job creation and security. How, therefore, do we measure corruption without having a clear definition of it? Measuring political corruption is not straightforward. In spite of discussions on possible methods, the most often used and cited gauge is the Corruption Perceptions Index (CPI), which measures the perceived levels of corruption in a society. The index is drawn up by Transparency International, and it is known as the survey of all surveys. The topics that it covers have become increasingly specific over the years, and governments and organisations refer to it when looking at levels of transparency in different countries. However, we cannot determine corruption figures from a single perspective, and it is therefore essential to find other tools which may determine and distinguish practices that are classed as corrupt in different regional contexts. Corruption in Latin America From the beginning of the 1990s, many Latin American countries have been going through a transition towards democracy. The transition has prompted the establishment of new political institutions, which has posed challenges for determining the concept of the state and the way in which these institutions should safeguard democracy. In some cases, the transition to democracy stimulated the development of successful economies with effective political and social control systems, leading to greater governability and increased transparency, which had been lacking in many of these countries in the past. The continent s most prominent example is Chile; after the fall of the dictatorship, it began a rapid process of economic development, which, coupled with good investment decisions, opened up spaces for transparency and social control. In other cases, however, institutions were not sufficiently strengthened and corruption was present at all levels of the state, making it the main obstacle to equality and the development of nations. Labelled as the most unequal region in the world today by the World Bank, Latin America is facing serious problems of transparency and in developing effective policies to combat corruption. According to Transparency International s Corruption Perceptions Index, Chile and Uruguay are the countries with the least problems of corruption in the region, ranked 22 nd and 25 th respectively. In contrast, countries such as Venezuela and Haiti are placed 172 nd and 175 th, making them the countries with the highest perceived levels of corruption in Latin America and among those with the highest in the world. Their ranking shows that the lack of transparency in Latin America is much more serious than generally perceived. This report reveals that other countries in Central America and the Andean Community countries are not in very good positions either; Columbia and Peru are placed joint 80 th, while Bolivia and Ecuador are ranked 102 nd and 151 st respectively (see Figure 1). DT\ doc 3/6 AP v01-00

4 In light of this, it is clear that our continent needs to draw up concrete regional policies to fight against this phenomenon, given that it is becoming one of the major sources of instability in the region. Although no country is immune to corruption, Robert Klitgaard differentiates between different scales of corruption. He defines normal corruption as a condition that has not become widespread and that can be controlled by a specially designed anti-corruption apparatus, which includes a legal system, accounting and auditing, budgets, competitive procurement and citizen oversight; these tools are available in the majority of Latin American countries. At the other end of the scale is systemic corruption, which implies corruption that is widespread and the apparatus set up to combat and restrict it is ineffective or has itself been taken over by specific interests. The latter is the main reason why corruption phenomena should be closely monitored and measured by a range of social organisations and international bodies. By identifying and establishing the main problems of corruption and the failings in the fight against it in Latin American countries, these organisations could draw up recommendations for public policy directives, which could have concrete results and a decisive role in reducing its scale. Source: Transparency International In this respect, it may be concluded that the main causes of corruption in Latin America are linked to a series of factors. Levels of corruption tend to be higher in countries with lower human and economic development. The level of development is considered to be the way in which citizens possess tools to demand a more responsive and transparent government and to make government more efficient 1.Low levels of education influence people s perception of corrupt practices due to a lack of information and knowledge. A lack of transparency also affects those countries in which political rights are limited and where there is a lack of or weak political competition. Studies show that in countries with 1 Morris, Stephen D., Corruption in Latin America: An Empirical Overview', University of South Alabama, USA. AP v /6 DT\ doc

5 higher levels of democratic competition there is usually a lower rate of corruption. This is because citizens from countries with strong democratic institutions usually have the tools needed to hold a government or politicians accountable. Corruption may even be more serious when the state plays a greater role in the economy and when there is less economic freedom and openness. According to Stephen D. Morris, two of the most useful variables for explaining the causes and consequences of corruption are the levels of inequality and economic openness or freedom. They are considered to be both causes and consequences of corruption. Inequality in the distribution of wealth is one factor which tends to encourage more corrupt societies. According to the author, corruption is usually more prevalent in countries where the most powerful groups also control the largest proportion of income 1. Finally, a loss of judicial independence and freedom of the press, combined with civil servants low salaries, can create the perfect environment for bribery and patronage to flourish, and even more dangerously, for them to become a way of life. In societies where this does occur, corruption becomes an easy tool to use when a state does not have an efficient democratic regime in place. Corruption can have devastating consequences for countries and above all for regions: From a political perspective, corruption causes a loss of public trust in politicians and the civil service. Confidence in public institutions, assessments of the government s performance and its legitimacy are also affected. This can lead to a loss of faith in government systems and the decline of a democratic regime or make way for new forms of authoritarianism. 10 % of responders to a survey in Latin America admitted to having paid a bribe. This figure contrasts with low levels of bribery in the European Union on the one hand, where 5 % admitted to resorting to this practice, and the very high level of 40 % in the Middle East and North Africa on the other. Nevertheless, there are significant differences within Latin America. In the case of Bolivia and Venezuela, 23 % and 49 % of those surveyed had paid a bribe, while at the other end of the scale less than 6 % admitted to doing the same in Argentina and Panama. In terms of the economy, corruption seriously affects growth, exports and investment; this has a knock-on effect on development and causes economic stagnation, which may lead to higher levels of inequality and poverty. The above figures show that the fight against corruption is only just beginning in Latin America. Greater incentives are still needed for the state and civil society to grasp the full extent of the damage that corruption causes to society in general and to look beyond each country s own specific circumstances. We must strengthen Latin American integration and analyse the viability of international initiatives. In May 2001, representatives from 190 countries came together at the Second Global Forum on Fighting Corruption and Safeguarding Integrity in The Hague, Netherlands. The Netherlands Minister for Justice, Benk Korthals, opened the forum by stating that 'no 1 Morris, Stephen D., Corruption in Latin America: An Empirical Overview', University of South Alabama, USA, p. 3. DT\ doc 5/6 AP v01-00

6 country can protect itself from the impact that corruption has outside its borders, and all nations must therefore work together to combat corruption. Ten years after this initiative was launched, we still have serious problems in defining clear and efficient public policies on this issue, and above all in deciding how to promote greater levels of transparency through different local and regional development policies. This difficulty is a result of the huge political and ideological divisions that exist in our continent. What does the future hold? Challenges During the last decade, international donors have stressed that combating corruption is a fundamental requirement for development and for countries to gain access to international loans. For this reason, significant resources have been allocated to developing methodologies for identifying this phenomenon, which would enable closer monitoring of critical cases on a global level. However, detached observation does not take into account each region s specific social and cultural issues and to some extent is an attempt to impose a single interpretation of this phenomenon. The main challenge is to identify corrupt practices, which leave the continent s countries at greater risk, more precisely. Latin America must also strengthen its governments and judicial systems, reform the police forces and create a culture of transparency, in order to combat corruption. This can be achieved through fostering cooperation between countries and promoting institutional policies. In conclusion, it is important to bear in mind that corrupt practices and a lack of transparency are both the result and the cause of inequality and poverty. To borrow the OAS Secretary- General José Miguel Insulza s words, Latin America is not the poorest part of the world, but it is the most unjust. Parliamentary assemblies such as EuroLat therefore have a moral and social duty to work on policies and strategies that promote transparency and equality in the most vulnerable regions. By improving current practices, these policies should reduce poverty, thereby representing an investment for world economic growth. AP v /6 DT\ doc