For the 10th year running, Venezuela has been ranked as the most corrupt country in Latin America by Transparency International’s annual Corruption Perception Index.
The index, which measures perceptions of corruption in the public sector, was released on 3 December. It ranked Venezuela 161st out of 175 countries worldwide, as the economic crisis continues to wreak havoc and corruption takes root across the entire government system.
“Corruption risks in Venezuela continue to get dramatically worse, given the security situation, the state of the economy and general disorder,” says Matteson Ellis of Miller & Chevalier in Washington, DC.
It has become difficult for local companies to perform basic compliance tasks and for parent companies to exercise proper compliance oversight of their local subsidiaries in Venezuela, which has a clear effect on FCPA risk, according to Ellis. “Many qualified compliance professionals have left the country, it can be complicated to conduct internal investigation interviews when people are afraid to talk about bribery schemes, and compliance training is not as easy to conduct when employees are reluctant to fully engage,” he notes.
TI’s Venezuelan branch Transparencia Venezuela states that the bad score evidences “a context where bribery prevails, acts of corruption go unpunished and public institutions don’t address the needs of citizens.” The group estimates that impunity levels are higher than 95 per cent and emphasised that a good result cannot be obtained in the annual index until there are “mechanisms of open government through which the public can demand accountability from their leaders.”
The index also showed that many Central American countries are perceived to be some of the most corrupt countries in the region. According to the report, Nicaragua is the most corrupt, ranked at number 133 out of 175, followed by Honduras, Guatemala, Panama, and El Salvador. Costa Rica is perceived as the least corrupt country, coming in higher than Brazil at number 47 in the rankings.
There are some common, very visible risks in Central America, according to Ellis. “The countries’ governments and business communities are usually controlled by a small community of powerful elites, and as the people who serve as leaders in government are often related to those who serve as leaders in business, Central American countries can be seen as very insular and particularly risky,” he explains.
This year Brazil fared the best among the BRICS countries, coming in 69th place, up from 72nd in last year’s report, and tied with countries such as Bulgaria, Greece, Italy and Senegal. The slight improvement may be due to recent government efforts, such as the enactment of the country’s Clean Company Act, or investigations such as that of stateowned oil company Petrobras.
For Simon Strong, president of Tenacitas International, a business intelligence and risk advisory company, change is being led by a combination of the commercial need to comply with anti-bribery statutes and of the greater overall awareness of the social and economic cost of corruption. “Perhaps the most spectacular example of this is the current Petrobras scandal in Brazil, which broke only a few months after Brazil passed its own Clean Companies Act imposing harsh penalties on public sector bribery,” says Strong. “The Act brought Brazil into compliance with its obligations to the OECD but nobody would have believed the Petrobras behemoth would immediately fall under the gun, roping in some of Brazil’s largest companies.”
The allegations against Petrobras emerged as part of a wider ongoing investigation by Federal Police into money laundering and bribery, codenamed Operação Lava Jato (Operation Carwash). So far, the investigation has unveiled a far-reaching scheme involving former and present Petrobras directors and employees, politicians, and high-ranking executives from some of Brazil’s largest construction and engineering companies.
Strong believes it is high-profile enforcement actions such as the Petrobras case as well as local and global legislation that are changing the way business is being conducted in the region. “We are seeing clear evidence that the rolling out of fully implemented anti-bribery programmes that bring third parties into the corporate governance realm of our multinational clients is having a real and demonstrable effect,” he argues. “The audit requirements are exacting but are now increasingly accepted as the norm by suppliers, distributors and other third parties if they want to retain the business.”
On the cleanest end of the spectrum, Chile and Uruguay were listed as the least corrupt countries in the region for the 10th consecutive year. Chile, which obtained 73 points out of 100, is credited for its political continuity despite changes of government, a police force that is “very clean,” and a judicial system that is “traditionally autonomous.”
“Companies do not confront the same levels of corruption risk when operating in Chile as they do in other Latin American countries — they confront rules that are much more reliable and consistently applied. It is less common to hear of Chilean officials requesting bribes from businesspeople. However, Chile still has had its own important domestic bribery cases, demonstrating that risk still exists,” says Ellis, referring to the Industrias Ceresita case, where the company allegedly bribed public officials to gain construction permits.
Also in the report, Colombia has neither improved nor worsened for the third year running, and is still ranked at number 94 out of 175, indicating that despite efforts by the government and the private sector to combat corruption in the country, the perception of the problem hasn’t significantly improved. The United States also got the worst result since the creation of the TI report 15 years ago, dropping out of the top 20 countries rated as least corrupt.
Overall, while the report may not show significant improvements for the Americas, Strong believes its mere existence has proved a catalyst for action and commentary, “It raises a mirror to countries’ performance in this area,” he says.
“There can be no doubt that this name and shame approach has contributed to the expansion of anti-corruption awareness in Latin America as well as elsewhere.”