The 2020 Latin America Corruption Survey, released today by Miller & Chevalier Chartered and 14 leading firms in the Latin American region, including Orihuela. The survey tracks the latest perspectives on anti-corruption issues in the region.
Despite Latin America’s anti-corruption progress over the last decade, including blockbuster investigations, high-powered politicians and business leaders behind bars, and improved laws in key jurisdictions, new survey data reveals corruption risk to be at an all-time high across the region.
This year, 54 percent of survey respondents said corruption is a significant obstacle to doing business – up ten percent since 2012 – while only 45 percent of respondents believe offenders are likely to be prosecuted, down from 66 percent in 2008.
At the same time, enhancements to local anti-corruption laws in numerous countries are generating some signs of hope. When asked if they think anti-corruption laws are having an impact, respondents from these countries show greater optimism than the regional average of 50%: Argentina (72%), Brazil (74%), Chile (59%), Colombia (55%), Mexico (68%), and Peru (63%).
COVID-19 and Corruption
The findings of the survey, which was performed just before the COVID-19 outbreak, offer important insight to understanding the region’s current challenges. “In this new COVID-19 era, Latin America faces a toxic mix of factors, from increased government emergency spending that bypasses standard public procurement rules, to business leaders in survival mode cutting corporate compliance budgets, to employees facing pressures to meet their numbers,” said Matteson Ellis, Miller & Chevalier’s Latin America Practice Lead. “Add to this mix the fact that business professionals were already noting high corruption levels before the pandemic began, and the result is a perfect storm for misconduct to thrive, making corporate compliance safeguards more important now than ever.”
The survey results on common areas of bribery risk bring into focus specific COVID-related corruption threats, like greater leverage by government officials to extract bribe payments, the potential for accounting manipulation by employees in areas like revenue recognition, and improper payments paid offers to public officials to unlock logistics bottlenecks as supplier chains have been disrupted.
Corporate Compliance Efforts Grow
The survey reveals that more companies, both local/regional companies and multinationals, are embracing corporate anti-corruption compliance standards, a trend that has steadily increased over the last decade.
“What we are presently seeing, however, is the impact of the COVID-19 outbreak in the implementation of compliance programs, as many companies are suffering financially and are concentrating on business operations, and this may impact upon some important compliance related milestones” says Sandra Orihuela, founding partner of Orihuela Abogados.
Additional Survey Highlights
Nearly 1,000 compliance officers, senior executives, directors, and in-house lawyers participated in the survey, which gauged respondents’ familiarity with local anti-corruption laws, local governments investigation and enforcement efforts, and the steps their own companies are taking to combat corruption.
- Respondents from multinational companies are just as likely as local/regional companies to think they have lost business to corrupt competitors – a shift from 2012 and 2016, when local/regional companies perceived more lost business due to corruption.
- While at least 70 percent of respondents across the region rank political parties (77 percent) and the legislative branch (70 percent) as the two areas of government in which there is “significant corruption,” other government areas also register high risk. Between 60 percent and 70 percent of respondents rank the executive branch, judicial branch, police, municipal/local governments, and state-owned companies as significantly corrupt.
- When compliance practices are analyzed on a country-specific basis, two divergent compliance environments emerge in the region. One features countries with companies that continue to expand compliance program efforts beyond basic policies, and the other features countries with companies that have engaged in little effort to mitigate corruption risk.
- Despite growing enforcement of local anti-corruption laws, the U.S. Foreign Corrupt Practices Act (FCPA) continues to be viewed as the most important anti-corruption law for the region. Half of local/regional company respondents have some familiarity with the FCPA, and 86% of multinational company respondents do. Fifty-nine percent of respondents who are not directly subject to the FCPA have at least some familiarity with the law.
Report key findings:
- Perceived corruption risk at all-time high.
- Enhancements to local anti-corruption laws generating optimism.
- Steady compliance program improvement for multinationals.
- Two distinct compliance environments emerging regionwide.
Peru Specific Findings
Several data points suggest increasingly optimistic attitudes towards anti-corruption efforts in the country.
According to Peruvian respondents:
- Nearly 75% are aware of corruption prosecutions, versus 44% in 2016.
- Eighty-five percent believe offenders are likely to be prosecuted, versus 56% in 2016.
- Only 12% believe they have lost business to companies willing to pay bribes, down from 44% in 2016.