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Corruption: Latin America Improves

Brazil and Mexico improve, as do all trade groups. But Venezuela worsens again, reaching record levels of corruption.


Venezuelan president Hugo Chavez is planning to transfer the country's international reserves to the central bank under his direct control.  However, when those billions of dollars are transferred to the presidential coffers, they will likely only compound a growing problem in Venezuela: corruption.

"Under Chavez, corruption permeates all levels of society," James M. Roberts, a Research Fellow at The Heritage Foundation, said in a recent analysis. "Bureaucrats rarely follow existing bidding regulations and demand bribes from ordinary citi­zens while they neglect basic government services. A general atmosphere of lawlessness prevails. Gov­ernment officials and others connected to the regime drive new cars and wear designer labels."


As the state's control over the economy has grown under Chavez, who assumed power in 1999, so too have bureaucrats demanding bribes to influence the outcome of applications or simply do their job. Especially disturbing for traders is that Venezuela has dramatically increased the documents needed - and cost - for exporting and importing containerized freight through Venezuelan ports (see Trade: Panama Best, Venezuela Worst). 

With billions of dollars in petro-cash floating around, few observers were surprised when a suitcase full of $800,000 in cash was discovered at Buenos Aires airport in August. The suitcase allegedly belonged to Guido Antonini, a Venezuelan businessman whose companies have benefited from close ties to Chavez. He had flown from Caracas to Buenos Aires on a private jet belonging to Argentine state oil company Enarsa. Chavez denies any wrongdoing, but the episode is seen as the latest evidence of the rising corruption in Venezuela.  

And that corruption has soared dramatically under Chavez. The country's corruption perceptions score has fallen from 2.7 in 2000 - the first full year of Chavez' government - to 2.0 in this year's survey by Germany-based watchdog Transparency International. Its international ranking has fallen from 71st place (out of 90 nations) in 2000 to 162nd place this year (out of 179 nations).

Although Venezuela is not the most corrupt country in Latin America (that honor goes to Haiti), it is now seen as more corrupt than countries like ZimbabweKazakhstan and Belarus. And it is only slightly less corrupt than countries like Congo and Laos, according to the 2007 Corruption Perceptions Index from Transparency released last week.


The deterioration in Venezuela stands in contrast with Latin America overall. Its corruption perceptions score improved slightly - by 0.1 percentage points - to an average of 3.5 points, according to a Latin Business Chronicle analysis based on Transparency data.

Nine countries improved their score, seven worsened their score and four kept their score. Brazil and Mexico - Latin America's largest and second-largest economies - improved their score by 0.2 percentage points to 3.5 points. That means they are seen as less corrupt than countries like Saudi Arabia and Thailand. Brazil also fares relatively well within the so called BRIC group. Its score is the same as those of fellow BRIC countries China and India and significantly better than the last BRIC country, Russia.

Ranked by Latin American trade groups, all made slight progress. CAFTA made most progress (its average score improved by 0.2 percentage points), while the region's other trade groups also saw slight improvements (up 0.1 percentage points each), according to the Latin Business Chronicle analysis. CAFTA includes six nations that signed a free trade agreement with the United States in 2004. However, one of those nations - Costa Rica - has yet to implement the accord and is holding a referendum on Sunday to decide whether to approve it or not (see Costa Rica’s CAFTA Choice). If Costa Rica is not included in the CAFTA average, its progress is identical to the other trade groups analyzed.


However, within each trade groups, there are strong differences:

  • Mercosur: Uruguay is best, with 6.7 points and Paraguay is worst, with 2.4.
  • Andean Community: Colombia (3.8 points) is best and Ecuador (2.1) is worst.
  • CAFTA: Costa Rica (5.0) is best and Honduras (2.5) is worst. (If Costa Rica is excluded, El Salvador is best, with 4.0 points)
  • ALBA: Cuba (4.2) is best and Venezuela (2.0) is worst.

Measured individually, Costa Rica is by far the biggest winner, with an improvement of its score of 0.9 percentage points. It also boosted its international ranking by nine places. Costa Rica is less corrupt than EU countries like Slovakia and Greece.

"The case of Costa Rica may serve to illustrate the importance of having autonomous and respected institutions in place that can help to adequately fight corruption," Transparency says. "Just a few years ago the country experienced a decrease in its CPI score, which could be attributed mainly to the fact that former presidents and high level officials have been found to be involved in bribery scandals. The independence and actions of the justice system in taking up the cases possibly contributed to an improved image of the government and politicians in the eyes of the expert community responsible for rating the countries listed in the CPI."


Despite the improvement, Costa Rica is not the most transparent country in Latin America. Chile holds that position. With a score of 7.0 points, Chile has less corruption than countries like Spain and Barbados. However, its score worsened by 0.3 percentage points from last year. Uruguay, the second-least corrupt country in Latin America, improved its score by 0.3 percentage points. It is less corrupt than countries like Portugal and the Czech Republic.

On the opposite end, Haiti, again cements its position as the most corrupt country in Latin America. Despite some progress in stabilizing its institutions, the country's corruptions score declined by 0.2 percentage points to 1.6 points. That makes Haiti the fourth-most corrupt country anywhere, according to Transparency. Only Iraq, Myanmar and Somalia are worse.

Meanwhile, Venezuela is expected to continue worsening its corruption level. "Meaningfully reducing corruption in Venezuela would require eliminating motives and opportunity for corruption and punishing those responsible," Gustavo Coronel, a former board member of PDVSA and former official of the Inter-American Development Bank, wrote in a detailed CATO report on Venezuelan corruption late last year. "It’s entirely clear that the battle against corruption in Venezuela cannot begin until Chávez has gone."

  © Copyright Latin Business Chronicle


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