by Frank Holder and Jerry Haar*
It’s been a decade since Brazil’s state-owned oil giant Petrobras was at the center of a massive corporate espionage and corruption scandal, known as “Operation Car Wash” (Operação Lava Jato). Although primarily a corruption investigation, it was revealed that several companies had engaged in illegal activities, including espionage, to secure lucrative contracts with Petrobras. Executives from various construction and engineering firms were found to have exchanged bribes and insider information to win contracts.
In another example from three decades previously, Pfizer on the eve of launching a breakthrough anti-inflammatory drug (Feldene)—a game-changer for the treatment of arthritis—a corporate spy had hijacked the molecule and sold it to an offshore lab that produced a generic version for manufacture at half the cost. This had a huge negative impact on the firm’s operations in Mexico, in particular.
Corporate espionage and corruption go hand in hand, creating massive damage to economies that can least afford it.
Corporate espionage, whether instituted by governments or private sector actors, continues to plague the Western Hemisphere is a significant concern across the region. This type of espionage involves the theft of trade secrets, proprietary information, and other confidential data by rival companies, state actors, or other entities seeking a competitive edge.
The key factors contributing to corporate espionage in Latin America are as follows:
The first is economic growth and foreign investment. As Latin American countries continue to develop, attracting foreign investment, there is an increase in industrial activity and competition. This growth makes the region a target for espionage by both domestic and international actors seeking to gain access to valuable information and technologies.
In many Latin American countries, the legal frameworks for protecting intellectual property (IP) and corporate information are still developing and at times are at loggerheads with emerging country needs. Enforcement of existing laws can also be inconsistent, making it difficult to deter or punish perpetrators effectively. Additionally, there are many cybersecurity challenges, as the rise of digital technologies and the internet have increased the potential for cyber espionage.
In terms of sectors, the mining sector in countries like Chile, Peru, and Brazil has been a target for espionage due to the high value of minerals such as copper, lithium, and gold. Competitors may seek to gain information about extraction techniques, reserve quantities, or strategic plans. Additionally, technology and pharmaceuticals are rife for corporate espionage. As these sectors grow in countries like Brazil and Argentina, there is a heightened risk of espionage targeting research and development efforts, product formulations, and technological innovations.
The geopolitical pressure enveloping the region makes government and corporate espionage converge in some instances, with China becoming the region’s largest investor and pushing a development agenda that does not include Western standards of regulation and corporate probity.
Just how are governments and companies battling corporate espionage in the Americas today?
For one, governments in the region are working to improve intellectual property laws and ensure consistent enforcement to protect businesses from espionage. For instance, Brazil has made significant updates to its data protection laws with the enactment of the General Data Protection Law (LGPD) in 2020, which mirrors the European GDPR. Other countries are also enhancing their IP laws and improving enforcement mechanisms to deter espionage.
Another course of action is to bolster cybersecurity. Companies across Latin America are increasingly investing in advanced cybersecurity measures to protect their data and networks. This includes the use of encryption, multi-factor authentication, intrusion detection systems, and regular security audits.
Governments in the region are increasingly collaborating with international partners to combat corporate espionage. For example, the Organization of American States (OAS) has been instrumental in promoting cybersecurity awareness and facilitating cooperation among its member states in Latin America.
Finally, public-private partnerships are becoming more common in the fight against corporate espionage. Governments are working closely with the private sector to share information on threats and vulnerabilities, conduct joint cybersecurity exercises, and develop strategies to protect critical industries. These partnerships are crucial in building resilience against espionage activities.
In sum, corporate espionage in Latin America is a challenging, complex issue that requires coordinated efforts from both the public and private sectors to mitigate risks and protect economic interests. Fortunately, ongoing efforts by governments and companies are gradually strengthening defenses and reducing vulnerabilities. The region’s increasing focus on cybersecurity, legal reforms, and international cooperation are key steps in combating this issue—steps that will yield benefits for companies, governance and the public at large.
*Frank Holder, founder of Holder Partners, is a veteran investigator who has run some of the largest related consulting firms in the world. He has published books and articles on business ethics, corruption and geopolitical issues in Latin America and throughout the world. Jerry Haar is a professor of international business at Florida International University. He is also a fellow of the Woodrow Wilson International Center for Scholars in Washington, DC, and the Council on Competitiveness.
