Corruption has been a critical hurdle for Latin American countries, denting growth, weakening democracy and governance, and violating the rights of citizens. With governments under increasing financial strain and healthcare systems severely impaired by the pandemic, graft’s effects on society are amplified. While governments engage in emergency spending, reduced oversight contributes to opacity in public procurement and overspending on protective equipment and medical supplies.
The 2021 Capacity to Combat Corruption (CCC) Index, published by Control Risks and AS/COA Anti-Corruption Working Group, indicates that the wave of anti-corruption efforts in Latin America is receding, a trend compounded by the impact of Covid-19.
The pandemic led governments and citizens to shift focus, allowing politicians to diminish judicial bodies’ autonomy and resources without triggering outrage. Additionally, the erosion of democratic institutions in several countries contributed to a decline in the efficiency and independence of anti-corruption agencies. These setbacks pose significant challenges for compliance teams.The CCC Index assesses 15 Latin American countries’ abilities to detect, punish and prevent corruption. Countries with a higher score are more likely to prosecute and punish corrupt actors.
The overall scores are composed of three categories: legal capacity, democracy and political institutions, and civil society and media.
The index shows significant declines across most countries in legal capacity and democracy and political institutions.
While Uruguay, Chile, and Costa Rica’s scores remained stable, and the Dominican Republic, Panama, and Ecuador all saw improvements, Brazil, Mexico, and Colombia experienced significant regression.
Brazil experienced the largest drop of the countries surveyed due largely to a reduction in the independence of Brazil’s main anti-corruption agencies and prosecutor’s office. Additionally, transnational anti-corruption investigations have lost momentum. Brazilian President Jair Bolsonaro’s political capital has diminished, leading his allies to resort to trading appointments and public funds for support in Congress.
Mexico has had little progress in its fight against corruption. The issue has become highly politicized, and the investigations appear to be politically motivated, with concerns regarding anti-corruption agencies’ independence. The Financial Intelligence Unit, which reports to the president, is the most active in anti-corruption investigations—while the attorney general’s office, an independent body, has done very little. President AMLO’s austerity measures have resulted in budget cuts, hindering the ability to conduct broad investigations.
Colombia continues to face challenges affecting its capacity to combat corruption. The country has been on a downward trajectory mostly due to a decline in almost all drivers within the legal capacity category. This reflects perceptions that some corruption agencies and prosecuting bodies are too close to executive power, raising questions about transparency and efficacy. Emergency Covid-19 pandemic spending has decreased oversight of public contracting and reports of corruption.
These findings reveal an uneven, rapidly changing enforcement landscape complicated by the Covid-19 pandemic. Companies should commit to good corporate governance and ethics, and compliance through clear and consistent messaging from the board and leadership teams and ensure that the compliance department has sufficient independence and resources to maintain an effective program, especially in light of rising ESG-related expectations.