Compliance and risk officers whose companies do business in Latin America and the Caribbean will want to check out two new corruption reports that, combined, provide a comprehensive look at bribery risk in the region.
Anti-corruption group Transparency International this month published a new report from its Global Corruption Barometer series based on surveys with more than 22,000 citizens living in 20 countries across Latin America and the Caribbean. In that report, citizens were asked about their perceptions and firsthand experiences of bribery in public services and their perceptions on the scale of corruption in the region.
Meanwhile, a separate report released this month—the 2017 TRACE Bribery Risk Matrix, conducted by non-profit business association TRACE International—assessed the likelihood of being asked for a bribe by a foreign public official in 200 countries around the world. The matrix looks at not only the perceived expectation and tolerance of bribery within a given country, but also a host of other factors that can affect a company’s likelihood of encountering bribe demands.
By assessing the findings from TI’s Global Corruption Barometer survey with findings from the TRACE Bribery Risk Matrix, compliance and risk officers can better assess where bribery and corruption risk may lurk in the Latin America and Caribbean region.
Overall, most respondents to TI’s Global Corruption Barometer said that corruption in Latin America and the Caribbean has increased over the past year. Just 10 percent said they thought that corruption levels had declined, while another 25 percent said corruption levels had remained the same.
Citizens in Brazil, Peru, Chile, and Venezuela were particularly critical, with between 78 percent and 87 percent reporting that corruption was on the rise. In comparison, between 41 percent and 42 percent of citizens in Argentina and Guatemala reported the same.
Corruption risk by group. In TI’s survey, police and elected representatives—such as members of parliament or senators—were considered more corrupt than any other group. In fact, 47 percent of citizens in Latin America and the Caribbean thought that people working in these institutions were mostly or entirely corrupt.
Citizens living in Venezuela were the most likely of all surveyed countries to think that the police in their country were highly corrupt. In this country, 73 percent said that most or all police officers were corrupt. The finding correlates with Venezuela’s bribery risk ranking in the TRACE matrix, which received an overall “very high” bribery risk score of 85 out of 100.
Moreover, in the TRACE matrix, Venezuela received the highest possible bribery risk score possible—100 out of 100—for business interactions with the government. This was based on a “high degree of government interaction, high expectation of bribes, and a very high regulatory burden.”
In TI’s survey, most citizens (between 61 percent and 64 percent) in Trinidad and Tobago, Bolivia, Mexico, and Paraguay also reported high levels of police corruption. In contrast, just 19 percent of citizens in Uruguay said they believed police officers were highly corrupt.
In the TRACE bribery matrix, each of those countries received less-than-exemplary scores concerning their business interactions with government, based on varying degrees of government interaction, expectation of bribes, and overall regulatory burden. Trinidad and Tobago received a medium bribery risk score of 54, while Bolivia received a high-risk score of 70. Mexico received a medium score of 56, Paraguay received a medium score of 54,and Uruguay received a medium score of 42.
Regarding elected representatives, citizens living in Paraguay were most likely to think that their elected representatives were highly corrupt (69 percent), followed by 64 percent of Peruvian citizens, and 62 percent of Chilean citizens. In comparison, just 20 percent of citizens Uruguay thought their elected representatives were highly corrupt.
Behind police and elected representatives in the TI survey, other groups perceived to be highly corrupt included local government officials, officials in the office of the president or prime minister, and judges or magistrates, with between 40 and 45 percent of people across Latin America and the Caribbean saying these institutions were mostly or entirely corrupt. Ranking below judges and magistrates were government officials (37 percent); tax officials (36 percent); and business executives (36 percent).
Corruption risk by government. Governments are still doing badly at fighting corruption. In TI’s corruption barometer survey, 53 percent of all citizens ranked their governments’ efforts as poor, while 35 percent of citizens said their governments were doing well.
In the TI survey, citizens in Venezuela and Peru, especially, gave their governments’ performance a poor rating (76 percent and 73 percent of respondents, respectively).
Citizens in Venezuela were the most critical of government efforts to fight corruption, with 76 percent reporting that their government was doing a bad job. Again, this correlates with Venezuela’s bribery risk ranking in the TRACE matrix, in which Venezuela received a subpar bribery risk score of 60 for its anti-bribery laws and enforcement, based on having high-quality anti-bribery laws, but low quality enforcement of those laws.
Below is a list of the business-related bribery-risk rankings (from highest to lowest risk) in the TRACE Bribery Risk Matrix of all the Latin American and Caribbean countries assessed in Transparency International's report.
Venezuela: Bribery risk score of 85 out of 100
Nicaragua: Bribery risk score of 61 out of 100
Bolivia: Bribery risk score of 58 out of 100
Ecuador: Bribery risk score of 57 out of 100
Brazil: Bribery risk score of 54 out of 100
Paraguay: Bribery risk score of 54 out of 100
Argentina: Bribery risk score of 54 out of 100
Dominican Republic: Bribery risk score of 52 out of 100
El Salvador: Bribery risk score of 52 out of 100
Mexico: Bribery risk score of 52 out of 100
Guatemala: Bribery risk score of 51 out of 100
Peru: Bribery risk score of 44 out of 100
Panama: Bribery risk score of 42 out of 100
Colombia: Bribery risk score of 38 out of 100
Jamaica: Bribery risk score of 38 out of 100
Costa Rica: Bribery risk score of 33 out of 100
Uruguay: Bribery risk score of 30 out of 100
Chile: Bribery risk score of 27 out of 100
Source: Trace Bribery Risk Matrix
Most citizens in Chile, Paraguay, and Peru also gave their government a poor rating in their efforts to fight corruption—which does not align with the low scores of these countries in the TRACE matrix as it concerns their anti-bribery enforcement efforts. Among these three countries in the TRACE matrix, Peru received the highest risk score of 41 (although still considered a low score) relating to its “high quality” anti-bribery laws and “medium quality” anti-bribery enforcement.
Chile and Paraguay similarly have “high quality” anti-bribery laws, according to the TRACE matrix. Paraguay, however, has “low quality” anti-bribery enforcement and, thus, received a score of 39 in this domain, while Chile received a low score of 11 for its “high quality” anti-bribery enforcement.
In contrast, 54 percent of citizens in Ecuador, Guatemala, and Honduras surveyed by TI expressed positive views about their governments’ efforts to address corruption risk.
Although each of these countries scored low in the TRACE matrix for having high-quality anti-bribery laws, Guatemala and Honduras still have “low quality” anti-bribery enforcement, whereas Ecuador has “medium quality” enforcement. Thus, there is clearly room for improvement among these countries concerning enforcement of bribery and corruption.
Other corruption risk areas. Aside from business interactions with government and anti-bribery enforcement, the TRACE matrix also assessed “government and civil services transparency” in each country. In this area, Venezuela and Nicaragua received high bribery risk scores of 81 and 78, respectively, indicating poor scores in the transparency of government regulatory functions and in the transparency and health of the civil services sector.
Another area assessed in the TRACE matrix was “capacity for civil society oversight,” looking at each country’s degree of media freedom and quality, as well as social development. Except for Venezuela, most countries in Latin America and the Caribbean received low to medium scores in this area, a positive finding.
Prudent compliance and risk officers will want to review the TI corruption barometer survey and TRACE matrix together, along with the findings of their own risk assessments, to most effectively gauge where bribery and corruption risk may lurk before entering, or seeking to invest more in, the Latin America or Caribbean region.