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News > Analysis

Latin America's Ongoing Crusade Against Corrupt Elites

  • Argentina's President Mauricio Macri and Brazil's President Michel Temer have both denied accusations of corruption.

    Argentina's President Mauricio Macri and Brazil's President Michel Temer have both denied accusations of corruption. | Photo: EFE

Published 8 December 2017
Opinion

Corruption is a global plague, but is Latin America properly addressing the issue in the wake of recent scandals gripping the region? On International Day Against Corruption, teleSUR investigates.

Pressured by massive corruption exposés, governments across the globe are slowly acknowledging that tax havens attract neither foreign investment nor employment opportunities, but instead inflict grave economic damage while reinforcing existing inequalities. 

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The people of Latin America, too, have shown greater awareness of the issue over the past two years, although many of the resulting changes are still too embryonic to be truly visible. 

1. Odebrecht, Panama Papers, Paradise Papers: An Endless List

Last month, 13.4 million documents dubbed 'the Paradise Papers' revealed how politicians, social organizations and businessmen across Latin America have been opening offshore shell companies and tax-haven accounts. It was the third corruption scandal in 18 months exposing how the rich get richer at the expense of those who are most impoverished.

The finance ministers of both Argentina and Brazil are now among those who have been accused of tax evasion as a result.

In Colombia, even President Juan Manuel Santos was revealed as being involved in the papers. He allegedly has connections with two offshore companies in Barbados: Nova Holding Company and the Global Tuition & Education Insurance Corp., a tax-exempt initiative which finances travel expenses for Colombians studying abroad.

Mexican businessmen and corporations also appeared in the Paradise Papers, with one of the most shocking being the former leader of the Confederation of Mexican Workers (CTM) Joaquin Gamboa Pascoe, now deceased, who reportedly had about US$19 million invested in the Cayman Islands and the Bahamas in 1982.

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One of the richest men in the world, Mexican business leader Carlos Slim also allegedly used a Bermudan company for one of his first endeavors in 2000.

The revelations only enlarged the number of prominent politicians from across the region who had been cited in previously leaked documents and corruption scandals.

Last April, the Panama Papers exposed more than 11 million confidential files from Panamanian law firm Mossack Fonseca.

The documents involved Argentine President Mauricio Macri; Mexican President Enrique Pena Nieto; Peruvian presidential candidate Keiko Fujimori, and Brazilian lawmaker Eduardo Cunha.

And Odebrecht — the corruption scandal involving the largest construction company in Brazil — ballooned into a worldwide bribery scheme when the firm was caught paying US$788 million in bribes to officials in Panama, Colombia, Mexico, Brazil, Guatemala, Peru and the Dominican Republic, not to mention laundering money in the United States and Switzerland.

2. Public Pressure For Better Policies

Following the successive high-profile scandals, the public began to realize that corruption doesn't just affect their daily lives with bribes, nepotism and clientelism. In fact, elites have set up an entire tax-evasion system that allows them to accumulate wealth more-or-less legally, increasing de facto inequality.

According to experts, the vast amount of money tucked away in tax havens has severe implications for national economies: the dodged tax revenues are automatically deducted from social programs that would otherwise benefit low- and the middle-income groups.

A 2014 report by Oxfam shows that evaded tax revenue could lift 32 million people out of poverty in Latin America alone, equivalent to the total population of people living in poverty in Ecuador, Bolivia, Colombia, El Salvador and Peru combined.

No surprise, then, that across the region people regularly take to the streets to protest against corruption. Some have even hailed the new tide of popular discontent as a "Central American spring," although the movement has spread beyond Central America, including to Brazil and Argentina.

Yet social movements have so far failed to systematically implement structural changes, besides the spectacular ousting of Perez Molina in Guatemala and former Vice President Roxana Baldetti, along with 30 others, back in 2015.

Hondurans also launched a new "indignados" movement and a weekly tradition of torch-lit marches through the capital, Tegucigalpa, and other cities every Friday night after the ruling National Party was implicated in a multimillion-dollar scandal in the social security institute.

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Protesters have called for the resignation of President Juan Orlando Hernandez, investigations and jail time for those responsible for fraud. They are also calling for the establishment of an International Commission Against Impunity (CICH) in Honduras to lead independent investigations into corruption cases.

And Guatemalans have resumed their own anti-corruption protests since President Jimmy Morales became embroiled in an independent investigation led by the U.N.'s anti-impunity body, CICIG.

Morales tried to interfere with U.N. investigations by expelling the commission's head, Ivan Velasquez. He then forced back onto the streets thousands of Guatemalans to demand his resignation, along with those of the more than two-thirds of Congress allegedly involved in corruption rings.

Last month, a U.N. report concluded that a staggering 83 percent of Guatemalans still live "in extreme poverty," while almost half of children below the age of five suffer from chronic malnutrition.

3. How Ecuador Is Leading The Way

Incerasing awareness of the issues surrounding corruption has prompted several countries to implement public policies to crack down on tax evasion, most notably Ecuador, Bolivia and Venezuela.

In response to the Panama Papers, Ecuador's government proposed a referendum earlier this year asking voters: "Do you agree that, for those holding a popularly elected office or for public servants, there should be a prohibition on holding assets or capital, of any nature, in tax havens?"

The vote took place with the first round of the presidential elections in late February and people voted overwhlemingly to bar officials hiding money abroad while in public office.

With the presidential victory of left-wing candidate Lenin Moreno against right-wing opponent Guillermo Lasso, a former banker exposed in the Panama Papers as having millions of dollars abroad, the fight against tax havens is expected to continue in Ecuador.

In Bolivia, meanwhile, lawmakers have proposed a new bill to help fight tax evasion.

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In Venezuela, President Nicolas Maduro sent a clear message both to his country and to the Venezuelan authorities when he requested jail sentences for those who had received bribes from Odebrecht in February this year.

The Venezuelan Military Counterintelligence Agency immediately seized Odebrecht's offices in Caracas, while authorities froze the firm's assets and bank accounts.

In the aftermath of recent revelations concering state-owned oil company PDVSA, the president has outlined new measures to crack down on corruption, having replaced the company's entire leadership.

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