International Corruption laws & Culture HCA 457i Michelle Wheeler, Miyeon Kim

Political Corruption Political Corruption: the use of power by government officials for illegitimate private gain Forms of Political Corruption: Bribery, Extortion, Cronyism, nepotism, patronage, graft & embezzlement.

South America Customs Regarding bribery in South America, “The general attitude toward bribery is more relaxed than in the U.S., and some may even view it as an accepted part of doing business (Giovingo, Schumacher, 2012).” Many politicians often expect to be offered money in order to pass certain laws and regulations Local officials are even paid lower wages since they expect to gain payments from companies and individuals needing their services Bribery is a form of making deals to many in South America

South America Laws OECD Anti-bribery Convention Originated in 1999 only adopted by Argentina and Brazil The provisions of OECD, “require signatory states to enact laws criminalizing bribes paid by their corporations to foreign officials in an effort to obtain or retain business (Spahn).” Inter- American Convention Against Corruption (IACAC) Members are territories of the Americas 2 Provisions: Promotes non government cooperation against corruption Members are expected to assist each other in fighting corruption (Morrissey,2007) United Nations Convention against Corruption (UNCAC) United Nation members vow to fight corruption Promote international cooperation in fighting corruption (Argandoña,2007) South America often lacks the resources and motivation to enforce these laws

U.S. Laws Against Corruption Foreign Corrupt Practices Act Federal law which prohibits companies from paying bribes to foreign government officials and political figures for the purpose of obtaining business There are two provisions to this act: Anti-bribery provisions are enforced by the Department of Justice Accounting provisions are enforced by the Securities and Exchange Commission American Anti-Corruption Act Prohibit members of Congress from soliciting and receiving contributions from any industry or entity they regulate including those industries’ lobbyist Prohibit all fundraising during Congressional working hours

Dilemma The struggles that are accompanied with this broad business are adapting to other countries’ laws and regulations. The Foreign Corrupt Practices Act states along with the amendment, “raised awareness of the need for efficient and adequate internal control systems to prevent illegal acts such as the bribery of foreign officials, political parties and governments to secure or maintain contracts overseas (Rocco, 1999).” The United States occupies a stance indicating business contracts will not be decided based on bribes in their country nor while engaging in international business.

Dilemma (cont.) A United States company is in an unfortunate position while doing business in South America, where business thrives on bribery. In South America, political and government figures often base their decisions on the bribery terms offered by companies. Deciding to engage in bribery or follow the United States Foreign Corrupt law is a challenging decision when a company is seeking to succeed.

Corruptions Perception Index (CPI) CPI “is a composite index which ranks countries in terms of the degree to which corruption is perceived to exist among public officials (Youngblood-Coleman, 2011).” Countries with the least perceived corruption have higher numbers. (highest=10) Countries with the most corruption, are indicated by lower numbers. (lowest=1)

CPI Continued South American corruption perception index ratings: Brazil: 3.7 Venezuela: 1.9 Brazil and Venezuela rank very low on the CPI The ratings in South America indicate the there is a perception that corruption exists among government officials. Even though the territories vary, it is apparent South America ranks as a country with perception of corruption

Anti-Corruption Enforcement U.S. companies are faced with the frightening task of balancing regulatory compliance with the need to compete in the business environment within South America as investment activity increases. All South American countries have now adopted at least one of the anti-corruption conventions. Inter-American Convention Against Corruption United Nations Convention against Corruption (UNCAC) Organization for Economic Cooroperation Development Convention against Transnational Bribery

Potential Risk Areas in S. America Factors at risk include level of government oversight, involvement in the industry, ratio of government sales to overall sales, reliance on business partners, and other third- party intermediaries. Certain risks differ depending on the country.

In South America… Chile was rated as having little or no enforcement of anti- corruption laws in Transparency International’s 201 Progress Report. Argentina’s government has a history of establishing short and long term trade barriers to protect local industries. Argentina was also cited to have certain inadequacies in its legal framework to combat bribery and corruption, such as no criminal liability for corporations and inadequacies in statutes of limitations. Venezuela has the highest level of perceived corruption among South American countries based on Transparency International’s 2011 Corruption Perception Index.

Venezuela’s Challenges Click for video (AFP, 2013)

References AFP. (26 March 2013). Venezuela’s challenges. Retrieved from: Argandoña, A. (2007). The united nations convention against corruption and its impact on international companies. Journal of Business Ethics. Retrieved from: Giovingo, V. & Schumacher, T. (5 April 2012) Potential corruption risks in South America. Latin Business Chronicle. Retrieved from Morrissey, D. (2007). The fight against corruption by international organizations. The George Washington International Law Review, 39(1), Retrieved from Rocco, R. V. (1999). The foreign corrupt practices act: An international perspective. Managerial Auditing Journal, 14(4), Retrieved from Spahn, E. K. (2012). Local law provisions under the OECD anti-bribery convention. Syracuse Journal Of International Law & Commerce, 39(2), Youngblood-Coleman, Denise. (2011). Corruption Perceptions Index (Electronic Version), Retrieved from INTRX&GLOBAL=true