An anti-corruption movement is sweeping through Latin America, as developments in Brazil, Mexico, and Argentina show. The region and its citizens have increased their efforts to prevent, detect, combat, and remediate corruption-related practices. So, although Transparency International’s Corruption Perceptions Index ranks Latin America as highly corrupt, it’s a perception that’s likely to decrease in the future.
Widespread measures are being adopted to end corruption, a systemic and recurring problem in the region. Examples include enacting anti-corruption laws and imposing criminal liability on both people and companies for bribery schemes. On top of that, local authorities in Latin America and enforcement agencies in the United States continue to cooperate on cross-border violations. They have achieved effective resolutions.
Sanctions recently imposed by U.S. enforcement agencies on companies – including Petróleo Brasileiro S.A. (Petrobras), Telefônica Brasil S.A., Centrais Elétricas Brasileiras S.A. (Eletrobras), and Embraer – for U.S. Foreign Corrupt Practices Act violations show a focus on Latin America. And since the U.S. Federal Bureau of Investigation (FBI) announced, in March 2019, its new Miami-based international corruption squad, more sanctions are likely.
The FBI created the squads to combat international corruption and has signaled its increased focus on Latin America. For example, the FBI unit based in Brazil recently indicated it has asked the U.S. Department of Justice for more resources. These are to handle requests for information from Latin American local authorities, through mutual legal assistance treaties.
Brazil moves back and forth on sentencing
There are, however, political uncertainties that may affect the enforcement of anti-corruption laws for better or worse.
On 7 November 2019, the Brazilian Supreme Court (STF) issued a ruling that, once again, shifted its stance on whether the Brazilian Federal Constitution allows a person to be imprisoned after a conviction in the first appellate court. In a tight decision – a six to five vote – the STF affirmed a person can be imprisoned only when all appeals have been exhausted. The majority of STF ministers ruled that serving a sentence after its confirmation by an appellate court breaches the presumption of innocence principle. That is, a conviction may only take effect once all applicable appeals have been fully analyzed by the court.
As a result, the majority of people convicted in Operation Car Wash, the investigation into Brazil’s biggest corruption scandal, will be released from prison, if they file a request before the appellate court. In fact, this shift in stance became reality when convicted former Brazilian president Luiz Inácio Lula da Silva was released on 8 November 2019, one day after the STF’s decision.
In other developments, the Minister of Justice and former judge Sérgio Moro presented, in February 2019, an “Anti-Crime Package” bill enacted by the current Brazilian President Jair Bolsonaro on 24 December 2019 (Act No. 13,964/2019). The bill aims to fight corruption and organized crime and provides for changes in 14 laws. These include Brazil’s Criminal Code, Criminal Procedure Code, Criminal Execution Law, and Electoral Code. The proposals contain measures to toughen sentences, including to reduce rights such as progression of the sentence, and to allow plea bargaining – the accused will be able to make an agreement with the Public Prosecutor before initial proceedings – among other measures.
In addition, two bills being discussed at the Brazilian Chamber of Deputies Commission and the Brazilian Senate provide for changes in the Brazilian Federal Constitution. These would allow a person to be imprisoned after the first appellate court confirms a conviction. The bills came about as a result of street protests by citizens, who disagreed with the STF’s decision. The Brazilian Congress has yet to discuss and approve these bills.
Mexico steps up its efforts against public corruption
In Mexico, the López Obrador government has mainly focused on investigating public officers from the previous government. The prosecutions of the former Minister of Social Development and the CEO of state-owned company Pemex are examples. There’s real effort from this new government to combat and punish public officers involved in corruption. However, there has been little change around imposing criminal or administrative liabilities against people and companies. That’s because there hasn’t been, until now, a proper investigation against a private party linked to this government.
In light of anti-corruption legislation enacted in July 2017, companies may be held liable for various corrupt practices, such as bribery, influence peddling, and illegal use of public funds. So far, the new government hasn’t named the anti-corruption judges who will have the legal competence to impose the administrative penalties on private parties. And there hasn’t been a relevant investigation by the government against a company involved in a bribery or corruption scandal. Yet this may soon change: on 26 November 2019, President López Obrador proposed to the Senate the names of the anti-corruption judges.
New developments to the anti-corruption laws in Mexico have been enacted recently. Examples include the Whistleblower System Against Corruption Guidelines, the Guidelines for the Reception of Gifts and Hospitality by Public Officers, and the new Austerity Act.
The whistleblower guidelines establish the basis for, among other things, creating, promoting, operating, and coordinating a governmental system through which public officers or citizens may alert or provide information on practices of corruption (as well as violation of human rights, harassment, and sexual harassment).
Concerning the Guidelines for the Reception of Gifts and Hospitality and the new Austerity Act, even though there are no specific bans or penalties for private parties, the law specifies clear-cut bans for public officers. With this new legislation, there is a definite path to reinforce the new administration trend toward a stricter approach to the fight against corruption.
Companies should toughen their internal regulations to avoid offering gifts to public officers. They should also avoid hiring a former public officer who supervised or regulated the company’s activity, unless at least 10 years have passed since the officer left their public position. Companies should try to mitigate any potential issues, since the government is unlikely to tolerate such actions.
Looking ahead, the López Obrador government is likely to continue taking action against public officers linked to corruption in the past or current government. And at any time, people and companies involved in corruption and other illicit conducts will probably be investigated. Penalties contemplated in both criminal and administrative legislations are rigid; therefore, companies must avoid any potential corrupt activities when doing business in Mexico.
Argentina braces itself for uncertainty
In Argentina, the election of Cristina Fernández de Kirchner to the vice president of President-Elect Alberto Fernández in the 2019 elections may meaningfully affect the anti-corruption efforts in Argentina if she uses her power as vice-president to halt corruption investigations against herself and others generally. Uncertainty remains around whether ongoing corruption-related investigations will remain unharmed, as former president Ms Fernández de Kirchner has been accused of taking millions of dollars in bribes in exchange for public work contracts – which is also under investigation.
More focus despite uncertainty
Taking all these developments as a whole, it’s clear that corruption in Latin America is no longer seen as a subject that can be ignored. However, due to political challenges, the efforts to combat corruption-related conduct should be continually intensified, especially because multi-jurisdictional cooperation and investigations are on the rise and will continue to grow.