Latin America: 'The Mechanism' and the Cost of Corruption

As the crusade against corruption continues across Latin America, one can only hope that 'the Mechanism' that menaces Latin America will be slowly but surely dismantled.

Late on April 8, Luis Inacio Lula da Silva became the first former president of Brazil to go to prison. Brazil, and Latin America in general, are no strangers to corruption. Earlier this century, arrests were made in connection with the notorious mensalao scandal in which Lula’s chief of staff, party treasurer and others were convicted for bribing parliamentarians for votes. Fernando Collor de Mello, the first Brazilian president popularly elected after 30 years of military rule, resigned in 1992 to avoid impeachment on corruption charges.

Brazil’s politicians have thrived inside a cocoon of political immunity. Over the past year, however, several leading politicians, including the speaker of the parliament, have gone to jail as a result of Operation Car Wash. The largest corruption investigation in Latin America’s history — around bribes paid by the Brazilian construction giant Odebrecht to secure government contracts — has spread to 14 countries, implicating a vice president of Ecuador (sacked last year), a Colombian senator and Venezuelan President Nicolás Maduro. The current Brazilian President, Michel Temer also faces charges of corruption and has been debarred from further public office.

The recently released Brazilian Netflix documentary series, O Mecanismo (The Mechanism) describes the tortuous process followed by determined prosecutors to unearth the truth. The Odebrecht scandal engulfed Brazil’s colossal national oil company Petrobras – the golden goose which doled out contracts at inflated prices – and led to the impeachment of President Dilma Rousseff, Lula’s successor. These revelations and their ramifications were welcomed by furious voters suffering from an economic downturn and clamouring to bring the guilty to book, despite overwhelming criminal, official and political resistance. They have also created havoc in the political economy. Brazil’s voters are united in their condemnation of corruption. They are divided over who is more at fault. In the case of Rousseff, it was clear that the centre-right saw an opportunity and manipulated Congress to remove her, even though there are no corruption charges against her. Lula defended her and then became the alternative of the left. He has condemned the motives of his opponents, not without some credibility.

Next door (though 2,000 miles away) President Pedro Pablo Kuczynski of Peru resigned on March 22 when it became apparent he would lose a no-confidence vote in parliament. Ironically, he too was suborned and destroyed by Odebrecht, as were his three immediate predecessors – Ollanta Humala, along with his wife; Alan Garcia and Alejandro Toledo. Humala, his wife, and several of Garcia’s associates, are behind bars. Toledo, a fugitive in the US, has his bank accounts frozen.

Other corrupt heads have recently rolled in the region. Guatemalan strongman, President Otto Perez Molina resigned and was arrested the same day in September 2015, thanks to an impartial commission inquiring into corruption (CICIG) in connection with a scandal labelled La Linea. His vice president resigned earlier, having used a ‘telephone line’ to the customs to enable evasion of import duty. Four Guatemalan presidents have been indicted, including former President Alvaro Colom, arrested along with nine of his cabinet members in February this year. Current President Jimmy Morales is in CICIG sights, despite his attempts to paint it as a witch-hunt.

Further south, former Argentine President Carlos Menem was sentenced to four years for corruption in 2015 but enjoys senatorial immunity. Former president Cristina Kirschner is being investigated for corruption and leading members of her cabinet have been arrested, including her former vice president. Allegations that these arrests are political have been drowned in a chorus of public approval. Even in neighbouring Chile, reputed for political stability, former President Michelle Bachelet ended her term recently under a cloud over allegations of misuse of her office by her son.

Mexican President Enrique Pena Nieto soon hands over a presidency mired in allegations of personal corruption, including his wife’s purchase of a multimillion-dollar home from a major government contractor. In 2014, the government cancelled a $4 billion high-speed railway concession awarded to a Chinese company which came under a cloud. A recently established National Anti-Corruption System, an ombudsman body, is considered too close to the government.

Not all institutions have succeeded in removing the corrupt. In Honduras, reputed to have the most homicide rates in the world, President Juan Orlando Hernandez was allowed to run for re-election by the Supreme Court in 2015, a change in the constitutional structure, which his left-wing predecessor Manuel Zelaya proposed and for which he was removed from office in 2011. Hernandez, also accused of corruption, managed to get re-elected in a controversial recount in December 2017. In Panama, which has often been cited as a tax haven, former President Ricardo Martinelli served his full term before allegations against him surfaced. He fled to the US but is to be extradited.

It may appear that Latin America will never be rid of the malaise that has held it back from joining the ranks of the developed world. With its abundant natural resources, favourable land-man ratio, relatively conflict-free politics, it should grow faster than the average 2-3% over the past decade. Recent revelations, a more demanding public opinion supported from abroad, a muscular judiciary in some cases, and the sheer exigencies of transparency in 21st-century economics are forcing Latin American regimes to acknowledge the primacy of institutions over political interests. They face opposition from entrenched lobbies, not least domestic business houses accustomed to having their way. The political party system has much to answer for, despite the personalisation of presidential politics.

The example of Lula affirms that, despite his overwhelming popularity (he was the front-runner for this October’s election) and all the good work done during his presidency, he cannot be above the law. As institutional actors strike at the heart of corruption and make more high-profile examples of the hitherto immune, one can only hope that ‘the Mechanism’ that menaces Latin America will be slowly but surely dismantled.

Deepak Bhojwani is a retired diplomat and former Consul General of India in Sao Paulo, Brazil.