Honest at home and a brigand elsewhere

Carlos Alberto Montaner

(FIRMAS PRESS) One decade ago, Argentine analyst Gerardo Bongiovanni predicted that the presence of multinational corporations in Latin America would substantially reduce the levels of corruption in the region. The theory seemed reasonable. If these companies came from societies where lawful behavior was the rule, once they settled in Ibero-America they would, by their example, help make public life decent in those countries. They would act as irradiative sources of what today is called “corporate responsibility” -- in other words, the idea that businessmen are not exempt from adhering to a code of ethics, the same as is expected from doctors, lawyers or any other professionals.

With some melancholy, Bongiovanni has just rectified his opinion in a forum organized in Madrid by the International Foundation for Liberty. The opposite has happened. The multinational corporations -- U.S., European and Asian -- have adapted to the rotten Latin American habits and, with few exceptions, pay kickbacks and break the rules, hiding behind the argument that that's the only way to do business in the region. Either they pay or they go, because only by bribing dishonest officials can they win public bids. Naturally, not all countries operate with the same degree of corruption. In Chile, Uruguay and Costa Rica, the governments' habits are a lot healthier, according to Transparency International, an organization that evaluates the honesty of nations worldwide.

Corruption causes dual harm. On one hand, it raises transaction costs. If an international communications or energy company hands out millions of dollars to the functionaries and politicians who have guaranteed it an advantageous position in the local market, undoubtedly that money will be added to the fees charged to the final consumers. Corruption costs the businessman nothing. It doesn't come out of his pocket; it is paid by the defenseless consumers, either directly or through taxes.

The intangible damage is worse, however. In societies where corruption is rampant, and where the culprits are never or rarely punished, the population becomes totally cynical and distances itself from the State. How can we feel that the public sector belongs to us and has been freely set aside for our benefit, when it serves only to enrich the ruling class? Through that moral crack slip the Chávezes and the Moraleses of this world. That is why military coups or the violent acts of rebels have a certain popular support in Latin America. They are seen as aggressions not against the rule of law but against injustice and peculation. For the same reason, the corruption of multinationals is not only an economic crime but also a serious assault on democracy.

It makes no sense for the developed nations to persecute money laundering at home while the most important international companies participate abroad in a form of crime that is even more destructive and harmful. How can this problem be alleviated? With exemplary sanctions, obviously. If the European Union has imposed multimillion-dollar fines on Microsoft (U.S.), Siemens (Germany) and Telefónica (Spain) for throttling their competitors, how much should those multinationals pay for their even worse practices in Latin America? Isn't it a lot worse to buy presidents, ministers and legislators in an effort to manipulate the market?

The argument that that's the only way to do business in the Third World is not valid. If we are not willing to allow a doctor to deceive his patients, a lawyer to lie to his clients or to the courts, we musn't grant businessmen carte blanche to engage in trickery abroad. If breaking the law is the only road ahead, it is preferable not to take it and to concentrate entrepreneurial activities where the game is fair. It is not acceptable to be an honest person at home and a brigand in someone else's.

July 26, 2007

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