The Latin Pivot

Latin America decisively changes direction

-By Alvaro Salas

The pivot, occurred in a twelve-month period—from April 2015 to April 2016.  It was during that year that the pressure that had been building for two and a half decades (since the return of elected governments to Latin America) burst out.  From Guatemala to Brazil, from Mexico to Chile, from Panama to Bolivia—Latin America pivoted away from its centuries old culture of governmental corruption as a normal and largely accepted part of national life. 

During the pivot year the old tradition of legal impunity for top political leaders and top members of the economic elites in regards to corruption was destroyed.  A sitting president was removed from office and sent directly to jail for corruption, and the head of the largest construction company in the largest economy in South America also landed in jail.   This was unheard of in Latin America.  Both men were victims of newly invigorated judicial systems which were given strategic muscle by the street power emanating from unprecedentedly massive middle class-led street marches against corruption.  After this pivot year, no top Latin American leader involved in corruption can rest completely at ease—the guaranteed impunity is gone.   After this pivot year, no government can be entirely certain that its urban middle class will continue to passively tolerate widespread corruption.  After this year, Latin America is pointed in a new direction: the corruption of the political and economic elites as something ordinary and acceptable is now on its way out as a Latin American cultural norm.  The speed of the change is open to question, but the new direction is not.    

The year of the Latin Pivot began in Guatemala on April 16, 2015 with the first arrests in a hard hitting corruption investigation called “La Linea.”  By September, the Guatemalan President and Vice President were out of office and into prison cells where they remain today.  Nineteen weeks of massive but peaceful citizen marches against corruption (unprecedented in the nation’s history) handed the Guatemalan judicial system the clout to incarcerate the President.  The end of the Latin Pivot year can be said to be April 14, 2016 when the Brazilian Congress voted to impeach the Brazilian President after months of massive street marches.  The demonstrations were fueled in significant part by anger over the fact that President Rousseff had previously been the Chairman of the Board of Petrobras when that government-owned corporation had been looted of $5 billion dollars.  Rousseff claimed that she knew nothing of the lost $5 billion stolen mostly during her watch.  The Brazilian public did not accept it, and her connection to Petrobras, combined with the plunging economy, sent millions into the streets and this once again gave political muscle to the judiciary to continue its series of “Operation Car Wash” investigations and arrests.  Soon even ex-President and national and international icon, Lula de Silva, was being formally investigated for obstruction of justice in the Petrobras case and for other alleged crimes.  Guaranteed impunity at the top levels no longer existed.

The stunning events in Guatemala and Brazil were just the most prominent examples from a large anti-corruption wave that poured over much of Latin America during the pivot year. In Honduras, three months of the largest, most sustained street protests in the history of the country forced President Hernandez to invite the Organization of American States (OAS) to send in a special international mission with a four-year mandate and special powers to address corruption in the country.  At the same time, the United States charged multiple members of the economic elite Rosenthal family with using their Honduran banks to launder narco-money, and the Honduran government seized the Rosenthal banks and other large businesses in a move that stunned a nation used to certain “untouchable” families.  In Mexico, an unprecedented effort by Mexican civil society came within a single vote in the Mexican Senate from passing a far ranging anticorruption law with sweeping provisions never before proposed in Mexico. They will try again for the final push later this year.  (President Peña Nieto of Mexico was wildly popular when he started his administration, but his popularity never recovered from the discovery of his wife’s involvement in a shady deal concerning a mansion--the public is no longer forgiving corruption.) In Bolivia, Evo Morales was pushing a hard fought referendum to give himself a 4th consecutive term, but before the vote it was discovered his former girlfriend had benefited from a lucrative government contract.  Many observers believe that discovery cost him defeat in the close referendum—yet another example of a public less willing to turn a blind eye to corruption and of the issue of corruption shaping the history of another country during the pivot year.  In El Salvador, ex-President Francisco Flores was charged with corruption and taken into custody in late 2015.  He died about a month later at age 56.  Even in Chile—a country less corrupt and not surprisingly more prosperous than the rest of Latin America—a corruption scandal during the pivot year rocked the country at top levels.  President Bachelet’s daughter-in-law was charged with corruption and the scope of the scandal has continued to expand.     

And there is Panama, sitting in the geographic center of Latin America, which has earned a global reputation as a center for stashing illicit money.  During the pivot year, Panama for the first time indicted an ex-president for corruption and ex-President Martinelli fled Central America to Miami to attempt to resist extradition.  Then the “Panama Papers” globally exploded onto the international scene and the days of Panama as the major Latin American safe haven for corrupt money have become numbered--as not so many corrupt people will trust Panamanian financial and law firms any longer.  Guatemala, where it all started, finished off the Latin Pivot year by arresting the ex-President’s son-in law in an international contract scandal, and by then publicly forcing a company owned by high ranking members of the traditional economic elite to pay $100 million in back taxes and penalties.  The Guatemalan public was mesmerized by the spectacle of a major elite owned company forced to pay a giant tax bill it had previously avoided by bribing tax officials. And anyone who doubts whether the momentum from the Latin Pivot year is continuing, now that the year has ended, need only note the recent arrests of the ex-Argentine President Cristina Fernandez for a conspiracy to manipulate the bond market and the take down of the economically elite Waked Family in Panama for money laundering. 

To grasp the full significance of the Latin Pivot year, it helps to recognize that impunity is the disease and corruption the symptom.  It is impossible to have a national culture of corruption unless the political and economic elite perceive they have effective impunity from arrest, imprisonment, and loss of their social prestige and their fortune.  During the Latin Pivot year, for the first time, the disease—elite impunity—was consistently attacked.  It was demonstrated to both the elites and the public that rule of law could now be extended to the top rungs in Latin America—and attacking impunity at the top automatically starts the process of eroding a widespread culture of corruption in the rest of society.   

----

Some would argue that what happened between April 2015 and April 2016 was not a really a pivot, but merely the normal ups and downs of an entrenched culture of corruption that will soon show its long term tenacity and quickly retake its position as a dominant norm in the region.  Two strategic trends, however, point to why the Latin Pivot will prove to be irreversible:

1. The Revolution In Communication And Information Technology Increasingly Empowers The Anticorruption Forces

Decentralized social organizing: Social media allows the formation of urban middle class-led street power in support of anticorruption.  Elite control of the traditional media (most newspapers and TV in Latin America are owned by the economic elite) and the communication systems no longer automatically prevents middle class led mobilization of the society against corruption, as was seen in Guatemala, Brazil and Honduras.  The effectiveness of social media as a tool for effective decentralized popular organizing by citizens is only going up and that technology cannot be controlled by the elites.

Technology driven transparency: Secrecy and the belief that you can maintain it comprise the nerve system of successful corruption.  The entire thrust of modern information technology, however, makes it increasingly difficult to keep secrets. The Panama Papers can be spirited out of the office on thumb drives.  Corruption as a system cannot withstand transparency, and the digital technology revolution grinds on relentlessly in the direction of more transparency making corruption increasingly harder and harder to hide.    

2. The Anticorruption Fight Is Increasingly Global 

More and more corruption is seen as a threat to the global system, and as a result local anti-corruption forces can increasingly count on support and resources from the international community.  Guatemala, where the pivot year started, is a strong example of this. The events in Guatemala were made possible by a ground breaking United Nation’s entity, the Commission Against Corruption and Impunity in Guatemala (CICIG), which was given shared legal sovereignty with the Guatemala’s legal system over matters of corruption in the country.  The successful CICIG was headed by a highly respected Colombian prosecutor named Ivan Velasquez.  It was the UN’s CICIG working together with the local Guatemalan prosecutor’s office that made “La Linea” and all the subsequent investigations possible.  A similar experiment with “shared legal sovereignty” with the international community over national corruption crimes began in early 2016 in Honduras with the installation of the OAS’s Support Mission against Corruption and Impunity (MACCIH) headed by former Peruvian Prime Minister, Juan Jimenez.  In Panama, President Varela has reacted to the “Panama Papers” by forming a high level commission to reform the Panamanian financial system headed by U.S. Nobel Prize Laureate, Joseph Stiglitz.  Both Costa Rica and Colombia are attempting to join the OECD and in the process are being required to bring their laws up to the OECD’s international anticorruption standards.  The increasing globalization of anticorruption efforts is a strategic trend that will contribute substantially to making the Latin Pivot year a permanent change of direction.

----

Transparency International, the world’s most respected anti-corruption organization, publishes every year its “Corruption Perception Index” (CPI) which ranks the nations of the world in terms of perceived corruption.  The CPI ranks Venezuela as the most corrupt country in Latin America.  Simultaneously, Venezuela has by far the worst performing economy in the region, bordering on economic calamity.  The correlation has not gone unnoticed.    

By May of 2016, however, Latin America, viewed as a whole, from Mexico to Argentina, had pointed itself in a new direction—towards more rule of law, towards more transparency and accountability, towards an increasingly widespread rejection of a cultural norm that had dominated the region since the time of the Spanish conquest—a norm that said that corruption in the political and economic elite class was normal, accepted, and unpunished.  Not anymore.  The arrow has turned, and now is the time for those who believe in democracy in Latin America, nationally and internationally, to fight even harder to institute a new rule of law culture where no person and no class is above the law.  Ultimately, “anticorruption” is just a code word for the triumph of rule of law led by an independent judicial system that receives popular support from the vigilant citizens of a democratic nation.


Alvaro Salas holds an MBA from INCAE Business School, an MPA from Cornell University and is currently a Ph.D. student in Public Administration at the Maxwell School at Syracuse University in New York. He was also a fellow of the Center for the Study of the Presidency and Congress in Washington DC. He is Executive Director of the Democracy Lab (DL), a small citizen-oriented think tank based in Costa Rica. He is also proud to be Lifetime Member # 2 of the INCAE MBA Oath Club. He would like to thank all the DL associates who helped in the research, preparation, writing and editing of this paper..

Danilo Sierra is our Media and Webmaster manager