Ricardo Rincon
Miller & Chevalier, Washington, DC
rrincon@milchev.com

Ann Sultan
Miller & Chevalier, Washington, DC
asultan@milchev.com

Introduction

Nearly ten years after it started, one of the biggest corruption scandals in recent history, ‘Lava Jato’, or Operation Car Wash, continues to wind its way through the Brazilian courts. In January 2024, a Brazilian Supreme Court judge suspended the payment of more than US$2bn by Novonor (formerly Odebrecht) as part of a leniency agreement where executives admitted to bribing Brazilian officials. According to media reports,^[1] Justice Toffoli expressed reasonable doubt about whether the agreements were signed voluntarily and suggested that the judge who administered the fines might have colluded with prosecutors. Brazil is just one example of the shifting anti-corruption landscape across Latin America, a region that continues to be a diverse and challenging area for businesses.

Other countries in the region, such as Colombia, are also grappling with corruption scandals. In early May, it was reported^[2] that two former Colombian disaster risk management officials offered to testify about their alleged involvement in corrupt purchases related to the transportation of drinking water. The allegations involve COP 46.8bn. In Peru, the world has witnessed a troubling series of corruption cases involving presidents spanning at least the last three decades. Most recently, the ‘Rolexgate’^[3] scandal implicates current President Dina Boluarte. Mexico is similarly in the midst of corruption allegations^[4] that involve President Lopez Obrador and his inner circle.

Against this backdrop, Miller & Chevalier, with 14 law firms in the region, conducted the 2024 Latin America Corruption Survey^[5] (the ‘2024 Survey’^[6]), a benchmarking survey now in its fourth iteration that surveyed over 1,000 professionals across sectors in Latin America. The results provide valuable insight into the state of corruption in Latin America, as well as the perceived effectiveness of local anti-corruption measures, and the evolving compliance environment in the region.

Below are our top five takeaways.

Takeaway one: corruption persists, but there is a positive trend in the fight against corruption

Despite numerous reforms and increased enforcement over the past decades in the region, corruption remains considerably entrenched throughout Latin America. Nearly half the surveyed professionals in the region indicated that corruption acts as a 'significant obstacle' to business, showcasing a disturbing consistency in the perception of corruption since 2012. This underscores the deep-rooted nature of corruption and the long-term effort required to combat it effectively.

Overall, 41 per cent of respondents regionwide, including the majority in over half the countries surveyed, believe their companies have lost business to competitors that have made illicit payments. However, the data also indicates a slight positive trend. There has been a consistent decline in the percentage of respondents who believe their companies have suffered losses due to corruption over the past 12 years: 60 per cent in 2008, 52 per cent in 2016, 47 per cent in 2020 and 41 per cent in 2024.

Takeaway two: companies are adopting more sophisticated compliance programmes

There appears to be a significant evolution in corporate compliance strategies, with a higher rate of adoption of sophisticated compliance measures than seen in previous years. This shift reflects a proactive approach by businesses towards mitigating corruption risk internally rather than relying solely on fluctuating enforcement landscapes.

For instance, the measurement of compliance maturity in various markets recognises an evolution in countries like Guatemala and Panama, which are now among the group of countries with the most developed compliance measures in the region. Meanwhile, Argentina, Bolivia and Costa Rica have joined Honduras in the developing group, while the Dominican Republic, Ecuador, Paraguay and Venezuela remain in the least developed batch.

Takeaway three: there is great regional variability

Professionals from the region reported detailed insights into specific countries, highlighting varied levels of corruption and compliance.

Argentina and Venezuela

Argentina and Venezuela are perceived to be among the highest regarding corruption risk, with significant challenges in legal and enforcement regimes.

Argentina has experienced a notable decline in respondents reporting management efforts to combat corruption risk, dropping from 87 per cent in 2020 to 67 per cent in 2024. Despite being one of the region's largest economies, Argentina faces significant corruption challenges across various government sectors, potentially exacerbated by Covid-related budget constraints and limited enforcement of anti-corruption laws.

Respondents with business experience in Venezuela continue to perceive it as the most corrupt country in Latin America: 92 per cent (up from 90 per cent in 2020) of respondents rated Venezuela as displaying 'significant' corruption. One contributing factor is the lack of trust in Venezuela's judicial system, cited by 67 per cent of respondents as the primary reason for not reporting corruption. Weak judicial systems can foster a culture of impunity, allowing corruption to thrive unchecked among businesspeople and government officials.

Brazil

Brazil reflects a complex landscape where several factors, including recent political events, have led to decreased confidence in anti-corruption measures, despite legislative advancements. Even after a decade of the Clean Company Act, a growing number of Brazilians perceive anti-corruption laws as ineffective or only marginally effective (56 per cent of respondents in 2024, up from 44 per cent in 2020). Additionally, there has been a notable decrease in the percentage of Brazilians who believe that laws such as the Foreign Corrupt Practices Act (FCPA) have effectively reduced corruption risk (50 per cent of respondents in 2024, down from 74 per cent in 2020).

Chile

Chile shows a positive trend, with increased effectiveness of anti-corruption laws and active corporate compliance measures. Chilean companies are increasingly focusing on anti-corruption compliance initiatives: 88 per cent of respondents reported anticipating that their companies will boost efforts and allocate more resources to enhance the awareness of and prevent corruption in the next 12 months, a rise from 70 per cent of respondents in 2020. Moreover, in August 2023, President Gabriel Boric enacted the Economic Crimes Law, a comprehensive reform targeting corruption and white-collar crime. This legislation mandates companies to establish more advanced compliance programmes and is scheduled to take effect in August 2024.

Colombia and Peru

Countries like Colombia and Peru have shown worsening perceptions of corruption, indicating potential backsliding or ineffective reform implementations.

Colombians' trust in the judicial system has declined, with 67 per cent of respondents attributing their reluctance to report corrupt activities to authorities after business losses, compared to 43 per cent in 2020. Additionally, there is a diminishing emphasis on anti-corruption compliance, despite local authorities mandating corporate transparency and ethics programmes. In 2024, fewer Colombian companies prioritise tackling corruption risk, dropping from 77 per cent in 2020 to 64 per cent in 2024.

Peru's political instability has hindered progress, notably marked by the attempted coup leading to President Pedro Castillo's impeachment and ensuing social unrest. The country has witnessed a surge in corruption investigations involving ex-presidents and high-ranking officials, prompting the establishment of a ‘Special Team Against Corruption in Power’. The 2024 Survey results for Peru reveal alarming trends: declining faith in prosecution (77 per cent in 2024, compared to 85 per cent in 2020), with 77 per cent now viewing corruption as a significant business obstacle (up from 59 per cent in 2020). Business losses due to corruption surged from 12 per cent in 2020 to 68 per cent in 2024. Moreover, despite compliance programmes being recognised in local law, fewer Peruvian companies prioritise combating corruption (down from 73 per cent in 2020 to 50 per cent in 2024, below the regional average of 56 per cent).

Mexico

In Mexico, over half of respondents prioritise addressing corruption due to its significant impact on business. However, fewer than 60 per cent of survey respondents reported that their companies plan to enhance anti-corruption measures next year, putting Mexico below the regional average. Mexican respondents exhibit the highest lack of trust in prosecution services and investigators among major economies, with 57 per cent expressing distrust, up from 47 per cent in 2020. Regionally, only Guatemala, Paraguay, Panama and Uruguay have higher levels of distrust. The decline in local enforcement and potentially relaxed FCPA enforcement (Mexico previously led in FCPA actions in Latin America) may be a contributing factor.

Takeaway four: interaction with local governments and political parties is a primary risk.

Consistent with a common risk-based approach to anti-corruption measures, sectors with high government interaction appear more vulnerable to corruption, necessitating robust compliance frameworks. The adoption of compliance practices, such as due diligence for third parties, anonymous reporting mechanisms and regular audits, has increased, reflecting a maturing compliance landscape across the region.

Overall, respondents perceived political parties and local/municipal governments as the most corrupt entities within their countries. This highlights the critical need for reforms at both the political and local levels to address the root causes of corruption, as well as the need for companies to focus on those interactions in tailoring their own compliance programmes.

Takeaway five: Chile is a growing success story.

There have been significant improvements in Chile in the last four years. For example, there has been a considerable jump in Chileans who are aware of prosecutions, from 38 per cent in 2020 to 74 per cent in 2024. Chileans are overwhelmingly aware that their anti-corruption laws have been strengthened, and more Chileans perceive their anti-corruption laws as effective to a moderate or significant extent (73 per cent in 2024 versus 57 per cent in 2020). Only 22 per cent of respondents reported corruption as a significant obstacle to doing business. Chilean companies appear to be prioritising anti-corruption compliance programmes as well: when asked if, in the next 12 months, respondents believe their company will increase efforts and resources to improve the awareness of and prevent corruption, 88 per cent or respondents reported they would, up from 70 per cent in 2020. These changes might be partially explained by the strengthening (and clarifying) of the Chilean corporate criminal liability regime, which regulates compliance programmes. In 2021, for instance, the Corpesca Case, involving corrupt payments by a fishing company to members of Congress, helped establish when and why a compliance programme can be considered effective. Most importantly, the ruling distinguished between ‘paper models’ (ie, programmes that are only defined in policies but are not implemented or enforced) and ‘effectively implemented models’. Further, in August 2023, President Boric enacted the Economic Crimes Law, an ambitious reform that aims to fight corruption and white-collar crime. This new law will require that companies develop more sophisticated compliance programmes and will go into effect in August 2024.

Nevertheless, corruption in Chile persists. The 2023 Caso Convenios caught the public’s attention and underscored the importance of corporate compliance programmes. At the beginning of 2024, the prosecution of the former mayor of Maipu (one of the largest districts in Chile's capital) for fraud also raised awareness of the need to include stronger anti-corruption rules and mechanisms, both in the public and private sectors.