Why Transparency Is Essential: An Overview By Dr. Jennifer McCoy, Latin American and Caribbean Program Director

The Carter Center's Latin American and Caribbean Program (LACP) initiated a multiyear project in September 1998 to build partnerships aimed at making the Western Hemisphere a model region for combating corruption.

The project stems from the Agenda for the Americas for the 21st Century consultation, held at The Carter Center in April 1997. At that meeting, 17 former and current presidents and prime ministers from the Americas joined the president of the Inter-American Development Bank (IDB), the secretaries-general of the Organization of American States (OAS) and the United Nations, and other leaders in identifying corruption as a threat to democracy and economic development. This undertaking reflects an emerging regional consensus that more than rhetoric must fight corruption if Latin America and the Caribbean are to enjoy the rule of law and attract the magnitude of investment necessary for more equitable development.

Corruption is a global problem, confronting all societies in some way. In Latin America and the Caribbean, there is abundant evidence of corruption at many levels. Public figures leave office with more assets than government salaries could amass. Postal clerks and policemen take bribes to supplement meager incomes. The Transparency International (TI) Corruption Perception Index suggests that top business people view Latin American nations as among the most corrupt in the world. Citizens in this hemisphere, however, are beginning to demand that governments take action, and are organizing themselves to promote change.

How anti-corruption measures have fared
Opening up economies and establishing democratic governments provide a strong bulwark against corruption in two ways. This reduces discretionary intervention in the economy and provides institutional checks on abuse of authority and public accountability via elections. Ironically, however, the twin economic and political transitions that hold such promise for future transparency tend, in the short run, to expose fragile democracies to corruption on an expanded scale in new forms and at new levels of governance.

Newly democratic governments have not been able to establish effective anti-corruption measures because they do not know how, do not have the resources, or are captive to the interests of entrenched elites. Across the hemisphere, judiciaries are weak, militaries cling to their autonomy and resist public oversight, police forces are ill-paid and ill-adapted to a community policing mission, and the rules for campaign finance and budget tracking are underdeveloped and unenforced.

Corruption's impact on people, economy
Where corruption is rampant, citizens are apt to lose faith in democracy. In a December 1997 survey of 17,800 respondents funded by IDB and the European Union, 65 percent of Latin Americans reported they were dissatisfied with their country's democracies.1

Distressingly, a poll sponsored by The Wall Street Journal and 16 newspapers in Latin America found that just before the April 1998 Santiago Summit, nearly one-quarter of Latin Americans thought more authoritarianism would be better for their country.2

The 1997 World Bank Development Report noted that corruption violates the public trust and corrodes social capital and political legitimacy "where even noncorrupt officials and members of the public see little point in playing by the rules."3 Corruption scandals have rocked Mexico and Argentina, and precipitated presidential ousters in Brazil and Ecuador.

The economic damage that corruption causes in the public and private spheres is difficult to accurately quantify, but is considered large and detrimental to financial planning. Corruption creates a hidden tax on business, averaging between 10 percent and 15 percent of a contract's value, and has cost U.S. firms at least $11 billion in contracts since mid-1994. World Bank President James Wolfensohn called corruption the single-largest deterrent to private investment in developing countries.4

Corruption remedies available
Discouraging as these reports are, The Carter Center's Transparency for Growth conference emphasized that practical strategies for fighting corruption already exist, and the international community cohesively supports such efforts.

The World Bank has conducted extensive corruption research and established a survey to identify inefficiencies in the delivery of public services to help map corruption. The International Monetary Fund and IDB have begun to enforce accountability from loan recipients and make good governance the criterion for their support. The U.S. and some European governments help fund measures to increase transparency, and Vice President Al Gore has made transparency a top priority, hosting a global summit in February 1999 to fight corruption.

This new consensus against corruption has formed just in time. With a freer press, awareness of corruption has mushroomed in recent decades. Corruption is hurting those who can least afford it. In response, politicians are transforming the issue into campaign platforms, pledging to clean up government, sometimes by rejecting established parties and constitutions. The stability of the region's economies and democracies will rely partly on our success in deepening the rule of law and strengthening accountability.

High-level transparency support
Three members of The Carter Center's Council of Presidents and Prime Ministers pledged to lead their countries toward transparency. Shortly after his election, President Miguel Ángel Rodríguez invited The Carter Center to partner him in maintaining Costa Rica's strong reputation for honesty. Prime Minister P.J. Patterson, now in his third term, seeks to make Jamaica a model of transparency in the Caribbean. President Jamil Mahuad Witt announced at his inauguration that he would take swift steps to stem the tide of corruption in Ecuador and requested The Carter Center's help in honoring that pledge.

Conference's focus
The Transparency for Growth conference held May 3-5, 1999, at The Carter Center in Atlanta, Ga., drew upon what we learned in the first eight months of work toward transparency in Ecuador, Costa Rica, and Jamaica, and offered civic and political leaders from those countries and others an opportunity to share their progress.

In our own efforts we have learned from and collaborated with the World Bank Institute and Transparency International, as well as the many individuals and organizations fighting corruption in each country. Cable News Network (CNN) worked with us to assure these ideas reached a broad audience, hosting our participants at an opening reception and dinner for reporters from its World Report conference. The network also asked CNN en Español anchor Jorge Gestoso to moderate our final press conference.

Our discussions focused on initiatives that the executive branch or civil society can lead to improve transparency of government transactions. This was not to deny the importance of such areas as judicial, customs, police, and security reforms. By capitalizing on the participating Council members, however, we emphasized how to achieve and exercise the political will to overcome structural and political obstacles to fight corruption. We also evaluated civil society's role in this effort, from generating the hope that something can be done, to demanding accountability of government officials, to organizing constructive initiatives to improve transparency.

Working groups' emphasis
The working groups centered on three themes:

1. Political-business nexus, highlighting the interdependence of the public sector with the private sector. From politicians dependent on private contributions to finance party activities and campaigns, to businessmen dependent on government contracts for their livelihood, this nexus can appear as an opaque tangle of promises and ties impossible to unravel. Opening up those transactions through specific disclosure mechanisms, however, will level the playing field, while protecting all the actors from unfounded accusations of conflicts of interest or unethical, even illegal, behavior. Three initiatives can improve transparency:
   • Party and campaign finances regulation and disclosure.
   • Financial disclosure requirements (a declaration of assets and business relationships) from elected and appointed officials to avoid conflicts of interest when they must make decisions that could affect their private interests.
   • Corporate codes of conduct, compliance programs, and financial disclosure to deter bribery or undue influence in corporate transactions with the public sector, particularly through public contracting.
2. International accords implementation. Six countries in the hemisphere have signed the 1997 Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials. Twenty-five countries have signed the 1996 Inter-American Convention Against Corruption, but only 14 have ratified. These treaties are important steps in bringing a common approach to solving both the demand and supply side of bribery. However, they will only be effective when signatory countries fully implement them. We discussed how to encourage ratification in additional countries, and what kind of support programs and monitoring efforts might help to ensure consistent implementation.
3. Civil society and access to information. Access to information or freedom of information laws can provide crucial transparency by allowing journalists and citizens the opportunity to evaluate what their governments are doing. Such transparency is particularly important in two areas of potentially high corruption: public contracting (government procurement) and privatization. We discussed different strategies to improve transparency by giving citizens additional mechanisms to follow government activities in these areas, including publicizing contract award information through Internet databases, holding public hearings to help prioritize and monitor public works projects, municipal-level social auditing of public works, and independent monitors of privatization processes. All of these mechanisms can help build crucial confidence in these transactions among both investors and citizens. Along with the working groups, a roundtable for media participants discussed the media's role — from credible investigative reporting to gaining access to information and using it appropriately. The roundtable also proposed future initiatives for conference participants and made final statement recommendations.

Conference sponsors, supportersOur Transparency for Growth conference, funded by The Coca-Cola Company, was the first of three events to be held over a five-year period, designed to strengthen the growing partnership between the United States and Latin America. We also received generous contributions from Delta Air Lines and United Parcel Service, both Atlanta-based firms with strong connections to Latin America and the Caribbean, and additional support from Invesco. Chick-fil-A and BellSouth made in-kind contributions, and King & Spalding hosted our opening dinner. The McCormick Tribune Foundation also made a substantial conference grant.

The conference would not have been possible without the tremendous organizational skills of Becky Castle, Tanya Mújica, and their student interns and volunteers. Robert Pastor, Nancy Boswell, Luis Moreno Ocampo, Henry Carey, Nobina Robinson, and Jan Barton graciously volunteered as discussion leaders and rapporteurs and wrote summaries of the working group sessions. Council members Osvaldo Hurtado, Gonzalo Sánchez de Lozada, and Rodrigo Carazo chaired the working groups. Pedro Pablo Díaz and Bob Pastor also encouraged and inspired us to begin this project.

Our hope was to galvanize public support for transparency, inform and encourage citizens across the hemisphere who devote their energy to building a corruption-free future, and assure leaders that their commitments to honest practices will be recognized and rewarded at home and abroad.

• Andres Oppenheimer, "Democracy Under Pressure in Latin Region," Miami Herald 12 Apr. 1998.
• Edward Schumacher, "A Meeting of Minds, From Peoria to Patagonia," The Wall Street Journal 16 Apr. 1998: International Section.
• The World Bank, "The State in a Changing World," 1997 World Bank Development Report, spec. issue of Accountability/Anti-corruption, 3 (September 1997): "Restraining Arbitrary State Action and Corruption," Chapter 6.

1. Jack Nelson, "29 Countries Commit to Pact Against Bribery," The Los Angeles Times 21 Nov. 1997: A1