Posted from: http://www.oas.org/juridico/Spanish/RepoBM.htm

THE FIGHT AGAINST CORRUPTION IN LATIN AMERICA AND THE CARIBBEAN…

A World Bank View

This story is an excerpt from the link above

The economic and social costs of corruptionCorruption imposes massive costs on countries and ordinary citizens. First, it corrodes public institutions by subverting laws, regulations and institutional checks and balances. Consequently, it undermines the legitimacy and credibility of the state, causing serious problems in governance. Second, it affects macro-economic stability by encouraging wasteful, ineffective government expenditures and tax evasion. Third, it discourages investment, especially foreign direct investment. It has been estimated that the ratio of investment to GDP is 16 percent lower in countries with high and unpredictable levels of corruption than those with low levels of corruption. Fourth, corruption raises the cost of doing business. In a World Bank survey of 3,600 firms in 69 countries, more than 40 percent of entrepreneurs reported having to pay bribes routinely to get things done. In addition to the financial burden it imposes, corruption also leads to other inefficiencies by entangling firms in time-consuming and economically unproductive interactions with the public sector.

As a result, of these factors, corruption obstructs economic growth and development. Also, countries with high levels of corruption face a serious risk of marginalization in the global economy. Unfortunately, the burden of corruption falls disproportionately on the poor. The siphoning off of public resources for private gain dries up anti-poverty programs, while the demand for bribes effectively shuts off the poor from access to public goods and services.

From the point of view of international development agencies such as the World Bank, corruption reduces the development impact of international assistance to developing countries. At the same time, the perception, that in many developing countries aid resources are misappropriated by corrupt public officials, weakens the long-standing consensus on aid programs.

Corruption: What is the Way Forward?Corruption is not an independent phenomenon, but a sign of broader governance problems. Where investors perceive corruption problems, they also typically perceive greater risks of doing business

because of unpredictable changes in policies and laws, more insecure property rights, more unreliable judiciaries, and poorer bureaucracies. In short, corruption is associated with a broader weakness in the rule of law.

There is much that we still do not know about the roots of corruption and poor governance, but this deep-rootedness of corruption indicates that solutions must be correspondingly broad, that they will take a long time, and that progress in the fight against corruption will be difficult and irregular. The rule of law is likely to be fostered by fundamental political changes which go in the direction of increased democratic participation, better public information, and better government accountability. Such changes are brought about by society as a whole, not just by governments. Short cuts in this process will be difficult: for instance, narrowly focused initiatives, such as anti-corruption laws or commissions, are less likely to take root where the rule of law is weak.

But this is not to say that countries are condemned to being passive about corruption. Governments can act, and are acting, in several areas.

First, promoting private ownership of productive resources and allowing competitive markets to work reduces the opportunity for corruption because it removes the discretion that public officials wield. For instance, the central licensing of foreign exchange formerly practiced by many Latin American countries often created an artificial scarcity of foreign exchange leading to black markets and huge "premia" which led to substantial corruption. State ownership of firms, in many countries, allowed public officials to use public resources for private ends, rather than serve the public interest. Latin America has made much progress in reducing these kinds of distortions, but there is still substantial room for further reforms by reducing levels of protection, eliminating privileges and inequalities in trade and tax regimes, simplifying rules, reducing, where possible, the discretion of public officials, and further privatizing state-owned firms.

Second, a more honest and capable state is necessary, not only to ensure that the strong do not exploit the weak in a regime of private markets and property, but also to provide the public services that underpin the rule of law and provide services that help the less privileged.

In some areas of the market governments must regulate or help maintain consistent standards (in banking supervision or natural monopolies, for instance) if markets are to be effective.

Where there is political will, governments can undertake a whole range of actions to establish a more transparent and accountable system of public finance, procurement, and audit and a more professionalized and better-paid civil service.

Judiciaries must also be modernized and their independence from undue political influence balanced with their accountability to the public.

It’s simple. With the power the Banks possess here in the southern Caribbean you see interest rates on Home Loans, 400 Basis points higher than in Europe and the US. Puerto Rico an Island of the US in the Caribbean has interest rates comparable to the Banks of the USA. It’s not a matter of economics

but of ethics and greed. Corruption exists and will continue to isolate these countries in an increasing manner as the stories continue to surface. If we don’t address the issue now than when shall we? Very few benefit from this as the countries corruption governs are held back or crushed under the weight of its existence all the while the rest of the world moves forward. Haiti, here we come.

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