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The fight against corruption in latin america and the caribbean…


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The fight against corruption in latin america and the caribbean…

  1. 1. Posted from: FIGHT AGAINST CORRUPTION IN LATIN AMERICAAND THE CARIBBEAN…A World Bank ViewThis story is an excerpt from the link aboveThe economic and social costs of corruptionCorruption imposes massive costs on countries and ordinary citizens. First, it corrodes publicinstitutions by subverting laws, regulations and institutional checks and balances. Consequently, itundermines the legitimacy and credibility of the state, causing serious problems in governance.Second, it affects macro-economic stability by encouraging wasteful, ineffective governmentexpenditures and tax evasion. Third, it discourages investment, especially foreign direct investment. Ithas been estimated that the ratio of investment to GDP is 16 percent lower in countries with high andunpredictable levels of corruption than those with low levels of corruption. Fourth, corruption raises thecost of doing business. In a World Bank survey of 3,600 firms in 69 countries, more than 40 percent ofentrepreneurs reported having to pay bribes routinely to get things done. In addition to the financialburden it imposes, corruption also leads to other inefficiencies by entangling firms in time-consumingand economically unproductive interactions with the public sector.As a result, of these factors, corruption obstructs economic growth and development. Also, countrieswith 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 ofpublic resources for private gain dries up anti-poverty programs, while the demand for bribeseffectively 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, corruptionreduces 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 publicofficials, 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. Whereinvestors perceive corruption problems, they also typically perceive greater risks of doing business
  2. 2. because of unpredictable changes in policies and laws, more insecure property rights, more unreliablejudiciaries, and poorer bureaucracies. In short, corruption is associated with a broader weakness inthe rule of law.There is much that we still do not know about the roots of corruption and poor governance, but thisdeep-rootedness of corruption indicates that solutions must be correspondingly broad, that they willtake a long time, and that progress in the fight against corruption will be difficult and irregular. The ruleof law is likely to be fostered by fundamental political changes which go in the direction of increaseddemocratic participation, better public information, and better government accountability. Suchchanges are brought about by society as a whole, not just by governments. Short cuts in this process willbe difficult: for instance, narrowly focused initiatives, such as anti-corruption laws or commissions, areless 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 canact, and are acting, in several areas.First, promoting private ownership of productive resources and allowing competitive markets to workreduces the opportunity for corruption because it removes the discretion that public officials wield. Forinstance, the central licensing of foreign exchange formerly practiced by many Latin American countriesoften created an artificial scarcity of foreign exchange leading to black markets and huge "premia" whichled to substantial corruption. State ownership of firms, in many countries, allowed public officials to usepublic resources for private ends, rather than serve the public interest. Latin America has made muchprogress in reducing these kinds of distortions, but there is still substantial room for further reforms byreducing levels of protection, eliminating privileges and inequalities in trade and tax regimes, simplifyingrules, reducing, where possible, the discretion of public officials, and further privatizing state-ownedfirms.Second, a more honest and capable state is necessary, not only to ensure that the strong do notexploit the weak in a regime of private markets and property, but also to provide thepublic servicesthat 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 (inbanking 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 moretransparent and accountable system of public finance, procurement, and audit and a moreprofessionalized and better-paid civil service.Judiciaries must also be modernized and their independence from undue political influence balancedwith their accountability to the public.It’s simple. With the power the Banks possess here in the southern Caribbean you see interest rateson Home Loans, 400 Basis points higher than in Europe and the US. Puerto Rico an Island of the US inthe Caribbean has interest rates comparable to the Banks of the USA. It’s not a matter of economics
  3. 3. but of ethics and greed. Corruption exists and will continue to isolate these countries in an increasingmanner as the stories continue to surface. If wedon’t address the issue now than when shall we? Veryfew benefit from this as the countries corruption governs are held back or crushed under the weightof its existence all the while the rest of the world moves forward. Haiti, here we come.