Talk to any taxi driver, student or small businessman from Mexico down to Argentina, and they’ll likely make one thing clear: Latin America has a corruption problem. The solution, however, may lie less in the legislatures of Bogotá, Brasília and Buenos Aires and more in the tech incubators of Silicon Valley, São Paulo, Medellín and Guadalajara.
In the past couple of years, a wave of anti-establishment candidates running — and winning — on vague platforms of combatting graft has shown just how salient the issue of corruption is in Latin America. Indeed, it is likely the region’s greatest ill, actively working against prosperity and progress. It’s not a new phenomenon, but one that’s now risen to the top of the agenda — and for good reason.
World Bank estimates put the cost of corruption in Peru at up to 5 percent of GDP, and the Organization of American States puts the figure at nearly 10 percent in Mexico. There is no force more effective in undermining public trust in institutions. In Mexico and Brazil, where perceptions of corruption are some of the highest, only 2 percent of citizens report having “a lot” of trust in their governments.
The colossal investigation into the Odebrecht scandal, with its tendrils spanning across the region, has laid bare the sheer extent of corruption and graft afflicting Latin America. Nearly every country in the region has politicians at the highest levels implicated in the probe, which revealed that the Brazilian construction giant had an internal division functioning exclusively as a bribery department. While Odebrecht is a particularly egregious case, the business model — albeit, sans the dedicated bribery division — is being replicated at a smaller scale across the region.
That graft is siphoning crucial funds away from health, education and social programs. It is destabilizing societies by eroding trust and social cohesion. And its effects are felt most severely by some of the poorest segments of society.
Despite the grand size of the problem, a fix is — quite literally — at our fingertips. A new brief by the Atlantic Council and the Inter-American Dialogue lays out a roadmap for combating Latin America’s oldest malady using existing and new technologies. And in no area is the potential greater than in public contracting, the lifeblood of corruption in the region.
The investigation into the Odebrecht scandal has made clear just how adept Latin American elites have become at guilefully shrouding graft within opaque public contracting structures. Even when, in the name of transparency, information related to these contracts is made publicly available, it is often scattered across countless databases. Piecing together evidence of graft then becomes a massive forensic feat in itself.
That illicit transitions can be hidden in plain sight within labyrinthine data provides a sense of security to those committing graft. The confidence that impropriety will go unnoticed breeds more and more of it. It’s hard to overstate, then, just how far tackling this opacity would go in deterring corruption. Any strategy to do so should have tech as its cornerstone.
Best practices, transparency protocols, international treaties and compliance regimes all are important and, to their credit, most countries in the region are moving in the right direction with respect to these. But a truly effective anti-graft strategy in the 21st century must use technology to the fullest extent. We have the tools to give all these protocols real teeth — especially by allowing ordinary citizens to become watchdogs. It’s just a matter of adoption.
A shift toward e-governance is already under way to some degree around the region. Government transactions increasingly are taking place digitally, with several states such as Mexico, Brazil and Uruguay moving to publish public procurement information in open data format.
But the quantity of open data and the quality of that data are two very different things.
Promising technologies such as AI algorithms that can sniff out irregularities and graft depend on data that are complete, readable, verified and disaggregated. Even those Latin American states that have been the most zealous in adopting e-procurement practices still hamper auditing and oversight capabilities through low-quality and unreliable data.
Among the many potential fixes are distributed ledger technologies (DLTs) — an example of which is blockchain — which decentralize data storage and allow for what is effectively a democratization of auditing. DLTs remove the opacity that traditionally has allowed for fudging of numbers; data stored on a distributed ledger are immutable and hack-proof. This is crucial in Latin America, where most of the alteration of contracts happens after they have been signed.
Implementing DLTs in datasets for everything from campaign finance to public contracts would dramatically minimize the space for corruption.
Moving toward large-scale adoption of these sorts of technologies will require a great deal of political will and stakeholder collaboration. The stakes couldn’t be higher, but the benefits will be manifold. Building a transparent Latin America not only will minimize political risk by restoring public trust in governance, it also will bring profits to balance sheets. If this happens, the region’s governments and companies will see greater investment inflows as Latin America builds a reputation for probity and transparency.
Latin America could be on the verge of a governance sea change. Recent revelations of mind-boggling graft have created an anti-corruption momentum that the region’s governments now have the opportunity to seize. Massive breakthroughs in data technology provide invaluable tools to do so. If Latin American states make a real commitment to implement those tools, they’ll reap dividends for generations to come. If combating corruption remains just rhetoric, expect citizen disillusionment with government to reach new, dangerous levels.
Jason Marczak is the director of the Atlantic Council’s Adrienne Arsht Latin America Center. María Fernanda Pérez Argüello is an associate director with the Adrienne Arsht Latin America Center. Follow on Twitter @ACLatAm.