1. 24 25ETHISPHERE.COM ETHISPHERE.COM
Anti-Corruption
Mexico and Brazil // 24 Ahead of the Eight Ball // 26 Beyond the FCPA // 28
of corruption, fraud, money laundering,
and reputational risks.
There is no single recipe for steering clear
of corruption risks in Brazil and Mexico,
but the International Organization for
Standardization’s anti-bribery manage-
ment systems standard—ISO 37001—is
about as close as it comes. This document,
to be released in 2016, will identify clear,
discrete steps that companies of all sizes
can take to certify that they have the con-
trols in place to resist demands for bribes.
Certification to this standard will become
a global competitive advantage for com-
panies doing business, allowing them to
avoid one of the biggest pitfalls in attrac-
tive markets such as Mexico and Brazil.
At the same time, there is also a move in
both Mexico and Brazil toward training
the next generation of compliance profes-
sionals. Local universities—such as Tec-
nologico de Monterrey in Mexico (ITESM)
and Fundacão Instituto Administração in
Brazil—have invested in programs that
teach the skills and techniques businesses
will need to ensure their actions remain
above board. As these students find their
way into the workforce, they have the po-
tential to reshape business culture.
Brazil and Mexico will not remain emerging
markets forever; however, in the long term,
increasedscrutinyofcorruptpracticesseems
inevitable. Companies that focus on compli-
ance now not only gird themselves against
uncertainty in the short term, but they set
themselvesuptothriveinthelongrun.
Of course, there are obvious differences,
too. In addition to speaking different lan-
guages, the countries boast different cul-
tural flavors: tequila, tacos, and mariachis
in Mexico; caipirinha, samba, and futebol
in Brazil. Similar cultural distinctions ex-
ist around the conduct of business—and
the paying of bribes—and companies that
appreciate these differences are more
likely to avoid allegations of wrongdoing.
Bribe paying has been a fixture of Mexi-
can and Brazilian business cultures for
years. It was rarely discussed, and never
legal, but greasing a few palms was wide-
ly understood to be the way things get
done. In the last decade, the taboos that
prevented people from speaking openly
about bribery began to break down. The
result has been raising public concern in
both countries over corruption and its ef-
fect on society.
That concern spurred each country’s gov-
ernment to pass new legislation. In 2012,
Mexico passed the Federal Law Against
Corruption in Public Procurement and
two years later, Brazil ushered in the
Clean Company Act. Both laws prohibit
the payment and receipt of bribes in both
the public and private sectors. Whereas
previous laws only sanctioned individu-
als, these new laws create penalties for
corporations as well.
But the similarities between the two
countries’ legal frameworks end when
it comes to enforcement. Since Mexico’s
law went on the books in 2012, there has
been no enforcement. The government
has continued to maintain positive body
language, reinforcing the anti-corruption
framework with a new transparency law
and establishing a third-party monitor,
but it has declined to bare its teeth.
The absence of enforcement has stalled
any momentum toward an improved
compliance paradigm in the country.
This has only served to reinforce a sense
of inevitability around corruption—that
every business venture will eventually
come up against someone in a position of
with wire instructions—a not-so-subtle
hint of a quid pro quo. This is particularly
common in more remote places, where the
risk of bribery and corruption is highest.
Up until a couple of years ago, Brazil’s
healthcare, pharmaceutical, and oil and
gas markets, among others, were very
similar. But a series of investigative re-
ports by major news networks cast a
spotlight on such practices. In fact, this
was one of the contributing factors to the
groundswell that led to the Clean Compa-
nies Act. Mexico is still waiting for such a
catalyzing moment, and there’s no telling
how long that wait will last.
Yet other similarities persist. Both coun-
tries have very relationship-driven busi-
ness cultures, which often results in inad-
equate due diligence. Failure to properly
monitor third parties is a classic recipe
for scandal; trust can easily be misplaced.
Both countries are also home to chal-
lenging security environments, which
increases the temptation to pay off crimi-
nal organizations in order to avoid op-
erational disruptions or retaliation. Such
extortion schemes usually end badly for
the company, leading to a Pandora’s box
power seeking to take advantage. For all
intents and purposes, companies’ need to
focus on compliance is no different than it
was five years ago.
Meanwhile in Brazil, enforcement of the
Clean Companies Act has made compli-
ance a top priority for businesses through-
out the country. Operation Car Wash—the
investigation into a widespread bribery
scandal at the state-owned oil company
Petrobras—has already implicated several
other companies and dozens of prominent
politicians. Petrobras says the scandal has
cost it US$2 billion, and the widespread
public protests have sapped the power of
President Dilma Rousseff. This is a para-
digm shift for Brazil, and is evidence of not
only a new legal framework, but also in-
creasingly independent law enforcement
and judicial institutions.
The divergence in the two countries’ anti-
corruption frameworks is particularly
evident in their oil and gas sectors. As one
Spanish investor traveling through Mexico
recently lamented, “Everywhere I go, some-
one asks for a moche (bribe).” It is true that
businesses seeking contracts, licenses or
permits will often receive a slip of paper
TOPICS COVERED // International & Trends
Efforts are Under Way to Reduce Corruption in
Pivotal LatAm Markets
Written by Fernando Cevallos
MEXICO & BRAZIL
Brazil and Mexico will not remain emerging markets forever;
however, in the long term, increased scrutiny of corrupt practices
seems inevitable. Companies that focus on compliance now not only
gird themselves against uncertainty in the short term, but they set
themselves up to thrive in the long run.
Mexico and Brazil have much in common. As the two
largest countries in Latin America, they boast the
region’s two largest and most dynamic economies.
As such, both countries have captured the attention
of investors seeking to capitalize on growth in
emerging markets, but each has proven challenging—
particularly when it comes to the culture of corruption
and official efforts to combat it.
Author Biography
Fernando Cevallos is the Mexico
City-based director for Compliance,
Intelligence, Investigations, and
Technology at Control Risks. For over 16
years, he has lived and worked in several
countries in Europe, America, and
Latin America. Currently, Fernando is a
professor at the ITESM and the global
convener of the communication task
group for the ISO 37001.
Latin America Economics at a Glance - A Snapshot of Current Growth Rates
GDP
Growth
Rate
Exports
Growth
Rate
Imports
Growth
Rate
Facts & Figures
3%
2.23%
2.92%