1. 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 corruption
Corruption 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

2. 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 thepublic 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

3. 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 wedon’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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