Anti-corruption and doing business in Brazil
Interview of Sidney Vianna, Director of Aviation Space & Defense Services for DNV Business Services North America. Sidney has lived in Rio de Janeiro for several years and follows developments in Brazil closely.
How are corruption issues seen in Brazil today?
For the last few years, the Brazilian society has been voicing their collective dissatisfaction with continual cases of endemic corruption, especially the ones emanating from the political bodies. After finally ascending to power in the early 2000’s, the Labor Party was expected to bring a higher level of ethics to the way government (at all levels; federal, state, municipal, etc.) conducts itself. Unfortunately, too many cases of alleged corruption followed many of the politicians who had vowed to clean up the Brazilian political process. To that effect, a significant percentage of the population felt betrayed by the Labor Party and their allies, since the expectation was for a modern, transparent, ethical government. The political opposition to the labor party obviously exploits the public cases of corruption to their benefit.
What explains this trend towards fighting corruption in Brazil?
Transparency, social networking, independent media, etc. Not very differently from the Arab Spring, social networking allows the free and rapid discussion of many subjects that entice the population. As mentioned earlier, the disappointment with the fact that the Labor Party, now in charge, did not significantly change the level of alleged corrupt practices created a collective feeling that society must pressure the institutions to combat corruption. From an external perspective, the globalization phenomenon has also contributed to general awareness of corruption and the need to repress it. After all, corruption affects Brazil’s competitiveness and its ability to attract foreign investments.
Is it appropriate to say that Brazil is emerging from a “culture of corruption”?
Not really. The culture of corruption is too entrenched at all levels in the Brazilian society. A high percentage of the population in Brazil would not consider a small bribe to avoid a (traffic) speeding ticket as a corrupt act. So, corruption exists in many levels, both within the private and governmental sectors. Having said that, we should acknowledge that a collective awareness of the losses and damages associated with corruption is taking place in Brazil. Individuals and organizations are becoming more educated on the need for mechanisms to detect and prevent corruption. Experts believe that it will take decades for the levels of corruption to decrease significantly, but, I believe it is fair to say that the issue is a mainstream issue these days and we need transparency to start tackling corruption in a systemic manner.
How does the Brazilian context affect the way companies do business in the country?
Both in the private and public sectors, the shadow of corruption prevents fairness in competitive bids, and in the end, customers and end consumers might not get the best possible product/service because a lesser supplier might have won a contract, by offering kickbacks to the purchasing agent. So business decisions are not always done with the most cost-effective, quality offering because sometimes corruption gets in the way and distorts the laws of the market of supply and demand and healthy competition for business. As alluded earlier, foreign investment might not happen, due to the perception that unethical business practices are commonplace.
What corruption-related challenges do foreign companies face with regards to Brazilian employees, intermediaries, suppliers and other partners?
Foreign companies operating in Brazil might find themselves dealing with potential dilemmas related to the shadow of corruption. While a large percentage of multinational companies operating in Brazil might have some form of anticorruption policies, self-enforcement might not be as robust as it should. With a heated economy, continual industrial expansion, increasing buying power of the general population, Brazil represents a very desirable market, especially with the economic downturn in North America and Europe. To that effect, foreign organizations might feel “forced” to succumb to corrupt practices in order to gain access to very large, profitable contracts with both public and private organizations. Against the backdrop of a strengthened anti-corruption regulatory regime, foreign organizations (as well as domestic ones) find themselves between a rock and a hard place when doing business in Brazil.
How can companies overcome these challenges within the Brazilian context?
Like we say in the USA, that’s the 64,000-dollar question. Not an easy answer. One of the possible ways to assist (both foreign and domestic) organizations in this context is to have very robust and publicly available anti-corruption policies in place. The Brazilian society is starting to demand ethical business practices amongst all stakeholders. Organizations that publicly disclose their anti-corruption policies will have societal goodwill and, in a proactive, forthcoming manner, let all of their business partners (potential and existent) know that they will not participate in under-the-table schemes and payouts. Anti-corruption certification can become a very visible, positive differentiator for organizations doing business in the largest Latin American economy.
10 January 2012
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Tags : anti-corruption, Brazil, culture of corruption, detect and prevent corruption