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International Business: Corruption and Bribery in Latin America Research Paper

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Updated: Apr 30th, 2021

Introduction

Corruption is a widely known social phenomenon that is regarded as a problem in the modern world. In this instance, it could be said that the occurrence of corruption can be seen in almost every country, as it is not difficult to set in motion, and many countries lack the kind of well-established legal system that will sufficiently control this wrongful state of affairs (Krivins & Vilks, 2013). The importance of eliminating such social blemishes as corruption and bribery cannot be underestimated. These activities adversely affect a society’s moral principles while intensifying the popularization of an “economy of greed” and causing a general disregard for ethics (Kriekebaum, 2008, p. 82).

Meanwhile, it has a deleterious influence on the understanding of the principles of equality, liberty, freedom, and democracy while building a strong association between the rise of corruption and the democratic nature of the state (Canache & Allison, 2005).

Based on the factors discussed above, it could be said that a combination of these aspects depicts the essentiality of minimizing or eliminating this issue, as its consequences tend to affect the economic and social condition of a country destructively. In the context of this paper, it could be claimed that in Latin America, the frequency of the occurrence of corruption and bribery tends to rise in response to the malfunction of inherent power mechanisms and as an intrinsic part of the area’s business culture. Furthermore, any prevention strategy should involve implementing a sequence of steps to minimize the incidence by prioritizing the cultivation of changes in how business is allowed to function in the area.

In this instance, the primary goal of the paper is to increase the awareness of issues related to bribery and corruption by addressing theoretical concepts and applying them in the context of the situation in Latin America. Meanwhile, it is vital to determine the key drivers, which lead to the encouragement of this phenomenon and offer insights into the potential negative effects on the prosperity and well-being of society.

The profound analysis of the mechanisms and structure of corruption and bribery will contribute to the understanding of their functioning and potential influences on the world. In turn, various prevention strategies are proposed while using the scholar’s and practitioners’ viewpoints as a basis to determine the most efficient tactic for implementation of strategies to improve conditions in Latin America. Lastly, conclusions are drawn to summarize the key findings of the paper and recommend a practical and relevant approach in the case described.

Theoretical Concepts and Theories: Definition of Corruption and Working Mechanisms

The term corruption is difficult to define due to the presence of a plethora of dissimilar theoretical concepts, which make this phenomenon “a risky and much-disputed endeavor” (Fletcher & Herrmann, 2016, p. 16; Hill, 2015). However, the definition can be portrayed as an act, which is targeted at the achievement of desired goals by violating the general principles of the legal system while being present in different spheres of life (Krivins & Vilks, 2013; Hill, 2015).

In this case, it could be regarded as a social instrument utilized to alter the behavior of individuals in society by seducing them with monetary rewards or other inducements. Nowadays, it is actively practiced since it is regarded as a number of potential problem-solving instruments (Krivins & Vilks, 2013).

In turn, bribery could be defined as offering monetary resources and other goods to contribute to desired changes in the behavioral patterns of the recipient (Malan & Smit, 2001; Hill, 2015). It could be said that this concept underlines the egoistic nature of the human being, and the dynamics imply that “the inner positioning of the culprits should be changed” (Malan & Smit, 2001, p. 232). This aspect reflects the cognitive nature of the phenomenon and highlights that emotions and personal beliefs affect the actions of an individual, including the decision to resort to acts of corruption and bribery. Understanding the psychological component of this singular fact reveals that social and personal values have a critical influence on the behavioral patterns of people and their attitudes.

Despite a clear understanding of the overall working principles of corruption and bribery, typological diversification has a tendency to exist while dividing this phenomenon into arbitrary and pervasive actions (Cuervo-Cazurra, 2008). In this case, pervasive corruption implies the necessity to use monetary instruments for bribery to ensure the possibility of operating in the market, and arbitrary corruption states that the act of bribery does not guarantee the achievement of the desired goals (Cuervo-Cazurra, 2008).

In this case, arbitrary corruption involves a high level of uncertainty while making this social phenomenon a potential obstacle to doing business in the area. Meanwhile, corruption can be distinguished by the actor who is responsible for the corrupting activities while stating that the participants might be represented by an individual or organization (Pinto, Leana, & Pil, 2008). Nonetheless, despite the clear theoretical identification of the actors, it is difficult to understand the variances in practice. In some cases, it is unclear who is responsible for particular actions.

In the end, it could be summarized that corruption is a complex phenomenon, which requires a clear understanding of its working mechanism and its principles. It could be said that this term has a high correlation with cognitive psychology, sociology, and economics and is present in different spheres. Corruption could alternatively be regarded as a positive phenomenon due to its problem-solving nature and negative due to its possibility of causing doubt and uncertainties. Lastly, it could be said that corruption can be present in dissimilar domains because of the universal application of the principle and similar concepts in any decision-making mechanism and values in these areas.

Analysis of the Situation in Latin America

As was claimed earlier, corruption in Latin America has a tendency to increase as it adversely influences economic stability in Latin American countries. In this case, it is essential to describe the situation in a country with the help of statistical resources while utilizing numerical data for clarity. In this case, a corruption index is used to measure the transparency of the region, portraying the gradation of countries from zero (transparent) to 100 (fully corrupted) (Transparency International, 2015).

For instance, Brazil has decreased its index from 43 to 38, showing negative progression in transparency with a place of 76 in the ranking (Transparency International, 2015). In turn, Mexico has a worse position, with a value of 35 and rank 95 on the list (Transparency International, 2015). As for Colombia, the third-biggest country in terms of population in Latin America, an index of 37 is listed, with position 83 (Transparency International, 2015).

Meanwhile, other countries associated with the region display a similar situation regarding transparency index and ranking in the world (Transparency International, 2015). The above-named countries are the most influential in the area, due to their size and economic importance. Consequently, the level of corruption is a critical identifier of political and economic stability in these countries, showing a negative progression in the ranking of these areas.

In turn, comparing the situation in the selected countries with related statistics in other parts of the world will contribute to understanding the ranking of the area in terms of its transparency and corruption rates. In this comparison, the leading positions are occupied by Denmark, Finland, and Sweden, ranking 91, 90, and 89 (Transparency International, 2015). The countries’ conditions tend to improve or move in a positive direction while being highly correlated with the quality of living and equality of the members of Nordic societies (Transparency International, 2015).

It remains apparent that Scandinavia’s situation cannot be compared with the countries in Latin America, as the ranking and transparency index is highly different, with a wide gap in transparency rates. In this instance, the comparison reveals that Latin America has high corruption rates, which detrimentally impact the population’s quality of living as changes continue to show a negative trend.

In the end, it could be said that the facts and statistics provided above emphasize that the level of corruption is critical and is showing a tendency to progress in Latin America, in comparison to other countries in Scandinavia such as Finland, Sweden, and Denmark. It could be highlighted that the leading countries of Latin America do not have the highest ranking in the list. Still, their positions are actually highly valuable to the prosperity and economic development of the area, as they have low corruption rates.

Consequently, it could be said that the level of corruption in Latin America is critical, as a rise in its prevalence might be a potential cause of negative consequences, such as the instability of the economy and the continuous expansion of the gap between the different levels of income and social classes. Finding the solution to this issue should be prioritized due to the strong correlation between economic and political stability in the region and the overall perception of Latin America in terms of comparative transparency to other countries in the world.

Reasons for Corruption and Bribery in Latin America

Meanwhile, it is critical to provide a rationale for the incidence of this phenomenon while exploring the particular features of the business and corporate cultures in Latin America. One of the potential reasons for the occurrence of corruption and bribery is the domination of certain values in the organizational culture, which become the drivers for the development of particular behavioral patterns, and reasons for certain actions in specific situations. In this case, Brazil serves as an example in terms of a lack of understanding of the importance of ethical leadership as a corruption prevention tool (Halter, Halter, & Arruda, 2009).

The overall underestimation of ethics cultivates the rise of corruption rates in the business sector, even as transparency comes under question. The importance of this matter cannot be underrated, considering the potential influence of these practices on overall business processes and decision-making principles in any affected organization.

Apart from misconceptions in the business culture, the absence of well-established control tools serves to lead to an increase in corruption and bribery rates in the region. In this case, Latin America shows poorly functioning political, economic, and social mechanisms and portrays a correlation between the structure of the justice system and corruption levels (Rios-Figueroa, 2012). Research has shown that unstructured law and governmental schemes can lead to the rapid progress of corruption due to the absence of any well-established control mechanisms (Rios-Figueroa, 2012).

Case studies from Chile and Mexico offer profound evidence that failure by governmental authorities to address the issue and the lack of well-established control mechanisms within the legal structure tend to have a magnifying impact on the development of corruption (Rios-Figueroa, 2012). In the context of Latin America, these matters drive an upsurge in corruption that can be attributed to the existence of favorable conditions, leading to one of the critical problems afflicting the area.

Meanwhile, high crime rates and the wrongful understanding of equality have an adverse influence on the functioning of the countries, as well as driving the rise in corruption (Ungar, 2013). In this case, an unlawful conception of the principles of democracy causes an upsurge in crime rates, even as the actions of governmental authorities are limited due to the lack of compliance with the constitution (Ungar, 2013). It remains apparent that this aspect has a critical interdependence with the reasons mentioned, as it reflects the condition of the economic system and determines the necessity of considering the values associated with corporate culture mentioned above.

Summarizing the reasons for the occurrence of corruption as mentioned above, it could be said that the political structure, social values, legal system, and business culture are the primary drivers for corruption and bribery in Latin America. It is apparent that the lack of control and the devaluation of ethics contribute to cultivating the rise of corruption, and vice versa. These matters add clarity to understanding the development of this phenomenon in the region, as the dearth of control and ethics leads to an increase in corruption rates.

Negative Consequences of Corruption and Bribery on the Society in Latin America

It remains apparent that corruption is often regarded as an adverse phenomenon due to its negative impact on the society, justice system, and economic stability of each country in the region. For instance, the unequal distribution of resources is a primary cultivator of poverty, as some layers of the population remain deprived (Carballo, 2010). This matter creates a substantial gap between different levels of income, raising questions about the reasonability of governmental actions and the beneficence of the political regime. The lack of financial resources is the primary reason for the decrease in well-being and prosperity that troubles the countries within Latin America. As a consequence, this approach leads to a lack of control in social segments and an inability to predict the actions of the citizens and is a threat to national stability and safety, as well.

Meanwhile, the incidence of political corruption has an adverse impact on the creation of a trusting relationship between governmental authorities and citizens (Canache & Allison, 2005). It could be said that such corruption has a negative influence on perceptions about democracy, as residents build an association that correlates the democratic regime with corruption in Latin America (Canache & Allison, 2005). It remains apparent that this approach leads to the development of misconceptions about the political scheme and could be regarded as a potential cause of the growth of potentially disruptive social attitudes in the future.

Apart from the general negative consequences, pervasive, arbitrary corruption is a primary threat to direct investment, as it can be linked to increased levels of uncertainty and instability of the market (Cuervo-Cazurra, 2008). This matter causes investors to question the attractiveness of the market, decreases the pace of development of domestic industry, and raises doubts about the appeal of the market to foreign direct investments. In this case, corruption has a serious and negative impact on the development of the overall national economy and drives the budgeting activities in the region.

In the end, it should be highlighted that the matters discussed above could be considered as being equally vital, as they tend to bring into question the economic and political stability of the countries. The population could be regarded as the primary focus of influence, as the existence of corruption creates a gap between people with different levels of income, and at the same time, adversely influences the overall well-being of the nation. In turn, it could be regarded as a source of political instability because it encourages the creation of wrongful perceptions about democracy. Lastly, the attractiveness of investing in the industry in Latin America is doubtful, as the uncertainties introduced by corruption serve to repel foreign investors.

Potential Prevention Strategies

Based on the factors discussed above, the paramount importance of the issue cannot be underestimated, as it has an adverse influence on the economic and social stability of the population in Latin America and affects the business culture and attraction of foreign investment to the countries in the region. With regard to bribery and corruption, potential prevention strategies must be assessed and described to ensure the applicability of the tactic in the case under consideration, with a focus on the initial causes of corruption in the area. The approaches that follow cover the issue from dissimilar perspectives and suggest possible instruments that might improve the current condition.

It could be said that the research tends to highlight how increased frequency of random checks and making the cultivation of clean working culture a priority, as essential elements for the minimization of the occurrence of bribery (Zou, 2006). The application of this strategy will determine the current situation in the country, while “institution of random and regular checks” will discourage or even eliminate the act (Zou, 2006, p. 15). Meanwhile, this tactic could be regarded as the first step for changes in the corporate culture, as the employees’, workforce’s, and partners’ behavioral patterns will be dictated by unsystematic auditing.

The rediscovery of the involved legal principles might be regarded as another approach, as legal concepts form the understanding of the principles of business and political interactions and the way in which they comply with the law (Krivins & Vilks, 2013).

The auditing of actions and the cultivation of such new principles as responsibility, compensation, “in dubio pro reo” (one cannot be convicted if there is any doubt of guilt), “the principle of compensation, the principle of control, the principle of objectivity,” and the limitation within the timeframe will have a beneficial influence on the current situation with regard to corruption in Latin America (Krivins & Vilks, 2013, p. 236). It could be said that this prevention strategy will cultivate the principles of justice and stability in the countries under consideration while contributing to the reestablishment of ethical legal and business principles.

Meanwhile, another tactic implies focusing on a systematic approach with an eye to influencing the social sector from different angles simultaneously (Gorta, 2003). In this case, this strategy will contribute to acquiring an overall picture of the issue in Latin America while focusing on the most affected segments such as social, political, and economic areas. Moreover, the described approach increases the scope of considering the implications of policies targeted at reducing corruption, as it tends to take into account every segment of the social system.

In the end, it could be said that the effectiveness of the strategies described is dependent on the current situation in the country. It will be necessary for governmental authorities to seek the initial reason for the occurrence of high corruption rates, as minimizing or decreasing the supplementary problems might decrease the overall efficiency of the selected prevention approach. In the context of the situation in Latin America, the redesign of the business culture and continuous auditing of the legal system should be regarded as the action with the highest priority for the prevention of corruption due to the core nature of the principles involved.

Conclusion and Recommendations

The initial purpose of the paper was to thoroughly analyze the corruption plaguing Latin America as a political phenomenon, which has a cognitive component and could play the role of a problem-solving instrument. In turn, the typologies are dependent on whatever actor is in charge and responsible for the actions and the nature of uncertainty associated with the potential effectiveness of activities aimed toward the achievement of the particular goal. Meanwhile, the paper discussed these principles from a theoretical perspective while depicting the conceptualization and classification of the impact of corruption and bribery on various aspects of society. In this case, the initial emphasis of the paper was to describe the phenomenon of corruption by using Latin America as an example.

Simultaneously, it could be said that the essay revealed the potential rationale for the presence and growth of corruption and bribery in Latin America. The situation in the region is critical, as the rate of corruption continues to rise. In this case, corruption is identifiable and applicable in different spheres; that is to say, the conceptualization implies the existence of social mechanisms, such as business culture and social values, as the primary drivers for the popularization of bribery and corruption in the area.

In turn, the absence of any well-established punishment and control system contributes to the increase of this political phenomenon, and its contribution to the cause of poverty, the existence of a substantial gap between the different layers of the population, and the creation of the misconceptions, negative stereotypes, and association of democracy with corruption.

Alternatively, it questions the attractiveness of the region for foreign direct investments, as high corruption rates cause an upsurge in the uncertainty of conducting operations and increases the perception of vulnerability. It remains apparent that these aspects have an adverse influence on the functioning of a country’s society and raise questions about any positive intentions that may or may not be inherent in the actions of governmental authorities, as the egoistic inner-self (or a view to self-interest) has a tendency to dominate.

A number of prevention strategies and tactics were considered in conjunction with identifying factors that have a potential influence on their effectiveness. One of the suggested approaches is the introduction of random checks, as these may have a positive impact on the establishment of new and constructive values in the business culture. In turn, the development of new concepts, such as an emphasis on responsibility, will also contribute to the cultivation of changes in the existing values in business operations. Lastly, a systematic approach implies focusing on different spheres of the problem simultaneously, with an eye to increasing the overall effectiveness of the strategy. It remains apparent that the efficiency of any prevention tactics will be dependent on the ability of governmental authorities to determine the initial reason for the incidence of corruption and bribery.

As for the recommendations to improve the current conditions in Latin America, administrative entities should address the problem from different angles simultaneously, as the core issue lies in the established business culture, as well as the absence of a centrally controlled system to modify existing business practices and social perspectives. It could be said that this systematic strategy could be viewed as a crucial implementation tactic, in part with regard to the changing and progressive nature of the phenomenon and the necessity to affect the principles from different spheres.

In this case, the effectiveness of this approach cannot be underestimated, as it will have a beneficial impact on resolving the issue while decreasing its frequency of occurrence and rate of development. In the end, the role of corruption in the formation of international relationships cannot be underestimated, as it has a vast influence and impact on different spheres of the lives of people in the affected areas. Consequently, based on the aspects revealed above, corruption and bribery as political phenomena have to be eliminated for there to be any hope of enhancing the quality of living in the region, improving organizational structure, and altering social perceptions in a positive direction.

References

Canache, D., & Allison, M. (2005). Perceptions of political corruption in Latin American democracies. Latin American Politics and Society, 47(3), 91-111.

Carballo, A. (2010). Poverty and corruption in Latin America, challenges for a sustainable development strategy. Opera, 10(10), 41-65.

Cuervo-Cazurra, A. (2008). Better the devil you don’t know: Types of corruption and FDI in transition economies. Journal of International Management, 14(1), 12-27.

Fletcher, C., & Herrmann, D. (2016). The internationalization of corruption: Scale, impact and countermeasures. London, UK: Routledge.

Gorta, A. (2003). The NSW independent commission against corruption’s experience in minimizing corruption. Asian Journal of Political Science, 11(1), 1-21.

Halter, R., Halter, M., & Arruda, M. (2009). Transparency to reduce corruption? Dropping hints to private organizations in Brazil. Journal of Business Ethics, 84(3), 373-385.

Hill, C. (2015). International business: Competing in the global marketplace. Boston, MA: McGraw-Hill Education.

Kriekebaum, H. (2008). Corruption as a moral issue. Social Responsibility Journal, 4(1/2), 82-88.

Krivins, A., & Vilks, A. (2013). Prevention of corruption in public sector: Importance of general legal principles. Jurisprundencija, 20(1), 235-249.

Malan, F., & Smit, B. (2001). Ethics and leadership in business and politics. Lansdowne, India: Juta & Co.

Pinto, J., Leana, C. & Pil, F. (2008). Corrupt organizations or organizations of corrupt individuals? Two types of organizational-level corruption. The Academy of Management Review, 33(3), 685-709.

Rios-Figueroa, J. (2012). Justice system institutions and corruption control: Evidence from Latina America. The Justice System Journal, 33(2), 195.

Transparency International: Corruption perception index. (2015). Web.

Ungar, M. (2013). The rot within: Security and corruption in Latin America. Social Research: An International Quarterly, 80(4), 1187-1212.

Zou, P. (2006). Strategies for minimizing corruption in the construction industry in China. Journal of Construction in Developing Countries, 11(2), 15-29.

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