The following is a guest post from Diego Cano and Gavin Parrish of FTI Consulting. Mr. Cano is a Managing Director in the FTI Consulting Forensic and Litigation Consulting practice and is based in Buenos Aires. Mr. Parrish is a Managing Director at FTI Consulting and
is based in Houston, TX. This post is edited from the original version, and reprinted with permission from FTI Consulting, Inc.
In December 2015, Mauricio Macri donned the blue-and-white presidential sash of Argentina, following his hard-fought and surprising presidential victory. He immediately proceeded with a flurry of reforms by promptly slashing export taxes, removing capital controls and lifting a number of import restrictions. He also negotiated a deal with holdout creditors that allowed Argentina to return to the capital markets, potentially ushering in a wave of foreign investment. His bold departure from the previous administration continued when he received President Obama for an official state visit in April. In short, President Macri quickly distanced himself from the policies of his recent predecessors and lifted expectations for his administration, particularly within the business community.
Generally speaking, Argentina has always presented operational challenges, particularly around transparency and corruption concerns. Argentina currently ranks 107 out of 168 countries in the Transparency International Corruption Perceptions Index, behind other large economies in the region like Brazil, Mexico and Colombia. Furthermore, according to the 2016 Doing Business report published by the World Bank, Argentina’s business climate is poor, ranking 121 out of 189 nations evaluated.
In February, President Macri responded in part to these widely recognized problems and launched his Plan for the Modernization of the State, which emphasizes transparency as a central tenet for his government. The objective of the plan is ambitious: to position Argentina among the 10 most transparent countries in the world
How does President Macri expect this to be achieved? He has advanced the following proposals:
- Laws creating access to governmental information and public expenditures as part of an open government policy;
- A “Repentant Act” that would reduce the sentences of individuals involved in corruption who cooperate and provide information on others involved in crimes;
- A law addressing the confiscation and recovery of property and proceeds resulting from corruption; and
- Consideration of a law that would punish transnational corruption and includes liability for corporations, in an effort to bring Argentina in line with its commitment as a signatory to the OECD Anti-Bribery Convention.
Implementation of the policy package, generating greater independence for government institutions in Argentina and the question of sufficient resources for enforcement remain major challenges for the nation, particularly after emerging from an era of intense interference by the government in the economy and politicization of public institutions.
There is a long way to go. The anecdotal evidence plaguing corporations operating in Argentina is reinforced by formal reports on corruption concerns. In December 2014, an OECD working group on bribery published a report on Argentina, describing the nation as “seriously non-compliant” with articles of the Anti-Bribery Convention. The report went on to note that the working group “doubts Argentina’s commitment to fight foreign bribery.”
Faced with reports like these, the challenge for President Macri is creating confidence among Argentine citizens that transparent institutions and open governance are achievable. Unfortunately, governance during much of the 20th century has only deepened Argentine citizens’ doubts, so the challenge for President Macri should not be underestimated.
Will Argentina achieve meaningful transparency and develop a deeper level of institutional independence? That will only be answered in time, but President Macri has taken a first, small step. As accountability across Latin America rises, democracies consolidate further and the region gets more serious about combatting longstanding corruption, Argentina may do its part to bring local enforcement actions against organizations that engage in improper payments to run their businesses. Admittedly, this does not describe Argentina at present, but companies are already preparing for a different Argentina ahead.
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