In the last post of our special series on some issues that, although usually neglected, are vital for British exporters doing, or planning on doing, business with Latin America, we discuss transparency (the two previous posts covered democracy and press freedom, and peace).
I find that transparency is usually easier to grasp for UK exporters than peace, democracy or press freedom, either because of the extra cost that a lack of transparency involves (directly and indirectly) and/or because of a general awareness that UK companies must comply with the UK Anti-Bribery Act.
Latin America has a reputation for corruption and therefore transparency is something I get asked about often and here’s my general response:
- Levels of transparency (or corruption) vary considerably across countries. Just because you rule out Venezuela because of its 2017 Corruption Perception Index (Transparency International) score of 18 (169th out of 180 in the world), you wouldn’t necessarily have to rule out Uruguay, say, which has a score of 70, 23rd in the world (for comparison, the UK ranked 8th, with a score of 80).
- Levels of transparency will vary considerably across sectors – the exposure you get to corruption will clearly be proportional to the value of the contracts at stake and to the amount of contact with the public sector.
- Latin Americans are in general very aware of what “corruption” means, particularly after scandals such as the infamous Lava Jato in Brazil. However, the tolerance to corruption varies. In some countries, I find that people are “resigned” to it or take it as part of their daily lives. In some other countries, it is just not seen well and is not tolerated. These very subjective perspectives are very important when doing business in the region.
- Related to the above is the understanding of what actually constitutes a bribe. I was in Chile last week when a local businessman told me that “we don’t get asked for bribes and we don’t give them out, but we can pay for the odd present, nothing big, and the odd meal out, that’s not bribing, that’s just manners”. Similarly, a while ago in Panama, I was told by a local rep that “no, we don’t get into that stuff but we from time to time do pay buyers the odd holiday or so, you know, a treat”.
- This is very subjective, but through my travels across the region and from dealing with Latin American businesses every day, I feel there is a generational change taking place, with younger generations being a lot more cautions and skeptical about corruption, maybe because of the power of the internet and social media (malpractice gets discovered and spread around very quickly), brave journalists and a public opinion that is pretty much fed up of corruption at all levels. Also, the cost of corruption to our societies is clearer now, I think.
Corruption can have a huge impact on your business, so here are some tips:
- When researching markets in Latin America, take the level of corruption/transparency into account when evaluating whether or not to enter a market. Corruption, in my opinion, is risky, costly, inefficient, terribly stressful and just not worth it.
- When researching opportunities in Latin America, such as those involving large contracts (large sporting games, etc), make sure you assess if you have a chance at all if you are not going to engage in corrupt practices. Don’t waste your time bidding for contracts when everyone knows who the winners will be years in advance!
- When appointing a local distributor/rep, make absolutely clear what bribery means to you and make it clear that corruption is not tolerated. Make them understand that even if you are not aware of it, you are liable in the UK for your distributors’ malpractice. Send them a copy of your company anti-bribery policy. If in doubt, get specialist legal advice.
- Make sure that your staff are well trained, particularly those engaging with distributos and clients in the region. Some might come from companies or countries that might see corruption in a different light.
- A colleague in Peru recently told me a few practical tips on avoiding corruption, such as only visiting a buyer/client with a third person present (preferably a lawyer), making sure that all your visits are recorded on an attendance sheet, and not accepting meetings outside the buyer’s office. I am sure you can think of a lot more (feel free to leave your tips below!)
- Honesty as a selling point: I find this plays particularly well when dealing with technical people, such as engineers, because they will know that what you are specifying/quoting is what they need and that you are not over-specifying or over-pricing in order to pay a bribe. Sometimes your client will find it hard accept, or even “endearing”, but remaining true to your principles will make you stand out in the long-run in markets where your other local and foreign competitors are focusing less on technical specs and more on paying buyer A or B.
- If you are not going to engage in corruption practices, be prepared to lose an order or two to the people that won’t mind paying a bribe. We’ve been there and it is very annoying, to say the least, particularly when you’ve worked hard on a specification for years, for it to be taken away from you by someone that is willing to pay to get an order. C’est la vie. Move on.
I can assure you that it is perfectly possible to do business in Latin America without falling into corruption practices. I am not naïve to think it doesn’t happen, but the point it that it doesn’t have to. You can grow a healthy, stable and long-term business in most sectors and most countries in the region without breaking the law. As a Latin American myself, I will thank you for that. Corruption is a barrier to our development and, believe me, it costs lives. And it doesn’t have to be that way.
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What can you do to avoid getting involved corruption in export markets? Would you rule out a clearly corrupt market? Do you take corruption into account when exploring new export markets?
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