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Combatting a hidden scourge

Corruption. Ten years ago the word was rarely spoken in public, and
even the news media handled the subject with kid gloves.

But last September, hundreds of government officials, scholars, and civil society representatives from 90 countries met in Lima, Perú, to engage in candid debates on what participants described as one of the most urgent threats to democracy in the countries of the developing world.

The conference, "The State and Civil Society in the Fight Against Corruption," was organized by the Peruvian government and the Berlin-based nongovernmental organization Transparency International with IDB participation.

The event could hardly have been more timely. In the last few years, news of corruption--generally defined as the use of public office for private financial gain--has become a recurring item on front pages around the world. Allegations of illegal campaign contributions, customs fraud, rigged government contracts and other abuses are leveled at governments in every continent and at every stage of development.

Is the world suffering an unprecedented "epidemic" of corruption? Probably not, according to experts in law enforcement and governance. To a surprisingly consistent degree, corruption has always been present in public administration in all cultures. What has changed is society's awareness of the problem and its willingness to openly acknowledge and combat abuses.

A number of factors have combined to push corruption into the spotlight. The political exigencies of the cold war, which often deflected attention from domestic governance problems, no longer dominate local and international agendas. In Latin America and the Caribbean, the growth of democracy has resulted in demands for more transparent accounting by public officials and less tolerance of malfeasance. Finally, the explosion in international private sector investment in developing countries has focused unprecedented attention on local business and financial practices.

Speakers at the Lima meeting described how these developments have coincided with growing criticism of the notion that corruption is an unavoidable byproduct of economic development that doesn't necessarily interfere with growth. Harvard University researcher Daniel Kaufmann, for example, reported on the results of a survey in which he asked 150 senior business and government officials from 63 developing and formerly communist countries to name what they considered the most serious obstacle to their country's development. All pointed to public corruption as the number one barrier to development.


A TAX ON SOCIETY...

These findings were anticipated by IDB President Enrique V. Iglesias at the 1994 Summit of the Americas. At the Miami meeting Iglesias described corruption as "one of the greatest evils plaguing the consolidation of democracy in Latin America and the Caribbean." He said that if "inflation is a tax on the poor," then corruption "is a tax on the entire society." Corruption exacts economic costs "by diverting resources away from development," political costs through "popular disaffection and the weakening of democratic regimes," and social costs by "disintegrating the social fabric, perverting culture and strengthening illegality and clientelism."

At the Lima conference, the IDB funded the participation of 15 legal, judicial and civil society experts from the region. The Bank also organized three roundtable panels and commissioned Latin American specialists to write papers that were presented at these panels. María Luisa Rains, chief of the IDB's Fiscal Division, conducted a panel on corruption in the tax administration sector and presented a paper on the subject. Jorge Claro de la Maza, chief of the IDB's Procurement Policy and Coordination Office, conducted a panel on tightening procurement systems. Edmundo Jarquín, chief of the IDB's State and Civil Society Division, helped organize a panel on the role of civil society in countering corruption in Latin American nations that are in the process of modernizing the public sector.

The IDB is also providing direct support to countries' corruption-fighting efforts, according to J. James Spinner, the IDB's deputy general counsel. Bank-financed programs to reform government financial management, tax collection, customs and the judiciary are helping to reduce opportunities for corruption in the public sector. Bank-funded programs in the areas of regulation, privatization and decentralization stress the importance of transparency and accountability.

"The Bank is prepared to provide additional assistance to member countries who request it," Spinner said. For example, the IDB is currently preparing a regional technical cooperation program that would offer financial regulators courses in the detection and prevention of money laundering.
 

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