Open Forum Cleaning up Corruption: Peru's Example

September 25, 2007

Diverse and complex factors underlie Latin America’s economic backwardness, but one of the most important is the persistence of corruption, especially that undertaken or permitted by individuals at the highest levels of government: the presidency, treasury, army, police, judiciary. When top officials facilitate illicit actions, they undermine and destroy the trust and respect those institutions ought to inspire. At the same time, their behavior encourages others—businessmen, union leaders, lower level public servants—to try to get a piece of the action. Private individuals can reap considerable benefit from such under-the-table dealings, but the social and economic cost to the country is enormous.

There is a growing consensus today that if corruption is not progressively eradicated, Latin America’s democracies will again fall into collapse. While few countries have managed to make significant headway, Peru may be an exception. Under the administration of Alejandro Toledo, a number of investigations have brought to light details of the many forms of corruption and abuse of power at the top during the long presidency of Alberto Fujimori (1990-2000).

The first thing Peru’s Congress did after the fall of Fujimori was to dismantle the National Intelligence System (SIN) and replace it with a civilian-controlled intelligence agency under congressional supervision. As many will recall, Fujimori’s powerful advisor, Vladimiro Montesinos, used his unchallenged power over the intelligence apparatus to set up an extensive spying and extortion racket. Putting Montesinos in jail set the stage for an investigation of corruption at all levels of government.

Congress took the lead in the inquiry, and its members have sat on a number of key commissions, including the “Commission for Investigating Irregular Influence on the Judiciary and other State Powers during the Government of Alberto Fujimori,” and one for tracing Montesinos’ ill-gotten gains. In both cases, Montesinos’ own testimony revealed an enormous amount of information on the exercise of power in an authoritarian regime.

The Congress also set up two bodies to look into corruption in public finances: the “Commission on the Contracting and Renegotiation of Peru’s Foreign Debt with Multilateral and Private Foreign Banks in the Period 1990-2000,” and the “Commission to Investigate Economic and Financial Crime.” Their efforts to delve into the massive shady business deals carried on under the Fujimori Administration show close relationships among politicians, technocrats and private economic groups, a good number of them linked to bids on public works and to the privatization of state enterprises.

The construction industry grew more than most in the 1990s, thanks to a $10 billion state investment, a quarter of which went toward building public works. These were carried out under partnerships between public entities and some of the largest private construction consortiums in Peru. Some of these private companies were owned by politicians, including Jorge Camet, Economy Minister from 1993 to 1998 and at the same time the owner of one of the largest construction and engineering firms in the country.

In the case of Minister Camet, the Congressional investigation documents the incredibly tight correlation between the appropriation of funds from privatizations and the public works projects built by his company, detailing how under Fujimori the public purse was used to favor private interests. Despite the proliferation of such illegal deals—many others have come out in the press—international financial institutions such as the IMF continued for years to offer support to this corrupt and authoritarian regime. The inquiries have brought to light a very complex national and international web of complicity between public servants, businessmen and bankers. That said, more detail regarding these extensive investigations must be made public.

The most important conclusion to draw is that it is possible to investigate corruption, as well as to explain its origins and its workings. To do so, however, requires political will, great moral strength and a systematic effort to explore the many-layered links between politics and big business. Such inquiries can effectively reduce illicit practices: For example, on July 18, the National Magistrates Council of the Peruvian Judiciary suspended 41 public prosecutors and district attorneys in Lima and elsewhere in the country due to their links to the political mafias of Fujimori and his intelligence chief Montesinos.

The Peruvian Congress took up the challenge of investigating those who held the offices of the presidency and the treasury under the premise that high officials—those who hold the keys to state power—are responsible to all other officials and to society. As the great Argentine journalist Horacio Verbitsky, author of important works on corruption in Latin America, has pointed out, one must never lose sight of the bureaucratic pyramid, because those at higher levels are responsible both for their own acts and for those of their subordinates, whose crimes would not be possible with the connivance and protection of higher-ups.

Carlos Marichal is professor of economic history at the Colegio de México in Mexico City. He is the author of A Century of Debt Crises in Latin America (Princeton, 1992) and has been a frequent contributor to NACLA. Translated from Spanish by Mark Fried.


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