The New Cold War
America, China, and the Echoes of History
Just a few years ago, Latin America was on a roll. Its economies, riding on the back of the Chinese juggernaut, were flourishing. A boom in commodity prices and huge volumes of foreign direct investment in agriculture and natural resources generated a golden decade. Ambitious government programs began to reduce inequality. And relations with the United States, long a source of friction, were improving—even as they became less important to the region’s success.
Today the picture looks very different. Latin America’s economies are grinding to a halt: in 2015, average GDP growth slipped below one percent. Inequality is still declining, but more slowly. And according to the annual Latinobarómetro poll, satisfaction with democracy in Latin America is lower than it is in any other region and is at its lowest point in almost a decade, at 37 percent. In Brazil and Mexico, it has descended to just 21 percent and 19 percent, respectively.
Yet on one count at least, the lands south of the Rio Grande are faring better than ever: Latin Americans are denouncing corruption as never before. In decades past, residents of the region seemed resigned to the problem, treating it as an ordinary, if lamentable, part of everyday life. In 1973, for example, Argentines elected Juan Perón to a third term as president despite his infamous criminality; as a popular saying put it, “Mujeriego y ladrón, pero queremos a Perón” (Philanderer and thief, we still want Perón).
Such tolerance is now a thing of the past. According to the same Latinobarómetro poll, the region’s inhabitants identify corruption as their third most important problem, behind crime and unemployment but above inflation and poverty. Latin Americans have also started judging their politicians based on their perceived trustworthiness. Of the five most unpopular chief executives in Latin America today—Brazil’s Dilma Rousseff, Mexico’s Enrique Peña Nieto, Paraguay’s Horacio Cartes, Peru’s Ollanta Humala, and Venezuela’s Nicolás Maduro—three come from the countries with the worst ratings for government transparency (Brazil, Mexico, and Peru).
Several factors explain this change in attitude. First, the economic growth of the last 15 years has created a large middle class (now estimated at almost a third of the region’s population, according to the World Bank, up from around 20 percent a decade ago, although higher in Brazil, Chile, Mexico, and Uruguay) with high expectations. Second, the region has grown more democratic. As the recent economic downturn has highlighted the damage corruption causes, this newly enlarged middle class has used its new freedoms to vent its frustration with those in charge.
Foreigners have also played a role. As Latin America has become more integrated into the world economy, international media and civil society organizations have begun to direct intense opprobrium at corrupt leaders and to lavish praise on reformers. Outside forces have also helped the region’s more independent judiciaries and media outlets expose official malfeasance.
Latin Americans are denouncing corruption as never before.
Together, all these forces have created a combustible mix, and when cases of graft have come to light in recent years, they have sparked major scandals in one country after another. High-level Latin American officials and business leaders have found themselves denounced by the media. Prosecutors and courts have issued indictments, and protesters have taken to the streets. Although few of the governments implicated in the scandals have actually fallen—and few others are likely to—the sheer scale of the social and political protest has been astonishing and represents an important positive trend in a part of the world with an otherwise gloomy forecast.
Of all the region’s recent uprisings against corruption, the most dramatic has unfolded in Brazil. The problems began in late 2013, a time when popular discontent with the government was already running high. The previous president, Luis Inácio Lula da Silva (known as Lula), had been tarnished by a corruption scandal years earlier. Now the economy was stagnating, and protests had begun to erupt over Brazil’s lavish spending on the coming World Cup. Then, in late 2014, shortly after Rousseff narrowly won reelection, the so-called petrolâo scandal hit.
The scale of the revelations was unprecedented. In November 2014, federal police arrested 18 people, including senior executives of Petrobras, Brazil’s state oil company, for corruption in the first raid of the investigation. Numerous firms had paid high-ranking government officials, including members of Rousseff’s Workers’ Party, enormous sums of money to obtain contracts from Petrobras. The bribes were thought to have totaled around $3 billion. Prosecutors charged executives from more than a dozen of the country’s largest construction companies with corruption and money laundering. As several Petrobras executives turned state’s witness, the police investigation, known as Operation Car Wash, continued to expand. Before long, many Brazilians concluded that Rousseff, who served as chair of Petrobras’ board from 2003 to 2010, must be guilty herself. Although she has not been charged, Brazil’s supreme court has ruled that her predecessor, Lula, can be called in for questioning, and on September 1, his former chief of staff was charged with racketeering, receiving bribes, fraud, and money laundering.
Lula was already under intense official scrutiny at the time: just a few months earlier, prosecutors had concluded that they had enough evidence to launch a full investigation into allegations that Brazil’s biggest building company had paid Lula to lobby overseas on the firm’s behalf. In yet another case, Rousseff has been accused by Brazil’s Controller General’s Office of illegally using funds earmarked for social programs and development to cover up budget deficits. Taken together, all these charges have helped push Rousseff’s approval ratings down into the single digits; talk of her impeachment is now in the air. As demonstrations continue and the economy languishes—Brazil is now in its worst recession in decades—it’s looking increasingly likely that Rousseff will not manage to serve out her term, which ends in 2018.
Bad as all these revelations have been for Brazil, the public reckoning that has followed can also be read as a sign of progress. The fact that the police, prosecutors, and judges have been willing to investigate the country’s most powerful politicians and business leaders has highlighted the independence of Brazil’s judicial system. And the unprecedented level of anger suggests that business as usual will no longer satisfy a Brazilian public increasingly intolerant of high-level corruption.
Another country north of Brazil has also recently turned a corner. In early 2015, after it emerged that officials had siphoned off millions of dollars in customs revenue, thousands of Guatemalans took to the streets, gathering every Saturday for weeks in the central square of the capital. In May, they forced the resignation of the country’s vice president and several cabinet ministers. But the protests continued, and on September 1, legislators from President Otto Pérez Molina’s own party stripped him of his immunity. On September 2, he resigned and within hours was jailed on corruption charges—an extraordinary event in a country where politicians have long enjoyed great impunity.
The fight against corruption in Guatemala has benefited from outside support. That help has come in the form of the International Commission against Impunity in Guatemala (CICIG), which was created in 2006 as part of a larger agreement between the UN and Guatemala. The body, which was initially intended to investigate crimes committed during the civil war, is financed by the European Union, supported by the U.S. embassy, and led by a Colombian; it now numbers more than 200 foreign officials. It has become one of the most powerful instruments in the campaign against corruption. As a high government official told me in August, “It hurts to admit that we are unable to clean up our own house, but it is better that someone else does it than that nobody does.”
Guatemala’s example has sparked similar protests across Central America, in neighboring Honduras and to a lesser extent in El Salvador. In Tegucigalpa, the capital of Honduras, thousands of protesters gather every Friday in a marcha de las antorchas, or “march of the torches,” to demand an investigation into the defrauding of the Honduran Institute of Social Security by the governing party. President Juan Orlando Hernández has attempted to placate the demonstrators by creating a commission similar to the CICIG, although without prosecutorial powers, but so far, these attempts have failed. As long as it lacks the teeth of its Guatemalan counterpart, such a commission is unlikely to satisfy the protesters, and if more scandals come to light, calls for Hernández’s resignation will mount. And in El Salvador, there are calls for an external investigation into Alba Petróleos, the subsidized energy venture set up by then Venezuelan President Hugo Chávez several years ago, which is suspected of making financial contributions to El Salvador’s ruling party.
Foreign influence has played a crucial role in Mexico as well. The American press is responsible for unveiling three of the most important corruption cases in recent history: Walmart’s bribing of Mexican municipal officials (which The New York Times reported on in 2012); the revelation that Luis Videgaray, the country’s finance minister, had acquired property under suspicious circumstances (a story The Wall Street Journal broke in 2014); and the concealed purchase of multimillion-dollar condos in Manhattan and elsewhere by a former governor (another story broken by the Times, this one in 2015).
Yet Mexico’s domestic media have also done their part. The radio reporter Carmen Aristegui, the newsweekly Proceso, and the daily Reforma have helped expose numerous scandals. Aristegui revealed that the $7 million modernist mansion in Mexico City built for the Peña Nieto family was in fact owned by a company to which the president had awarded hundreds of millions of dollars in public contracts and that was headed by a personal friend of his. A government investigation has since exonerated Peña Nieto, but many in Mexico have dismissed the inquiry as a cover-up. Other accusations have been leveled at the interior minister and several governors. These scandals have all generated a great deal of anger and unhappiness in Mexican society. But so far, not much more has come of them.
Yet public opinion has come to matter more and more in today’s democratic Mexico. Online social networks now provide the new middle class with an outlet halfway between public protest and private complaint: Mexicans use Facebook and Twitter to vent their anger and share information (not all of it accurate) about high-level corruption. This allows for a measure of catharsis but has yet to produce actual change: although many think that Peña Nieto’s government is Mexico’s most corrupt since the late 1980s, so far calls for the president’s resignation have foundered.
A major corruption scandal is causing a similar reaction in Chile. It began in February 2015 with accusations of influence peddling against the son and daughter-in-law of President Michelle Bachelet. Other scandals soon emerged, involving tax fraud and campaign finance crimes on the part of opposition leaders and members of the governing coalition, several of whom were jailed. As of May, most had been released, but some were under house arrest. Even Marco Enríquez-Ominami, a former independent candidate for president and one of Chile’s most popular politicians, has been caught up in a controversy regarding campaign finance, according to Chilean media reports. Large financial and mining conglomerates—one of them led by the ex-son-in-law of Chile’s former dictator, Augusto Pinochet—have been accused of fraudulently contributing to electoral campaigns.
Yet as in Mexico, the scandals have prompted only muted protests so far. That may be a consequence of their relatively small scale. Historically, Chile’s has ranked as one of the more honest governments in Latin America, and the amounts at stake in the country’s recent scandals pale in comparison to those in Brazil and Mexico: the most serious charge against a Chilean official involves a loan of $10 million.
Of all the region's recent uprisings against corruption, the most dramatic have been in Brazil.
Yet the allegations still represent the most serious challenge Bachelet has faced in her two terms in power. Although she tried to show that she takes the issue seriously by asking for the resignation of her entire cabinet in May and by calling for a new constitution, by August her approval rating had dropped by 30 percentage points in one year. Popular protests are likely to become louder unless Chile’s elites take genuine steps to reduce corruption, especially if the country’s copper-dependent economy doesn’t pick up soon. But once again, this represents good news as well as bad. Chile’s independent and honest judiciary and its free press were central to uncovering the corruption scandals—an important sign of the growing effectiveness of Chile’s democratic institutions.
Even in Venezuela, where flagrant corruption is still the norm, there are signs that the public’s patience is running out. According to Latinobarómetro, Venezuela is the region’s second least transparent country, and at the end of 2015, Maduro was its third most unpopular president. The United States recently leaked accusations that many of the country’s leaders—including Diosdado Cabello, the head of the National Assembly and Maduro’s closest aide—have used illegal means to enrich themselves immensely, partly through links with Colombian drug cartels. In June, the deterioration of Venezuela’s economy and the increase in violence and human rights violations forced Maduro to call elections for December. Although candidates and voters mostly focused on the economy, violence, and repression, more and more of them raised corruption as well.
Yet there are exceptions to this trend. In Argentina, there are few positive developments in the fight against corruption. The outgoing vice president, Amado Boudou, is awaiting trial for corruption, but many suspect the charges will be dismissed. Allegations also surround outgoing President Cristina Fernández de Kirchner, whose net wealth surged to a reported $6 million over the 13 years she and her late husband ruled the country, but the chances of a prosecution are slim. Outsiders have less influence in Argentina than in many of its neighbors—the country’s tradition of Peronist nationalism makes it hostile to perceived meddling. And the public seems resigned to the status quo: although hundreds of thousands of Argentines joined demonstrations when the prosecutor Alberto Nisman died under mysterious circumstances—as he was investigating Kirchner in connection with the 1994 bombing of a Buenos Aires Jewish community center—they have remained stubbornly passive when it comes to corruption.
The people of Nicaragua, meanwhile, seem even more complacent. President Daniel Ortega is currently focused on an enormous undertaking: an attempt to build a second interoceanic canal just north of the existing Panama Canal. A Chinese businessman has agreed to underwrite the cost, which could reach up to $100 billion. Some Nicaraguans think that the businessman is working for the Chinese government, but given China’s economic problems, it is in no position to foot the bill, and more than two years after the project was announced, excavation has yet to begin. Many Nicaraguans believe that the whole venture is nothing more than an elaborate scheme designed to enrich the Ortega family and that no canal will ever be built. Yet Nicaraguans have done little to register their displeasure: there have been no massive protests, for example.
As all these stories suggest, corruption remains deeply embedded in Latin American political and social life. Some countries have seen little improvement from the bad old days decades ago. Yet the outraged reactions to the wave of scandals currently sweeping the continent may be the first sign that Latin American publics are no longer prepared to tolerate systemic dishonesty in their governments. The region’s new middle classes, aided by pressure from abroad and by increasingly confident and independent domestic institutions, have begun demanding better governance.
The outcome of all these movements is still uncertain. Some may generate new institutions: autonomous controller’s offices, more powerful and independent judiciaries, greater transparency, and more active and conscious civil societies. Others may take a populist turn, as candidates for office run on anti-elite platforms. And in some countries, the movements will subside. But in all cases, something will have changed in Latin America, and much for the better.