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This Week in Markets and Democracy: Brazil’s Crisis Snowballs, Deferred Corruption Prosecutions, U.S. Bets on Cuba

by Shannon K. O'Neil
Brazil's President Dilma Rousseff (R) greets former president Luiz Inacio Lula da Silva during the appointment of Lula da Silva as chief of staff, at Planalto palace in Brasilia, Brazil (Reuters/Adriano Machado). Brazil's President Dilma Rousseff (R) greets former president Luiz Inacio Lula da Silva during the appointment of Lula da Silva as chief of staff, at Planalto palace in Brasilia, Brazil (Reuters/Adriano Machado).

Brazil’s Corruption Crisis Snowballs
Brazil’s corruption investigations expanded to encompass the former and current president. Federal police detained and questioned former President Luíz Inácio Lula da Silva (“Lula”) over whether he personally benefited from the Petrobras bribery scheme. São Paulo state prosecutors then separately filed to arrest him on money-laundering charges. In a plea bargain, Senator Delcídio do Amaral claimed current President Dilma Rousseff knew about Petrobras bid-rigging and tried to stop the criminal probe. Abroad, Argentine prosecutors are investigating if their own officials received kickbacks, and my colleague Matt Taylor predicts the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) could bring FCPA charges against Petrobras. And in what most perceive as a cynical move to defy justice, Lula joined Rousseff’s cabinet as chief of staff, removing him from the jurisdiction of both state and federal courts (only the Supreme Court can now try his case). As millions take to the streets in outrage, the political consequences may come more quickly than the legal ones.

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This Week in Markets and Democracy: Nike’s Bribes in Kenya, Elections in Benin and Niger, and Women’s Anticorruption Role

by Shannon K. O'Neil
A policeman is seen outside the gates of Riadha House the Athletic Kenya (AK) Headquarters during a protest in capital Nairobi November 23, 2015. Dozens of Kenyan athletes stormed the athletics federation headquarters in Nairobi on Monday, locking out officials and demanding that top Athletics Kenya (AK) bosses step down following allegations of graft and doping cover-ups (Reuters/Noor Khamis). A policeman is seen outside the gates of Riadha House the Athletic Kenya (AK) Headquarters during a protest in capital Nairobi November 23, 2015. Dozens of Kenyan athletes stormed the athletics federation headquarters in Nairobi on Monday, locking out officials and demanding that top Athletics Kenya (AK) bosses step down following allegations of graft and doping cover-ups (Reuters/Noor Khamis).

Nike Bribes, Will the United States Prosecute?
Bank records and emails show Nike paid a $500,000 “commitment bonus” to Kenya’s athletics federation, and hundreds of thousands more in “honoraria.” Though allegedly to support poor runners, Kenyan prosecutors say athletics officials quickly transferred the money to their personal bank accounts. Yet the United States cannot use the Foreign Corrupt Practices Act (FCPA) against the mega brand. The law only covers U.S. companies that bribe “foreign officials” and “public international organizations.” Sports associations are private, so outside the FCPA’s jurisdiction. In taking on FIFA, the U.S. Department of Justice (DOJ) worked around the FCPA, indicting foreign and U.S. officials for laundering money through U.S. banks, not bribery. The United States may need to do the same in the Nike case if it wants to follow up on President Obama’s pointed criticisms of Kenyan corruption with legal actions.

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Anticorruption Efforts in Mexico

by Shannon K. O'Neil
Relatives hold pictures of some of the 43 missing students of Ayotzinapa College Raul Isidro Burgos and shout during a news conference after a private meeting with Mexico's President Enrique Pena Nieto, ahead of the first anniversary of the students' disappearance (Reuters/Henry Romero). Relatives hold pictures of some of the 43 missing students of Ayotzinapa College Raul Isidro Burgos and shout during a news conference after a private meeting with Mexico's President Enrique Pena Nieto, ahead of the first anniversary of the students' disappearance (Reuters/Henry Romero).

Corruption dominates Mexico’s headlines: helicopter rides for officials’ family members, housing deals from favored government contractors, the still unexplained disappearance of 43 students, and a drug lord escaping a maximum-security prison, for the second time. In a recent survey, Mexicans listed corruption as the country’s top problem, ahead of security and the economy.

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This Week in Markets and Democracy: Malaysia’s Corruption Probes, Ghost Workers, and Lax OECD Bribery Laws

by Shannon K. O'Neil
Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-general said on Tuesday that $681 million transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris). Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-general said on Tuesday that $681 million transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris).

International Investigations Take Over as Domestic Malaysian Justice Fails
New evidence shows that transfers from troubled state investment fund 1MDB into Malaysian Prime Minister Najib Razak’s personal bank accounts may top $1 billion—$300 million higher than previously thought. Yet Malaysian authorities continue to clear him of wrongdoing. The attorney general’s office ended its case, saying it found no evidence of graft, and Parliament is delaying a long-awaited investigatory report on the fund. The government has also shut down a Malaysian news site reporting on corruption and threatened harsh punishments for journalists who leak “official secrets”—a thinly-veiled warning to would-be whistleblowers. Less politically malleable are international authorities who continue to probe the cross-border case. Singapore recently seized a “large number” of related bank accounts. Criminal proceedings in Switzerland allege misappropriation of up to $4 billion in state money. And in the United States, the Department of Justice opened an inquiry into Najib’s U.S. real estate holdings and the Federal Bureau of Investigation (FBI) into the 1MDB case itself. Najib maintains the money was a political donation from an unnamed Saudi royal, a claim that conflicts with the growing financial paper trail.

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The Long Arm of U.S. Law and Latin America’s Corruption Malaise

by Matthew Taylor
A demonstrator holds inflatable dolls depicting Brazil's former president Luiz Inacio Lula da Silva (R) and Brazil's President Dilma Rousseff during a protest calling for the impeachment of Rousseff near the National Congress in Brasilia, Brazil, December 13, 2015 (Ueslei Marcelino/Reuters). A demonstrator holds inflatable dolls depicting Brazil's former president Luiz Inacio Lula da Silva (R) and Brazil's President Dilma Rousseff during a protest calling for the impeachment of Rousseff near the National Congress in Brasilia, Brazil, December 13, 2015 (Ueslei Marcelino/Reuters).

Latin America’s corruption scandals of the past two years are moving slowly toward resolution. As they move forward, it is interesting to note that in a region that has been particularly protective of its sovereignty, foreign cooperation has played a significant role, whether it is via bilateral exchanges between prosecutors, mutual legal assistance treaties, or even United Nations support, as in the case of Guatemala’s International Commission Against Impunity (CICIG). But these various forms of international cooperation may soon be joined by another international anti-corruption effort that is less well understood in Latin America: prosecution by U.S. attorneys.

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This Week in Markets and Democracy: Central America’s Anticorruption Support, UNDP at Fifty, Foreign Bribery Action

by Shannon K. O'Neil
Demonstrators hold candles as they sing the national anthem during a march to demand the resignation of Honduras' President Juan Orlando Hernandez, in Tegucigalpa, September 11, 2015. The protesters are calling for the resignation of Hernandez over a $200-million corruption scandal at the Honduran Institute of Social Security (Reuters/Jorge Cabrera). Demonstrators hold candles as they sing the national anthem during a march to demand the resignation of Honduras' President Juan Orlando Hernandez, in Tegucigalpa, September 11, 2015. The protesters are calling for the resignation of Hernandez over a $200-million corruption scandal at the Honduran Institute of Social Security (Reuters/Jorge Cabrera).

Central America’s Anticorruption Support
The presidents of El Salvador, Guatemala, and Honduras were in Washington to discuss plans for the $750 million that Congress authorized to help their nations take on violence and boost economic development. The outlay comes in the wake of a record uptick in Central American migration to the United States. Nearly 3 million people have fled their homes and neighborhoods, including 100,000 unaccompanied minors who arrived at the southern border between October 2013 and July 2015. The U.S. funding requires Northern Triangle governments to address myriad domestic problems, including strengthening legal systems, protecting human rights, and rooting out corruption. U.S. anticorruption efforts will be met with broad civil society and multilateral support, dovetailing with grassroots campaigns against graft and high-level impunity in Honduras and Guatemala, and furthering the resolve of multilateral-backed bodies such as Honduras’s new Mission Against Corruption and Impunity (MACCIH).

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This Week in Markets and Democracy: Mexico’s Anticorruption Pressure, Ukraine’s Stalled Reforms, and U.S. Acts on Forced Labor

by Shannon K. O'Neil
Pope Francis (C), Mexico's President Enrique Pena Nieto (R) and his wife, Mexico's first lady Angelica Rivera stand together during a farewell ceremony in Ciudad Juarez, Mexico, February 17, 2016 (Reuters/Jose Luis Gonzalez). Pope Francis (C), Mexico's President Enrique Pena Nieto (R) and his wife, Mexico's first lady Angelica Rivera stand together during a farewell ceremony in Ciudad Juarez, Mexico, February 17, 2016 (Reuters/Jose Luis Gonzalez).

Pressure for Mexican Action on Corruption
During a five-day visit to Mexico, Pope Francis repeatedly denounced corruption, decrying the “path of privileges or benefits for a few to the detriment of the good of all.” His message coincides with a strong push by civil society groups to change the status quo. Many are monitoring Congress to ensure it meets a May deadline for secondary legislation to get the National Anticorruption System, signed last year by President Peña Nieto, working. Others are behind the Ley3de3 campaign, which would introduce legislation that defines official corruption and conflicts of interest, and increases the ability to prosecute and convict perpetrators. Coalescing around a social media campaign, active business involvement, academic backing, and even a nod from the pope, the movement needs 100,000 signatures; they hope to collect many times that. Then the question will be whether politicians will tie their own hands.

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The Political Salience of Latin Americans’ Perceptions of Corruption

by Matthew Taylor
A demonstrator holds a scarf during a march to demand for the resignation of Honduran President Juan Orlando Hernandez in Tegucigalpa August 14, 2015. Thousands of protesters have been continuing demonstrations in Tegucigalpa, calling for the resignation of Hernandez over a $200 million corruption scandal at the Honduran Institute of Social Security (Jorge Cabrera/Reuters). A demonstrator holds a scarf during a march to demand for the resignation of Honduran President Juan Orlando Hernandez in Tegucigalpa August 14, 2015. Thousands of protesters have been continuing demonstrations in Tegucigalpa, calling for the resignation of Hernandez over a $200 million corruption scandal at the Honduran Institute of Social Security (Jorge Cabrera/Reuters).

Once a year, policymakers and the press are forcibly reminded of the terrible costs of corruption. This year, it fell on January 27, when Transparency International’s Corruption Perceptions Index (CPI) was released, inciting the ritual gnashing of teeth and beating of chests about relative national corruption gains and losses.

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This Week in Markets and Democracy: Moldova’s Protests, Investors Take on Graft, Corruption’s Costs in Nigeria

by Shannon K. O'Neil
People hold a protest in front of the parliament building in Chisinau, Moldova, January 21, 2016. At least 8,000 people protested in the Moldovan capital on Thursday against the appointment of Prime Minister Pavel Filip, whose hasty swearing-in ceremony at midnight also prompted a government spokesman to resign (Reuters/Viktor Dimitrov). People hold a protest in front of the parliament building in Chisinau, Moldova, January 21, 2016. At least 8,000 people protested in the Moldovan capital on Thursday against the appointment of Prime Minister Pavel Filip, whose hasty swearing-in ceremony at midnight also prompted a government spokesman to resign (Reuters/Viktor Dimitrov).

Moldova’s Corruption Undermines EU Bid
Moldova’s corruption continues despite deepening European Union (EU) ties. New Prime Minister Pavel Filip’s pro-EU party is linked to a $1 billion bank embezzlement scheme that saw nearly 13 percent of gross domestic product (GDP) disappear. Two former prime ministers fell in the scandal, one to a no confidence vote while another is in jail. Now, despite government rhetoric accepting the EU Association Agreement governance statutes and promising to stamp out corruption, protesters are calling for Filip’s resignation. It is unlikely that Moldova will move beyond EU “partner” status anytime soon.

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Nigeria’s 2016 Budget Continues Use of Secretive ‘Security Votes’

by Guest Blogger for Shannon K. O'Neil

In a post originally published on African Arguments, CFR International Affairs Fellow Matthew Page explains that despite President Muhammadu Buhari’s anticorruption progress, the government’s new budget includes allocations for opaque funds that often go missing.

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