CFR Presents

Development Channel

Issues and innovations in global economic development

This Week in Markets and Democracy: Zuma’s Corruption Woes, DRC Sanctions, Afrobarometer Report

by Shannon K. O'Neil Friday, November 4, 2016
DATE IMPORTED:November 02, 2016Protestors call for the removal of President Jacob Zuma outside court in Pretoria, South Africa, November 2, 2016 (Reuters/Mike Hutchings). DATE IMPORTED:November 02, 2016Protestors call for the removal of President Jacob Zuma outside court in Pretoria, South Africa, November 2, 2016 (Reuters/Mike Hutchings).

Report May Bring Down South Africa’s President
New allegations may finally bring down teflon president Jacob Zuma. Despite his earlier legal protests, South Africa’s public protector’s office released a report suggesting that a wealthy family close to the president influenced government hires and used their ties to promote their private interests. It recommends opening a criminal investigation, a prelude to impeachment proceedings. While the African National Congress (ANC) party backed Zuma during a previous impeachment vote over the use of $16 million in state funds to renovate his private home, these new allegations are hurting him within his party. Already Zuma faces a no-confidence vote in parliament next week, and some ANC members are joining religious leaders, thousands of protestors, and forty South African CEOs in calling for his resignation.

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This Week in Markets and Democracy: Embraer Corruption Case, UK Anti-Slavery Law Neglected, Rule of Law Index

by Shannon K. O'Neil Friday, October 28, 2016
Brazilian aircraft maker Embraer's CEO Frederico Curado (R) salutes workers next to an new Embraer E190-E2 during its unveil in Sao Jose dos Campos, Brazil, February 25, 2016. Brazilian planemaker Embraer SA is in early talks with Iran, with a focus on commercial aviation, following the end of international sanctions, Chief Executive Curado told journalists on Thursday (Reuters/Nacho Doce). Brazilian aircraft maker Embraer's CEO Frederico Curado (R) salutes workers next to an new Embraer E190-E2 during its unveil in Sao Jose dos Campos, Brazil, February 25, 2016. Brazilian planemaker Embraer SA is in early talks with Iran, with a focus on commercial aviation, following the end of international sanctions, Chief Executive Curado told journalists on Thursday (Reuters/Nacho Doce).

Brazil’s Plane Maker Fined in Bribery Case Spanning Five Continents
Brazilian aircraft manufacturer Embraer will pay $205 million to U.S. authorities, including $20 million for Brazil, for bribing officials in Saudi Arabia, Mozambique, and the Dominican Republic. U.S. prosecutors worked with their law enforcement counterparts around the world—including Brazil, Switzerland, Uruguay, France, and Spain—to bring the Foreign Corrupt Practices Act case (Embraer is a U.S.-listed company). The legal cooperation has gone both ways, as U.S.-gathered evidence has spurred additional investigations by Brazilian and Saudi authorities; thirteen employees were charged with bribery. Now India is looking into kickbacks from Embraer’s air force contracts. Expect more cross-border cooperation in global corruption cases.

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Corruption, FATCA, and the Tightening Dragnet Around Brazilian Offshore Accounts

by Matthew Taylor Monday, October 24, 2016
Replicas of R$100,00 banknotes are hung on a clothesline during a protest of the national union of prosecutors against money laundering in Brazil, at the Esplanade of Ministries in Brasilia March 18, 2015 (Reuters/Ueslei Marcelino). Replicas of R$100,00 banknotes are hung on a clothesline during a protest of the national union of prosecutors against money laundering in Brazil, at the Esplanade of Ministries in Brasilia March 18, 2015 (Reuters/Ueslei Marcelino).

The Brazilian Federal Revenue Secretariat (SRF) has some good news to cheer: a big haul of fines and taxes from assets held offshore by Brazilians. The deadline for filing under Brazil’s equivalent of the Offshore Voluntary Disclosure Program ends October 31, but news reports suggest that more than US$12.6 billion in foreign bank accounts held by more than 25,000 Brazilians have already been disclosed, leading to fines and taxes of nearly US$4 billion on money ferreted away in accounts that had previously been inaccessible to tax officials. More than a third of that money has been declared in the last week alone, suggesting that by the end of the month, the absolute volume of fines and taxes may be near the amounts collected under a sister program in the United States, whereby 45,000 taxpayers contributed $6.5 billion to the U.S. Treasury.

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This Week in Markets and Democracy: BRICS Fund Infrastructure, France’s Corruption Trial, UK Takes on Kleptocrats

by Shannon K. O'Neil Friday, October 21, 2016
Brazil's President Michel Temer, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Chinese President Xi Jinping and South African President Jacob Zuma pose for a group picture during BRICS (Brazil, Russia, India, China and South Africa) Summit in Benaulim, in the western state of Goa, India, October 16, 2016 (Reuters/Danish Siddiqui). Brazil's President Michel Temer, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Chinese President Xi Jinping and South African President Jacob Zuma pose for a group picture during BRICS (Brazil, Russia, India, China and South Africa) Summit in Benaulim, in the western state of Goa, India, October 16, 2016 (Reuters/Danish Siddiqui).

BRICS Fund Infrastructure
As commodity prices have plunged, global growth slowed, and geopolitical competition risen, the BRICS’ interests have diverged, making annual meetings of the five emerging economies more complicated. Last weekend’s get-together in Goa, India focused mostly on counterterrorism and the New Development Bank (NBD), a two-year old alternative to the World Bank and other Western-dominated institutions. Its focus is green and sustainable infrastructure, seeded with $100 billion in capital. At the BRICS Summit, leaders celebrated the NBD’s first $900 million in loans for renewable energy projects in Brazil, China, India, and South Africa, and promised to expand the banks portfolio tenfold by 2020. The NBD joins the new Beijing-led Asian Infrastructure Investment Bank (AIIB), which promises a similar capital base for a more traditional infrastructure-based projects. Together they could rival the World Bank’s lending power.

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This Week in Markets and Democracy: Violent Kleptocracies, Ethiopia’s Unrest

by Shannon K. O'Neil Friday, October 14, 2016
Demonstrators chant slogans while flashing the Oromo protest gesture during Irreecha, the thanksgiving festival of the Oromo people, in Bishoftu town, Oromia region, Ethiopia, October 2, 2016 (Reuters/Tiksa Negeri). Demonstrators chant slogans while flashing the Oromo protest gesture during Irreecha, the thanksgiving festival of the Oromo people, in Bishoftu town, Oromia region, Ethiopia, October 2, 2016 (Reuters/Tiksa Negeri).

Fighting the Worst Kleptocracies
Worse than kleptocracies are violent kleptocracies, as defined in a new report by advocacy group The Enough Project. In these, leaders run the state as a predatory criminal enterprise, looting the treasury and using virtually all means of government power—the judicial system, military, and security forces—to intimidate, jail, and eliminate any opposition. With near unquestioned power, this all happens with impunity. South Sudan is a classic example—its leaders making millions off of a brutal civil war they fueled. Existing anticorruption tools and agreements—the OECD Anti-Bribery Convention and the UN Convention Against Corruption among them—do little to change this deadly status quo, according the report. Instead, it says the United States should crack down on these corrupt leaders—taking away their visas, imposing sanctions, seizing ill-gotten assets that come through the U.S. banking system, and using evidence from Foreign Corrupt Practices Act investigations to help go after not only the companies that pay bribes, but the officials who take them.

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Mexico’s Corrupt Governors

by Shannon K. O'Neil Wednesday, October 12, 2016
Javier Duarte, governor of the state of Veracruz, attends a news conference in Xalapa, Mexico, August 10, 2015 (Reuters/Stringer). Javier Duarte, governor of the state of Veracruz, attends a news conference in Xalapa, Mexico, August 10, 2015 (Reuters/Stringer).

Last June, Mexico elected new governors in twelve of its thirty-one states. As millions of voters went to the urns, corruption was a top concern (along with insecurity). Eight states saw the incumbent party kicked out; in four—Veracruz, Quintana Roo, Chihuahua, and Durango—the PRI lost for the first time in the party’s history.

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This Week in Markets and Democracy: Study on Factory Labor, Thai Anticorruption Court, Afghanistan Aid

by Shannon K. O'Neil Friday, October 7, 2016
A woman stitches leather gloves at the Pittards world class leather manufacturing company in Ethiopia's capital Addis Ababa, March 22, 2016. Picture taken March 22, 2016 (Reuters/Tiksa Negeri). A woman stitches leather gloves at the Pittards world class leather manufacturing company in Ethiopia's capital Addis Ababa, March 22, 2016. Picture taken March 22, 2016 (Reuters/Tiksa Negeri).

Why Trade Deals Matter for Workers Everywhere
The shift of low-skilled manufacturing jobs from industrialized to emerging economies helped lift millions out of poverty over the past few decades (even as it displaced Western workers). But a new study of Ethiopia’s growing manufacturing sector shows that while factory jobs raise wages throughout the economy, the benefits for workers are mixed. Compared to a control group of self-employed and informal sector workers, those employed in the new factories did not earn more and faced significantly higher health and safety risks—exposed to chemicals and injuries from unsafe working conditions. These findings show why trade agreements matter. By incorporating labor and environmental standards and mechanisms to enforce these rules, they can improve the livelihood of workers in all places.

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This Week in Markets and Democracy: EU Investigates Panama Papers, Airbus Subsidy Ruling, Och-Ziff Bribery Settlement

by Shannon K. O'Neil Friday, September 30, 2016
An Airbus A380 performs during a flying display at the 47th Paris Air Show at Le Bourget airport near Paris, June 21, 2007 (Reuters/Pascal Rossigno). An Airbus A380 performs during a flying display at the 47th Paris Air Show at Le Bourget airport near Paris, June 21, 2007 (Reuters/Pascal Rossigno).

The EU Investigates the Panama Papers
Six months after the first Panama Papers leak, revelations about the global shell company business continue. The latest tranche of documents from the International Consortium of Investigative Journalists (ICIJ) detail over 175,000 Bahamian companies, many linked to European Union (EU) politicians. Having just opened a Panama Papers-inspired inquiry into whether the European Commission or European governments were applying their own laws on tax-avoidance and financial transparency, the new data illuminates potential test cases—including the former EU commissioner for competition policy and current UK home secretary. Reporters and the named politicians will be asked to speak at upcoming hearings that could lead to reforms.

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This Week in Markets and Democracy: Brazil’s Lula Charged, Thai Labor Case, Corporate Tax Battles

by Shannon K. O'Neil Friday, September 23, 2016
Brazil's former president Luiz Inacio Lula da Silva attends an event with workers' unions leaders against the privatization of Brazilian state companies and against Brazil's interim President Michel Temer, in Rio de Janeiro, Brazil, June 6, 2016 (Reuters/Ricardo Moraes). Brazil's former president Luiz Inacio Lula da Silva attends an event with workers' unions leaders against the privatization of Brazilian state companies and against Brazil's interim President Michel Temer, in Rio de Janeiro, Brazil, June 6, 2016 (Reuters/Ricardo Moraes).

Brazil’s Lula Charged with Corruption
After months of speculation, Brazilian judge Sérgio Moro allowed bribery charges against former president Luiz Inácio Lula da Silva (Lula) to move forward. He is accused of accepting $1.1 million in improvements for his beachfront apartment from OAS, one of Brazil’s largest construction companies, in exchange for Petrobras contracts. Lula is the latest and most prominent figure to be charged in the Lava Jato investigations, joining dozens of other political and business leaders, including former lower house speaker Eduardo Cunha, former Worker’s Party (PT) treasurer João Vaccari Neto, and construction magnate Marcelo Odebrecht. Next up may be President Michel Temer, already named in Odebrecht’s plea bargain for soliciting illegal campaign contributions during the 2014 presidential election.

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Beyond Supply Chain Transparency Laws

by Guest Blogger for Shannon K. O'Neil Thursday, September 22, 2016
Cresencio Bumanglag, a worker of Dole Food Company, rakes coffee fruits for them to dry at the company's Waialua coffee and cocoa farm on the North Shore of Oahu, in Hawaii November 9, 2011. Leaders of major nations bordering the Pacific will meet from Wednesday to Sunday in Hawaii in an Asia-Pacific Economic Cooperation (APEC) summit on building a regional free trade area and an environmental initiative to help spur world economic growth. Picture taken November 9, 2011 (Reuters/Yuriko Nakao). Cresencio Bumanglag, a worker of Dole Food Company, rakes coffee fruits for them to dry at the company's Waialua coffee and cocoa farm on the North Shore of Oahu, in Hawaii November 9, 2011. Leaders of major nations bordering the Pacific will meet from Wednesday to Sunday in Hawaii in an Asia-Pacific Economic Cooperation (APEC) summit on building a regional free trade area and an environmental initiative to help spur world economic growth. Picture taken November 9, 2011 (Reuters/Yuriko Nakao).

Global trade and the supply chains that support it are undergoing a period of profound change. Supply chains face threats including a resurgence of protectionism, climate change, decaying infrastructure, and human rights abuses. The Development Channel’s series on global supply chains will highlight analysis on emerging trends and challenges. This post is from Zoe Rubin, former intern with the Council on Foreign Relations’ Civil Society, Markets, and Democracy Program. 

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