Development Channel

In a post originally published on ForeignPolicy.com, Shannon O’Neil explains what Brazil and the rest of Latin America can teach the United States about keeping unregulated donations out of elections. On September 17, Brazil’s Supreme Federal Court ruled corporate contributions to political campaigns unconstitutional. The case, brought forward by Brazil’s bar association in 2013, ends companies’ outsized influence in electoral campaigns, contributing to the country’s ongoing efforts to root out corruption. The American political system could learn a thing or two from Brazil about the dangers of letting corporate donations run amok, as the Latin American nation works to check the private sector’s influence on its elections. Since the 2010 Citizens United Supreme Court decision, corporations have been able to contribute unlimited amounts to Super PACs (they still can’t contribute directly to candidates) backing candidates running for political office. Even worse, they can also do so through “social welfare” organizations, effectively rendering their donations anonymous. As a result, corporate and anonymous contributions have grown exponentially. As of August 4, super PACs had already raised more than ten times their take at this point in the last presidential cycle. Former Governor Jeb Bush and the super PAC that backs him brought in a combined $114 million in just the first half of this year. Campaign finance laws in the United States diverge substantially from those in Latin America, which uniformly frowns on unlimited individual donations. Despite having no shortage of wealthy, politically connected men and women, these nations limit their economic power over electoral contests. Individual contributions, in general, play a small role in political campaigns in the region. Whereas a Sheldon Adelson or George Soros can effectively buy a primary candidate in the United States via donations to outside spending groups (Newt Gingrich effusively thanked Adelson in 2012 for single-handedly keeping his campaign alive), Mexican telecom mogul Carlos Slim can only donate to parties: aggregate individual contributions in Mexico can’t rise above ten percent of total party financing. Brazil is more lax: its richest man, Jorge Paulo Lemann, can donate up to ten percent of his previous year’s income to campaigns—granted, that’s still a lot of money, but at least it’s regulated. Rather than relying on wealthy individual donors, many countries across the Western Hemisphere fund their elections with public money—over half of all Latin American democracies, in fact. And while most allow some corporate financing of campaigns, they impose more stringent limits than in the United States. Colombia forbids corporate money in presidential races. Costa Rica, Ecuador, and Paraguay have banned all corporate donations to political campaigns, due in part to worries about their power to skew the political process. Many of these electoral systems try to diminish the role of money altogether by instituting spending caps. Mexico, for one, has taken this to the extreme. For its federal deputy races, the rules limit campaign spending to roughly $85,000, or $1,400 a day. The National Electoral Institute also controls the airwaves, buying and then allocating advertising slots to candidates and parties. This brings us to Brazil, which, until recently, proved the exception to its neighbors’ rules. Brazilian companies, if they chose, could donate up to two percent of gross revenues to campaigns (equivalent to nearly $1 billion a piece for its biggest players). Construction conglomerate Odebrecht, meat processing company JBS, bank Santander Brasil, sugar and ethanol producer Copersucar, and a handful of other multibillion-dollar corporations accounted for more than ninety percent of all spending in last year’s presidential elections and some $580 million across all elections in 2014. The pay-for-play nature of these direct contributions was most visible during the 2012 election, when the construction company Andrade Gutierrez increased its political contributions by 500 times over the last election, just as federal and state governments were awarding contracts for the World Cup soccer stadiums. (Andrade Gutierrez would win one-quarter of the bids, including one for a $900 million stadium in Brasilia.) The still-unfolding Operation Carwash scandal upended this status quo. Not content with their legal campaign finance channels, major companies in Brazil overcharged state-backed energy company Petrobras for construction and service work, and then shared some $2 billion in spoils with Brazil’s political parties (as well as Petrobras executives). In the scandal’s wake, the treasurer of the governing Workers’ Party landed in jail. The lower house speaker of the National Congress and Brazilian Democratic Movement Party leader has been indicted, and dozens of other prominent politicians and party leaders are under investigation for graft. The recent Brazilian Supreme Court ruling addressed the resulting citizen outrage. Having taken on corporate malfeasance and meddling, the country now needs to rebuild its democratic political process. The United States, too, may face a similar conundrum, with corporate donations successfully dominating pay-to-play politics. What the United States and Latin America do share is a worrisome lack of transparency in campaign money flows, making it hard to know who is influencing the rules, regulations, and policy decisions affecting citizens’ daily lives. In the United States, this results from laws and court decisions shielding big donors from public scrutiny. Organizations with innocuous names like Right to Rise funnel hundreds of millions of dollars in “dark money” to causes and candidates. In most of Latin America, the lack of transparency stems not from the rules themselves but from their weak enforcement. Hundreds of millions of dollars, if not billions, flow illegally into electoral campaigns throughout the region. The public rarely gains a glimpse of these payouts. But when it does, the foul play is shocking: authorities stopping a plane full of pesos in Mexico or suitcases stuffed with Venezuelan cash ending up in Argentina. These campaign finance shenanigans breed broader systemic political corruption, as witnessed in the scandals unfolding in Brazil, Mexico, Chile, and Guatemala. All democracies struggle with the deep ties between campaign finance and corruption. In Brazil, the payoff from corporate campaign contributions has been surprisingly direct: one study estimated a fourteen-fold return on contributions to a winning candidate in the form of awarded public works projects. In the United States, the connections are usually more opaque, walking the fine line between constituency service and political corruption. And the estimated returns on investment for campaign contributions are much lower, with direct lobbying by far the most economically effective way for corporations intent on influencing policy. The challenges differ: The United States needs better rules, while Latin America needs better enforcement. All the nations across the Western Hemisphere need to improve electoral transparency—essential for democracy—enabling citizens and voters to know who gives what to whom, thereby allowing them to use their gray matter to figure out why.

The biggest achievement of the past week’s United Nations General Assembly (UNGA) in New York was the adoption of a new fifteen-year plan for global development. Replacing the soon-to-expire Millennium Development Goals, seventeen new Sustainable Development Goals (SDGs) will guide UN and domestic development policies through 2030 with an ambitious, and some say overly idealistic agenda. Based on UN member and civil society input over a three-year process, the final set of SDGs aims to eliminate hunger, reduce inequality, promote shared economic growth, and “end poverty in all its forms everywhere.” President Obama, UN Secretary General Ban Ki-moon, and Pope Francis all endorsed the new “global goals” during the three-day UN Sustainable Development Summit held in the run-up to UNGA. Here are two major takeaways from the summit: The Global Goal of Good Governance One of the more controversial global goals is SDG 16, which promotes inclusive, accountable institutions and includes twelve specific targets on anti-corruption, representative decision-making, access to information, and the rule of law. With a UN-led global survey of over eight million people ranking governance as a top priority (the second most popular answer in low-income countries), leaders incorporated it into the SDGs despite “adamant resistance.” While many, including U.S. policymakers, support the citizen-led goal, others point to the ambiguity over what “good governance” means, owing to differing perceptions between developed countries and poorer ones. Further, defining and measuring corruption remains difficult, with no standardized cross-country metrics. While polling data propelled governance onto the SDG agenda, citizen participation may also determine whether goal 16’s accountability objectives are achieved. Financing the Global Goals The SDGs now set, the development community must find ways to pay for them as costs are estimated to run $3 trillion a year or more. With private capital as a growing funding source—foreign direct investment (FDI) outpaced government-led assistance by about five times last year—the UN and domestic donor agencies embraced multinationals during the summit. A “UN Private Sector Forum” convened business leaders including Unilever’s Paul Polman, Facebook’s Mark Zuckerberg, and MasterCard’s Tim Murphy with German Chancellor Angela Merkel and Oxfam International’s Winne Byanyima to discuss SDG priorities. Many pitched a win-win “business for good” model that stimulates domestic economic growth and cuts poverty while expanding the customer base. Yet others highlighted the limits of private investment—UNGA President Mogens Lykketoft pointed to the failure of big corporations and wealthy individuals to pay taxes. Next week rich countries may advance this conversation with new international rules to govern multinationals.

CFR’s Civil Society, Markets, and Democracy (CSMD) Program highlights noteworthy events and articles each Friday in “This Week in Markets and Democracy.”  The U.S. Fight Against International Corruption What do kleptocrats in Nigeria, South Korea, Equatorial Guinea—and as of this week, Malaysia—have in common? Fear of the U.S. Department of Justice (DOJ). Over the past five years its Kleptocracy Asset Recovery Initiative has investigated and prosecuted corruption cases from each country, recovering over $600 million in ill-gotten assets. Increasingly active prosecutors trace and seize money that comes within U.S. borders, or through U.S.-based banks, revealing New York luxury apartments purchased through shell companies, bank accounts worth hundreds of millions, California beach homes, and even $1 million in Michael Jackson memorabilia. They don’t always succeed—the DOJ had recovered just half of its outstanding claims as of last year, the majority coming from one $480 million settlement involving former Nigerian dictator Sani Abacha. And not all the money makes its way back home, as DOJ has a less-than-perfect track record in victim compensation. But it remains one of the most effective U.S. tools against global corruption, as long as kleptocrats prefer to “invest” their money in more stable Western markets. Using Data to Head off Future Atrocities This week the United States Holocaust Memorial Museum (USHMM) launched The Early Warning Project, designed to prevent the very acts of genocide the museum commemorates. Its statistical assessments use historical indicators including political violence, infant mortality, and state failure to determine the countries most at risk of mass atrocities, defined as state-led killings of over 1,000 people. Myanmar and Nigeria top their rankings based on 2014 data. Nigeria seems to have overcome the immediate threat, completing the first peaceful power transfer in the country’s democratic history (though Boko Haram-perpetrated killings and alleged military abuses in the counterattack continue). Myanmar is still playing out in the run up to November’s parliamentary elections. Disenfranchised, the Muslim ethnic Rohingya minority continues to face systemic and escalating discrimination. And Myanmar’s election commission last week disqualified almost all Muslim opposition candidates (then reinstated eleven), threatening an already fragile democratic transition. By identifying elevated risks in fifty countries—including Sudan, Egypt, and Afghanistan—the USHMM hopes to galvanize global attention and action. What We are Reading on the UN’s New Global Goals Today world leaders adopted seventeen new Sustainable Development Goals (SDGs) at the United Nations (UN) General Assembly. Aiming to eliminate extreme poverty by 2030, targets range from reducing inequality and ending hunger to action on climate change. Here is what others are saying about the new development agenda: The word “sustainable” is used more than seventy five times in the text of the seventeen SDGs—but what does it mean? NPR talked to the Center for Global Development and other experts to find out. In a Huffington Post op-ed, U.S. National Security Advisor Susan Rice argues that the new UN development agenda is critical to U.S. national security, particularly SDG goal 16: good governance. Others are less enthusiastic about SDG 16. Matthew Stephenson, writing for The Global Anticorruption blog, argues that while the agenda’s anti-corruption focus is important, the goal will be difficult to measure and ultimately may prove counterproductive. Finally, FastCoExist argues that by painting an overwhelmingly positive picture of the SDGs without explaining poverty’s complexities, the UN may do a disservice to finding solutions needed to end it.