Corruption

This is a guest post by Allen Grane, research associate for the Council on Foreign Relations Africa Studies program. Last week, South African High Court Judge Francis Legodi ruled against the Zuma administration moratorium on the country’s domestic trade in rhino horns. As it is possible to harvest a rhino’s horn without killing the animal, there is discussion about the potential for a regulated trade in rhino horns. In light of the dramatic increase in rhino poaching, the argument that legalizing trade in rhino horn could help save the species has been gaining steam. The high court ruling is a reflection of this thinking. However, the decision from the judge may not actually mean much. Legodi’s decision is based on due process. He found that in 2009, when the moratorium was imposed, the then minister of environmental affairs did not give adequate notice of plans to impose the moratorium or allow proper public participation in the process. In the past, rhino farmers have argued that their right to sale rhino horn is guaranteed by the South African Constitution and its bill of rights which promises the “…use of natural resources while promoting justifiable economic and social development.” The rhino breeders who brought the case before the court argue that rhino horn is a renewable resource, as a rhino that is dehorned will grow the horn back (rhino farmers are able to harvest several horns in a rhino’s lifetime). And, because the South African government has long allowed people to ‘own’ rhinos, the breeders do have property rights to the animals. The South African Water and Environmental Affairs Ministry quickly announced its intention to appeal the decision. This action effectively suspends the High Court’s ruling, meaning the domestic rhino horn trade is still not legal in South Africa. The court’s decision, and the recent headlines it has made, may prove more significant than the domestic trade. Indeed, the demand for rhino horn within South Africa is relatively low, and rhino breeders (and the South African government) do not stand to profit much from a domestic trade. The largest markets for rhino horn are in Asia, where rhino horn can go for as much as $65,000 a kilogram. Many view the petition by rhino breeders as a way to convince the UN’s Convention on the International Trade of Endangered Species (CITES) to legalize the trade internationally. It is not a coincidence that the next meeting of CITES will be in South Africa next year. In light of the upcoming CITES meeting, the South African government has already formed a committee to determine the viability of a legalized trade. As rhino horn is renewable, this committee is meant to research whether or not a legal trade will alleviate the current pressure on rhino populations from poaching. It is believed that this committee’s recommendations will influence the South African governments decision whether to appeal to CITES for a legal international trade in rhino horn. Critics of this plan say that legalizing the trade would make the market for rhino horn larger, while proponents argue that by legalizing the trade the supply will increase and reduce the extravagant prices that currently drive rhino poaching. Both sides of the argument have merit. While the High Court’s decision may or may not stick, the end result may be a harbinger of what’s to come on an international scale.

Col. Sambo Dasuki, ret., National Security Advisor to Nigeria’s President Goodluck Jonathan from 2012 to 2015, stands accused of stealing huge sums of money intended for the military’s struggle against Boko Haram. He has denied the accusations and said that he is prepared “to open the can of worms,” but only at his trial. Dasuki’s career runs like a thread through Nigeria’s post-civil war (1967-70) history and crosses between traditional, military, and civilian politics. Born in 1954, he is the first son of Alhaji Ibrahim Dasuki, the Sultan of Sokoto, the most senior traditional ruler in Nigeria and generally regarded as the spiritual leader of the country’s Muslims. Dasuki entered the military and participated in U.S. military training: he attended the U.S. Army School of Artillery and the U.S. Army Command and General Staff College. His biography also says that he has degrees from American University and George Washington University, both in Washington, D.C. Some Nigerians will cite Dasuki as an example of how U.S. military training makes better coup plotters than democrats. He was an active coup-maker. He participated in Gen. Muhammadu Buhari’s 1983 military coup against civilian president Shehu Shegari. Subsequently, he also participated in the 1985 coup led by Gen. Ibrahim Babangida against Gen. Buhari (he was one of four officers who arrested Buhari). Subsequently, he served as General Babangida’s aide de camp while the latter was military chief of state (1985-92). Babangida’s successor as military chief of state was Gen. Sani Abacha (1993-98), who viewed Dasuki (and many others) with suspicion and was notorious for human rights violations. Abacha removed Alhaji Ibrahim Dasuki from the Sultinate of Sokoto and imprisoned Gen. Olusegun Obasanjo, a former military chief of state (1976-1979), who later would serve as civilian chief of state from 1999 to 2007. During the Abacha period, Sambo Dasuki left government and lived outside of the country for various periods. Sambo Dasuki returned to Nigeria following the restoration of civilian government in 1999. He remained close to Gen. Babangida. Goodluck Jonathan made him his national security advisor in 2012. It was in that position that he was the “face” of the Jonathan administration’s delay of the 2015 elections by almost two months, ostensibly because of a military campaign against Boko Haram. The western media is linking Dasuki’s arrest to the increasing Boko Haram carnage. Given the utter lack of transparency on military expenditure, it is premature to assume automatically Dasuki’s guilt. Indeed, given Dasuki’s threat to “open the can of worms,” presumably implicating many others in the Jonathan administration, there must be a question as to whether the trial will ever take place. In any event, there are many reasons for bad blood between Dasuki and President Buhari.

This is a guest post by Claire Wilmot, a former intern for the Council on Foreign Relations Africa Program. She is a master of global affairs candidate at the University of Toronto. You can follow her on twitter at @claireLwilmot. Violence in Burundi has escalated significantly over the past month. Opposition leaders and activists have been tortured and killed, independent media is being stifled, and human rights monitors report the daily discovery of bodies across the capital. It is estimated that at least 240 have been killed and thousands have fled since April, when President Pierre Nkurunziza announced his intention to flout a constitutional two-term limit and run for a third term in office. It is unsurprising that Nkurunziza’s refusal to relinquish power triggered a wave of violence, given the history of civil conflict in Burundi. The Arusha Accords, which ended Burundi’s 1993-2005 civil war recognized that the country’s vulnerability to violence stemmed from “a struggle by the political class to accede to and/or remain in power.” Arusha implemented a number of provisions that sought to lower the stakes of political competition in Burundi—a pivotal mechanism was limiting Burundi’s president to two terms in office. Limiting terms for leaders helps avoid the kind of zero-sum politics that can lead to violence in highly divided societies. Burundi’s colonial history gave rise to a state-capture complex—access to the state is a lucrative privilege for the political class in power, often at the expense of the majority. In poor or divided societies, maintaining power becomes a high-stakes game, and can lead political competitors to resort to violence. Term limits can play a stabilizing role by leveling the political playing field. Newcomers have a greater chance of ascending the presidency if the incumbent must step down after two terms, and opponents are more likely to challenge the government electorally. Nkurunziza’s victory in the July elections, which were not free or fair, proved to the opposition that contesting power peacefully is futile. Despite growing fear that the ruling party’s rhetoric is reminiscent of the genocide in neighboring Rwanda, it is unlikely that the conflict in Burundi will play out along ethnic lines. Burundi has been successful in ethnically integrating the government and key institutions. Political identities are not determined by ethnicity alone—both Hutu and Tutsi make up the opposition, and both have suffered government repression. Fears over possible military fragmentation are founded; however, the crowding out of certain officers appears to be based on party affiliation rather than ethnicity. The heart of the conflict is between Nkurunziza’s faction of the ruling CNDD-FDD, and those unwilling to accept democratic backpedaling. The AU was quick to condemn violence in Burundi, but failed to pressure Nkurunziza to respect his country’s constitution and step aside, which might have prevented violence. However, presidential term limits are a touchy subject at the AU—many heads of state in the region have successfully pursued strategies similar to Nkurunziza. The AU’s Peace and Security Council issued a statement in October urging Nkurunziza to commit to inclusive negotiations with the opposition. So far, he has failed to include key opposition groups in the inter-Burundian dialogue, denouncing them as “enemies of the nation.” Extending the dialogue to these groups would recognize the legitimacy of Nkurunziza’s political opponents, something he is yet unwilling to do. The AU also proposed an Africa-led peace implementation mission should a political solution fail. Ethnic rifts may be less salient, but political divisions have become explosive. Burundi’s conflict is unlikely to culminate in genocide; however, the re-emergence of civil war could be just as devastating. A political solution may still be possible for Burundi, and international actors should continue to pressure Nkurunziza to pursue inclusive dialogue with the opposition. The key to preventing future political violence, however, lies in defending constitutional provisions that encourage peaceful contestations of power.

In countries where corruption has become “structural,” distorting much of daily life, it can assume very localized forms. A petition by thirty-two imams, deputy imams, and muezzins of certain mosques in the Isa local government area of Sokoto state in Nigeria provides a window for outsiders into corruption at the local, grass roots level. The religious leaders have complained to the Independent Corrupt Practices Commission (ICPC) that the past chairman of the Isa local government area, Alhaji Umar Muhammad Wali, had “diverted” their allowances which, the petitioners say, the Sokoto state government had directed be paid to all imams, deputy imams, and muezzins on a monthly basis. The petitioners claim that imams were to receive 20,000 Naira per month (USD 100.80), deputy imams, 15,000 Naira (USD 75.37), and muezzins, 10,000 Naira (USD 50.40). Though Sokoto state is poor, it is the seat of the Sultan of Sokoto, the most senior Islamic traditional ruler in Nigeria, and the direct descendant of Usman Dan Fodio, who created the Sokoto Caliphate in 1806. The Isa local government area is in the far north of the state, and borders on Niger. Its population is mostly Muslim. Boko Haram, the jihadist terrorist group seeking to overthrow the secular state, has only rarely operated in Sokoto, though it has tried to murder the sultan, whom it sees as a collaborator with the secular government in Abuja. The state’s population is mostly Muslim, but there is a Christian minority (there are Anglican and Roman Catholic bishops). The amounts of money that the former chairman allegedly diverted from the Islamic religious leaders in the Isa local government area would likely be a significant part of each individual’s personal income. The ICPC is a federal body established in 2000. It receives petitions and reports of corruption and it has prosecutorial authority. However, it is usually underfunded, and it has had few prosecutions or convictions. But, a revitalized and energized ICPC could play a positive role in President Muhammadu Buhari‘s anti-corruption crusade. How it responds to the Isa petition could indicate whether it could play an effective role at the grass roots.

Tokyo Sexwale, ex-freedom fighter, ex-Robben Island inmate, ex-premier, ex-cabinet minister, and multi-millionaire businessman has confirmed that he is a candidate for the presidency of the scandal-ridden FIFA (Federation Internationale de Football Association). Sexwale, said to have his eye on the South African presidency, helped organize South Africa’s successful bid for the 2010 World Cup and played a significant role in its success. Universally known as ‘Tokyo,’ his full name is Mosima Gabriel Sexwale (the ‘Tokyo’ moniker is based on his youthful enthusiasm for karate). By most accounts, Sexwale has been exceptionally successful at pretty much everything to which he has turned his hand. (In 2009, he said that his wealth, based on oil and diamonds, amounted to two-hundred million dollars.) Soccer, called ‘football’ in most of the world, is overwhelmingly popular in Africa in general and South Africa in particular. Issa Hayatou, of Cameroon, is the current acting president of FIFA. Especially in the aftermath of FIFA scandals, there will be strong African sentiment for an African FIFA president. Sexwale has a successful history with FIFA, he has been a member of their fair play committee and an organizing committee board member, he is also the lead on FIFA’s Monitoring Committee for Israel and Palestine. Sexwale’s candidacy for the FIFA presidency is thoroughly credible. South Africa is sports-mad. Because of this, South Africans are very, very good at sport. Their exceptional athletic success contributes to a common national identity and pride right across the racial rainbow. But, like other areas of national life, sport is deformed by the consequences of apartheid. Soccer is typically a ‘black’ sport. White players are rare. One of the best known is Matthew Booth, called the “White Knight” because he was at one time the only white player on the South African national squad. Similarly, rugby is a “white sport,” with relatively few black or coloured players. The 2015 South African World Cup squad had twenty-three white players and eight “of colour” in a country that is 80 percent black, 9 percent coloured, and perhaps 8 percent white. (Unlike in the United States ‘coloured’ is not a pejorative label in South Africa.) Other sports where South Africa has an international reputation include tennis (Kevin Anderson), golf (Gary Player, Louis Oosthuizen), and swimming (Chad le Clos, Cameron van der Burgh). These athletes are mostly white. In this environment, Tokyo Sexwale has perhaps a qualification for the FIFA presidency that may not be internationally known. Through a foundation he has established, he is part of an international effort to break down racial boundaries in sport. On October 28, he said to the BBC:  “With this initiative we are giving a red card to racism in sport. Not just football. We are saying don’t throw bananas at players and do not make derogatory comments about the Williams sisters.” (The last is a reference to the celebrated American tennis players, Venus and Serena.) Other countries in addition to South Africa would benefit from de-racializing sport.

This is a guest post by Luis Ferreira Alvarez, an analyst with Stratas Advisors’ Global Biofuels Assessment and Global Alternative Fuels divisions covering Latin America.  As Brazil’s Petrobras corruption investigation continues to roil its economy and politics, the ethanol sector is emerging as a clear beneficiary. New government policies are boosting ethanol sales, chipping away at gasoline’s market share. Brazil’s ethanol comes from sugarcane. Each year producers look to market prices and expectations to decide where to direct their crops. When sugar prices fall, ethanol production increases (and vice versa). Producers must also bet on what type of ethanol will bring higher returns: anhydrous or hydrous. Anhydrous ethanol production is more costly, but demand is guaranteed by Brazil’s laws requiring it be blended into gasoline at the pumps. Hydrous ethanol is a neat fuel that’s cheaper to produce, but competes directly with gasoline. It also has a lower energy content, translating into fewer miles per gallon and meaning that prices must stay below 70 percent of gasoline prices to make it competitive.  The vast majority of Brazilian cars are flex fuel, capable of running on blended gasoline or hydrous ethanol. In 2014, Brazil produced 7 billion gallons of ethanol, making it the world’s second largest producer after the United States. Nearly all went to transportation, with anhydrous and hydrous ethanol accounting for nearly 50 percent of all vehicle fuel consumption (Figure 1). Figure 1: Gasoline and Ethanol Market Shares in 2015F  Stratas Advisors, "Global Biofuels Outlook," 2015. The last several years have not been easy for ethanol producers. The federal government reduced credit lines provided through the Brazilian Development Bank. Droughts hit harvests in the Center-South region, where some 90 percent of sugarcane is grown. Debt burdened companies, as many had taken out loans during former President Lula da Silva’s quest to make Brazil the “green Saudi Arabia.” And falling global sugar prices hurt an industry still recovering from the 2008 financial crisis. Government policies also undermined the ethanol sector. In its bid to control inflation, the government capped gas prices and removed the infrastructure tax (CIDE) on gasoline, making hydrous ethanol uncompetitive at the pump. Consumers quickly switched fuels, leading to a 10 percent decline in 2012 (Figure 2). As a result, many producers invested in anhydrous ethanol or switched back to sugar. Some forty other ethanol plants folded. Figure 2: Gasoline C and Hydrous Ethanol Prices in Brazil Stratas Advisors, ANP, August 2015. In the wake of the Petrobras scandal, the government implemented three major policy shifts to improve its finances and those of the state oil company. First, it increased the required ethanol share in gasoline from 25 percent to 27 percent. Second, Petrobras raised gasoline prices in late 2014. Finally, the government re-introduced the CIDE tax on gasoline in early 2015. Figure 3: Market Share of Pure Gasoline and Total Ethanol in Brazil Stratas Advisors, ANP, September 2015. Note: 2015 data is for January to July. These policy shifts, combined with rain in Brazil’s sugar-producing Center-South region, revitalized the ethanol sector. Producers shifted nearly 60 percent of their sugar harvest to ethanol, and sales rose 28 percent between July 2014 and July 2015 (Figure 3). Although challenges remain—producers are heavily indebted, global sugar prices are low, and gasoline price controls are still in place—ethanol may be among Brazil’s few stable sectors in the coming months.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This post is from Nadia Naviwala (@NadiaNavi), an Islamabad-based researcher and writer. Here she details a recent New York Times story on U.S. development assistance in Pakistan, and explains why investigating aid efforts there requires a different approach. The New York Times published a story last month about the second largest United States Agency for International Development (USAID) mission in the world: Pakistan. The Times argued that despite over a decade of work and billions of dollars, “aid has had minimal impact on the ground,” thanks to overreliance on “American contractors with little development experience,” and corrupt Pakistani subcontractors that don’t do the work or return equipment. As a former country representative for the United States Institute of Peace (USIP), a USAID desk officer, and a Congressional staff member who helped to lead the creation of the Commission on Wartime Contracting, I have been involved in U.S. assistance efforts in Pakistan since 2009. My research and experience with Pakistani civil society made me an early and vocal critic of foreign-led development efforts in Pakistan. Yet the Times story’s criticisms are not supported by the evidence. A Lawyer in Peshawar Sues USAID The Times story centered on a USAID contract in Pakistan’s Federally Administered Tribal Areas (FATA) terminated in 2010 for waste, fraud, and abuse. As the Times told it, three lawyers in Peshawar accuse USAID of failing to recover U.S. taxpayer money from a court settlement that awarded the agency damages. It continues: “A recent lawsuit against the agency highlighted the challenges and image problem it faces in a country where American aid is often viewed with suspicion… “Documents and correspondence filed by the lawyers lay bare the money and equipment that went to waste in a project in Pakistan’s insurgency-hit tribal areas…. “U.S.A.I.D. suspended Academy for Educational Development from United States government contracts…Academy for Educational Development was also awarded at least $300,000 after a drawn-out arbitration process with its Pakistani subcontractors — money that should have been returned to U.S.A.I.D. The Pakistani lawyers who filed the suit said that the aid agency had made no attempt to recover the money. “For many Pakistanis, the case is another puzzling instance of wastefulness. ‘This is U.S. taxpayer money,’ Sanaullah Khan, one of the lawyers, said. ‘Why is U.S.A.I.D. walking away from an ongoing legal process?’” The unasked question is, why did a Pakistani lawyer in Peshawar dedicate his time (unpaid) to chase American taxpayer money? After contacting Sanaullah Khan, one of the lawyers involved in the suit, it became clear that the Times is conflating two sets of cases. The first relates to local court battles over contracting corruption, for work USAID supported in Pakistan before 2010. The more recent lawsuit is over unpaid legal fees that have nothing to do with the development agency’s impact there. In 2010, USAID discovered corruption tied to the Academy for Educational Development (AED), a U.S. contractor working in FATA, thanks to a whistleblower who wrote a letter to President Obama. Khan, AED’s Director of Legal Affairs at the time, says he was left behind to fight off subcontractors after USAID cut ties and AED dissolved. Engineering subcontractors then sued AED for around $9 million, though a Peshawar court in 2013 decided these claims were illegitimate. They awarded damages in the other direction—subcontractors were to pay AED a total of $300,000, while AED owed them only $60,000. As to why USAID is not getting involved in the legal process to claim this $300,000 (which is still tied up in appeals), the U.S. Embassy in Islamabad explains: “AED’s subcontractors are not and were never in a contractual relationship with USAID. Because USAID’s contract was with AED and not with AED’s subcontractors, there is and was no legal way for USAID to recover funds.” In addition, the U.S. Department of Justice (DOJ) reached a settlement with AED in 2011. According to the terms, AED paid USAID $5.3 million dollars, plus another $350,000, plus the company’s remaining cash assets—possibly totaling over $15 million. It released both parties from future claims. Khan is now suing the dissolved AED in a Peshawar court for $750,000 in unpaid legal fees (the second case). Khan named USAID’s Pakistan mission director in the claim and asked the court to freeze USAID’s bank accounts in the country until he is repaid. His case faces a challenge by the 2011 DOJ settlement that specifically states the U.S. government is not liable for AED’s lawyers’ fees. In the Court of Public Opinion Khan likely hoped the Times publicity would help advance his cause. Less clear is why the Times extrapolates these cases to make their own about USAID’s minimal impact in Pakistan when the details undermine their argument. The fraud the Times describes happened over five years ago—before the implementation of the $7.5 billion, five-year aid program (known as the Kerry-Lugar-Berman Act) that the story calls into question. Further, the Obama administration acted swiftly and severely against AED’s corruption, effectively “killing” the company. They touted AED’s investigation and suspension as a success story in USAID accountability. The Times’ editors likely realized the overreach and within days of publication changed the title from, “In Pakistan, U.S. Aid Agency Produces Dubious Results,” to “In Pakistan, U.S. Aid Agency Faces Skepticism.” (They also added a lengthy editor’s note about their interactions with USAID in reporting the story.) Surprisingly Khan is not among the skeptics of U.S. development programs. He supports the work AED and USAID did in FATA. “Only the engineering team was involved in corruption. The rest of the program was good and useful. I’d say ninety percent of all other components—in agriculture, health, education, training, development, there are many—worked tremendously well.” Contracting with Governments The Times’ criticism—and its focus on U.S. contractor relationships as a source of the problem—detracts from more useful scrutiny of USAID’s work in Pakistan over the past five years. In 2009, around the time of the AED scandal and the new multi-billion dollar aid package, USAID reorganized the way it implements projects in Pakistan. The agency terminated contracts with U.S.-based companies (at the behest of the late Ambassador Richard Holbrooke, then U.S. envoy to Afghanistan and Pakistan) and started shifting funding to local partners, primarily the Pakistani government. The Pakistan package has since been one of the largest experiments in contracting with a foreign government—referred to as government-to-government or “G2G” assistance—in the world. According to the U.S. Government Accountability Office (GAO), between 2010 and 2014, the value of G2G contracts in Afghanistan and Pakistan exceeded the total value of contracts with all other foreign governments (see: Figure 1). U.S. Government Accountability Office (GAO), "USAID Has Taken Steps to Safeguard Government-to-Government Funding but Could Further Strengthen Accountability," 2015. The approach is not without flaws. G2G would be more aptly named B2B, or bureaucracy-to-bureaucracy. The slow pace has been a huge frustration to both Pakistani and U.S. officials and prompted the gradual reintroduction of U.S. contractors in complex arrangements with government institutions— a relationship worth investigating. The Times makes an important point that whether U.S. money is lost to graft and waste matters, but fails to substantiate it. A more valuable question is whether U.S.-funded projects in Pakistan, including schools, clinics, roads, and power and water infrastructure, are operating and can be sustained once handed over to local governments. And whether the hundreds of millions the U.S. invested in training, capacity-building, policy, and advocacy programs are helping to meet that goal.

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.

Last week, the British authorities arrested former oil minister Diezani Alison-Madueke for corruption, bribery, and money laundering. She has been released on bail. Often lauded as “among Africa’s most powerful women,” she was the first female Nigerian Minister of Petroleum, and the first female President of the Organization of Petroleum Exporting Countries (OPEC), a position she currently holds. A product of the Nigerian old-line establishment, Diezani Alison-Madueke’s husband is a retired Nigerian Navy admiral. Notorious for her over-the-top luxurious life style, for many Nigerians she was the face of corruption at the highest levels and on the Nigerian "street" she was widely hated for her arrogance. She was close to President Goodluck Jonathan, and it is often alleged that she diverted state oil revenue to the candidates and causes of his then-ruling Peoples Democratic Party (PDP). Her mother lives in London. She traveled there after the inauguration of President Buhari to seek medical treatment. The British press reports that British law enforcement had opened an investigation on her for corruption as early as 2013. Her arrest appears to be for the violation of British, not Nigerian, law. British police have seized over forty-one thousand dollars from her in London. At about the same time, Nigerian police sealed her residence in Abuja. It is unclear how much cooperation there is between the British and Nigerian law enforcement authorities on this case. In an earlier, notorious case of corruption, the British authorities arrested, charged, convicted, and jailed former Delta state governor James Ibori for violation of British law after a Nigerian prosecution failed. On October 7, Nigeria’s Economic and Financial Crimes Commission announced the arrest of Olajide Omokore, the chairman of Atlantic Energy. Forbes in 2012 listed him among Ten Nigerian Multi-Millionaires You’ve Never Heard Of. According to Forbes, his business interests include steel, oil, dredging, haulage, and property development. He, too, has been a major financial angel of the now opposition PDP. Meanwhile, President Buhari has issued another warning about corruption. It is likely that anxiety among some in the Nigerian political class is rising. In an environment that has been riddled with corruption, who is innocent? Where will the prosecutions stop? However, Buhari has signaled that a line will be drawn, that there will be no witch hunts. But, people remember when he was military chief of state and the federal military government’s vigorous prosecutions for corruption. It was during Buhari’s first administration that Nigerian authorities tried to kidnap from London Umaru Dikko to stand trial for corruption. Nailed into a crate labeled “diplomatic baggage,” he was freed by the British airport authorities. The result was a major diplomatic incident.

At home and abroad, criticism has been mounting over President Muhammadu Buhari’s lack of cabinet appointments. He promised to appoint a cabinet by September 30. On that date, he submitted a list of twenty-one names to Senate President Bukola Saraki in a sealed envelope. He will submit additional cabinet nominations “in due course.” Sen. Saraki confirmed that he received the envelope, but said that, following Senate procedures, he would not open it until the next Senate plenary session on October 6. So, while there is speculation, Nigerians will not know definitively until then who is on the list. Nor will they know who will be assigned to which ministry. The international financial community, especially, has been impatient to know the composition of President Buhari’s economic team. It will have to wait a bit longer. As in the United States, Nigerian cabinet appointments require Senate confirmation. Today, October 1, is Nigeria’s independence day. The Nigerian media is noting that for the first time since independence from Britain in 1960, there is no cabinet in place on the country’s national day. In his national day broadcast to the nation, President Buhari defended the slow and deliberate pace of his cabinet appointments, saying ”Our government set out to do things methodically and properly.” Most of his broadcast recalled his achievements since coming into office: building a coalition of five countries against Boko Haran; initiatives to increase the power supply; first steps “taken to sanitize” the national petroleum company; auditing of the central bank and other revenue agencies; and, addressing arrears in government salaries. However, the broadcast is no sugar-coating exercise. It notes that fifty-five years after independence, “Countries far less endowed have made greater economic progress by greater coherence and unity of purpose.” His broadcast closed with an exhortation: “We must change our unruly behavior in schools, hospitals, market places, motor parks, on the roads, in homes, and offices. To bring about change, we must change ourselves by being law-abiding citizens.” That exhortation will remind some Nigerians of his “war against indiscipline” when he was military chief of state from 1983 to 1985.

The coup in Burkina Faso is bad news for democracy in Africa and also for African perceptions of the United States. The coup puts off the likelihood of an elected civilian government and has been roundly condemned by UN Secretary General Ban Ki Moon, French President Francois Hollande, and the U.S. State Department. The new head of state and primary beneficiary of the coup is General Gilbert Diendéré. He was closely associated with Blaise Compaoré who came to power through a 1987 coup and ruled the country until he was in turn overthrown twenty-seven years later in 2014. Though it was in reality a dictatorship, under Compaoré the government maintained democratic window-dressing in the form of elections. Diendéré was, among other things, an enforcer for Compaoré, and is linked to criminal behavior ranging from arms trafficking to Sierra Leonean rebels to the murder of opponents of the regime – none of which has ever been proven in court but is widely believed on the Burkinabe “street.” From the perspective of U.S. interests, Diendéré was also Compaoré’s point person on the U.S. Trans-Sahara Counter Terrorism Partnership. In 2010, for example, he presided over a U.S. Africa Command (AFRICOM)-sponsored training exercise in Mali; he and a contingent of Burkinabe troops were flown to the training site in U.S. aircraft. He also facilitated the U.S. training of Compaoré’s elite guard several years ago, the same unit that carried out this latest coup that has brought him to power. In sub-Saharan Africa, just below the surface, there is abiding suspicion that the U.S. bolsters abusive and anti-democratic regimes’ security organs in the name of counterterrorism without much thought to the long term consequences. Yesterday’s coup in Burkina Faso will feed those suspicions.

2015 is shaping up to be the anti-corruption year for Latin America. After resigning last week in the face of a growing corruption scandal, Guatemalan President Pérez Molina now faces trial and potentially jail. Investigations into government corruption have disrupted politics as usual in Brazil, Chile, and Mexico, while scandals continue to unfold in Argentina and Panama. The Dickens quote "it was the best of times, it was the worst of times” is perhaps too dramatic, but differences in how the cases are playing out across the region are quite striking. In Brazil and Guatemala, wide-ranging investigations have led to prosecutions and convictions of many of the nations’ most connected political and economic elites. In contrast, in Mexico, President Peña Nieto, the first lady, and the finance minister were recently cleared of conflict of interest allegations, and in Chile, President Bachelet’s son, Sebastián Dávalos, has so far evaded criminal charges in an influence-peddling scheme. The divergent outcomes are due in part to the differing nature of the alleged crimes. In Brazil and Guatemala, officials are charged with embezzling public funds. Through the use of wiretaps, email monitoring, and financial forensics, Brazilian prosecutors traced the flows of hundreds of millions of dollars that private companies overcharged the state-led energy company Petrobras for construction and service work, and then distributed among themselves and into political party coffers. And the Guatemalan president and the vice president are accused of running a customs fraud operation, pocketing tens of millions of dollars in import duties. The Chilean and Mexican cases on the other hand are about profiting from political access. In Chile, Caval, a company half-owned by Bachelet’s daughter-in-law, received a $10 million loan from Andronico Luksic through his Bank of Chile the day after Bachelet was reelected president. Her daughter-in-law and son then used the money to flip real estate, using insider information to buy land that was expected to quickly soar in value when the local government reclassified it for commercial development—reaping $5 million in profit. In Mexico, the president, first lady, and finance minister purchased homes from Grupo Higa, a construction conglomerate awarded hundreds of millions of dollars in public works contracts. The alleged links in both cases between favorable financial terms and political favors—and wrongdoing—are more difficult to prove than the embezzlement schemes. The divergent outcomes also reflect the importance of independent and tenacious prosecutors. Brazilian attorney general Rodrigo Janot and his team have gone after dozens of high profile suspects, including Eduardo Cunha, head of Brazil’s lower house of Congress; construction magnate Marcelo Odebrecht; and former President Lula da Silva, despite pushback from many economic and political leaders (President Rousseff has repeatedly supported the investigations). The enterprising Guatemalan attorney general Thelma Aldana has found a sophisticated and willing partner in the UN-backed and independent International Commission against Impunity in Guatemala (CICIG), using its ten years of experience building corruption cases to take on the nation’s highest ranking officials. This hasn’t been the case with Chile’s and Mexico’s more halting and limited prosecutorial investigations. In Chile, prosecutors have been slow in advancing the case against the Bachelet family, hindered by Dávalos ordering his computer erased before leaving the presidential offices at La Moneda. No whistleblowers have come forward; his former coworkers maintain their silence. In Mexico, the federal comptroller, an office created by and reporting to the president, led the investigation and limited its scope from the beginning. The comptroller cleared the president, the first lady, and the finance minister after determining that the property transactions pre-dated the administration and contract terms weren’t changed once they took office. In finance minister Videgaray’s case, the comptroller further decided that the intent to purchase (which occurred before he assumed his current office) mattered more than the signing and notarizing of documents. The investigation revealed the actual closing occurred months later and the cashing of the check didn’t happen until a few days before the Wall Street Journal broke the story. As Latin American nations work to break out of the middle-income trap, and struggle to grow in the face of global economic headwinds, the ability to take on corruption will increasingly matter. Corruption favors connections over quality, stifles entrepreneurship, and scares away foreign direct investment. This seems to be a lesson two of Latin America’s most open economies have yet to learn.

2015 is shaping up to be the anti-corruption year for Latin America. After resigning last week in the face of a growing corruption scandal, Guatemalan President Pérez Molina now faces trial and potentially jail. Investigations into government corruption have disrupted politics as usual in Brazil, Chile, and Mexico, while scandals continue to unfold in Argentina and Panama. The Dickens quote "it was the best of times, it was the worst of times” is perhaps too dramatic, but differences in how the cases are playing out across the region are quite striking. In Brazil and Guatemala, wide-ranging investigations have led to prosecutions and convictions of many of the nations’ most connected political and economic elites. In contrast, in Mexico, President Peña Nieto, the first lady, and the finance minister were recently cleared of conflict of interest allegations, and in Chile, President Bachelet’s son, Sebastián Dávalos, has so far evaded criminal charges in an influence-peddling scheme. The divergent outcomes are due in part to the differing nature of the alleged crimes. In Brazil and Guatemala, officials are charged with embezzling public funds. Through the use of wiretaps, email monitoring, and financial forensics, Brazilian prosecutors traced the flows of hundreds of millions of dollars that private companies overcharged the state-led energy company Petrobras for construction and service work, and then distributed among themselves and into political party coffers. And the Guatemalan president and the vice president are accused of running a customs fraud operation, pocketing tens of millions of dollars in import duties. The Chilean and Mexican cases on the other hand are about profiting from political access. In Chile, Caval, a company half-owned by Bachelet’s daughter-in-law, received a $10 million loan from Andronico Luksic through his Bank of Chile the day after Bachelet was reelected president. Her daughter-in-law and son then used the money to flip real estate, using insider information to buy land that was expected to quickly soar in value when the local government reclassified it for commercial development—reaping $5 million in profit. In Mexico, the president, first lady, and finance minister purchased homes from Grupo Higa, a construction conglomerate awarded hundreds of millions of dollars in public works contracts. The alleged links in both cases between favorable financial terms and political favors—and wrongdoing—are more difficult to prove than the embezzlement schemes. The divergent outcomes also reflect the importance of independent and tenacious prosecutors. Brazilian attorney general Rodrigo Janot and his team have gone after dozens of high profile suspects, including Eduardo Cunha, head of Brazil’s lower house of Congress; construction magnate Marcelo Odebrecht; and former President Lula da Silva, despite pushback from many economic and political leaders (President Rousseff has repeatedly supported the investigations). The enterprising Guatemalan attorney general Thelma Aldana has found a sophisticated and willing partner in the UN-backed and independent International Commission against Impunity in Guatemala (CICIG), using its ten years of experience building corruption cases to take on the nation’s highest ranking officials. This hasn’t been the case with Chile’s and Mexico’s more halting and limited prosecutorial investigations. In Chile, prosecutors have been slow in advancing the case against the Bachelet family, hindered by Dávalos ordering his computer erased before leaving the presidential offices at La Moneda. No whistleblowers have come forward; his former coworkers maintain their silence. In Mexico, the federal comptroller, an office created by and reporting to the president, led the investigation and limited its scope from the beginning. The comptroller cleared the president, the first lady, and the finance minister after determining that the property transactions pre-dated the administration and contract terms weren’t changed once they took office. In finance minister Videgaray’s case, the comptroller further decided that the intent to purchase (which occurred before he assumed his current office) mattered more than the signing and notarizing of documents. The investigation revealed the actual closing occurred months later and the cashing of the check didn’t happen until a few days before the Wall Street Journal broke the story. As Latin American nations work to break out of the middle-income trap, and struggle to grow in the face of global economic headwinds, the ability to take on corruption will increasingly matter. Corruption favors connections over quality, stifles entrepreneurship, and scares away foreign direct investment. This seems to be a lesson two of Latin America’s most open economies have yet to learn.

Over the past month, there has been a lot of “China drama.” The volatility in the Chinese stock market, the yuan devaluation, and now the Tianjin warehouse explosion have all raised China chatter to a new level of anxiety. Some of the anxiety is understandable. These events have real consequences—above all for the Chinese people. At the urging of the Chinese government, tens of millions of Chinese moved to stake their fortunes not on real estate but on the stock market—the most unfortunate used their real estate as leverage to invest in the market and are now desperate for some good news. The Tianjin warehouse explosion has thus far left 121 Chinese dead, more than seven hundred injured, and over fifty still missing. Globally, the yuan devaluation has triggered a rate rethink by central bankers in Europe and the United States, and the stock market slide has contributed to steep drops in Asian and U.S. markets. Events such as these in any country would garner international attention. In the case of China, however, the noise around such events is amplified by the absence of three mitigating factors: Transparency. A lack of transparency in China compounds the challenge of understanding what is going on. What, for example, is behind China’s devaluation of the yuan? Is it part of Beijing’s bid to push forward on its economic reforms by making the currency more responsive to the market? Is it an effort to persuade the International Monetary Fund that the yuan should become part of its basket of currencies before Beijing has to wait another five years for its currency to be considered? Is it an effort to prop up China’s ever-declining export numbers? Or is it a confluence of all three? Context. While the human toll inflicted by the Tianjin warehouse explosion was devastating, no one should be surprised by the disaster itself or the political aftermath. The pattern of Chinese behavior—including the corrupt environmental impact assessment system that allowed for the placement of the factory so close to people’s residences, the lack of knowledge of what precisely the warehouse stored, the generosity of the Chinese people trying to help those affected, and the attention paid by the Chinese government to assigning blame and shutting down information transmission and popular commentary via the Internet—is one that repeats itself frequently. Perspective. Drama surrounding China is also heightened by the tendency of outside observers to lose a bit of perspective. The media, as well as China analysts—and those who play them on TV— are rewarded for bold statements and predictions. I looked back at what people were saying about the Chinese stock market at the end of 2014 and early 2015 when the market was surging. At that time, unsurprisingly, there was a lot of triumphalism punctuated by a few dark warnings. The Economist, for example, produced a piece, “Super-bull on the rampage,” that focused 95 percent of its attention on all the excitement the stock market was generating, with only five percent at the end mentioning some of the potential weaknesses underpinning the rise in the market. Kudos to Gwynn Guilford at Quartz, however, who pretty much called it all back in 2014, seeking out commentators who underscored the dangers in the stock market’s reliance on leverage, shadow finance, and government public relations. Dramatic events will always prompt breathless speculation and commentary, but real understanding should begin by paying attention to real experts. In the case of the Chinese economy, reading studies by China economists and analysts—for example Nick Lardy, Barry Naughton, Patrick Chovanec, Dan Rosen, Fraser Howie, George Magnus, Michael Pettis, and Victor Shih—would be a good place to start. They represent a wide range of views and, if brought together for a discussion, would be hard-pressed to arrive at a consensus; but anyone taking the time to read or listen to a constellation of them will inevitably become smarter about the Chinese economy. The other much needed commodity is humility.  One of my favorite discussions of the Chinese currency devaluation is David Dollar’s interview in the Nikkei Asian Review. He argues that the devaluation is a “move toward a more market-oriented system but not a blatant effort to push up exports.” But, he then continues on to say, “If I’m wrong….”  This ability to acknowledge what we don’t know with regard to China is at least as valuable as sharing what we do know—and certainly worth more than pontificating about that which we only think we know.

Since early July, when the Wall Street Journal and the Sarawak Report, an investigative website focusing on Malaysia, both reported that embattled Malaysian state fund 1MDB had allegedly transferred funds into the personal accounts of Prime Minister Najib tun Razak, Malaysia’s normally placid politics have exploded. Along with a battle within the ruling coalition between the prime minister and supports of longtime former Prime Minister Mahathir Mohamad, Najib is now apparently fending off challenges from some top leaders within the governing coalition. Even Najib’s own brother, a respected banker, appears to be distancing himself from the prime minister. After Najib’s administration in late July shuttered a Malaysian publication that has published articles investigating 1MDB, Najib’s brother defended the freedom of the local press, implicitly criticizing his brother. For months, Malaysians have learned---through stories in international publications and an investigation into 1MDB by a group of Malaysian state agencies---about the alleged problems within the state wealth fund. These problems allegedly included theft of monies from the fund for personal use, use of the fund for a string of poor investments, use of the fund to prop up state companies and fund the governing coalition’s campaign, and other irregularities. Mahathir, who either genuinely was appalled by reports of 1MDB’s waste and Najib’s wealth, or wanted to maneuver his own allies into the leadership (or some combination of the two reasons), has for months been attacking Najib online and at public events. In April, Mahathir wrote on his blog, “There are many things about his [Najib’s] personal behavior that I thought were not right … including he and his wife’s lavish lifestyle.” Still, Najib’s popularity with the public remained relatively strong before the Wall Street Journal and Sarawak Report stories, in part possibly because Malaysians seem to have a high tolerance for government scandals. The country, for instance, ranked 50th in the world on Transparency International’s 2014 Corruption Perceptions Index. The Journal and Sarawak Report stories, though, were the first to follow the money trail directly to the prime minister and his family. The Journal’s story, using documents that may have been leaked to the media, reported that nearly $700 million in deposits, which allegedly came through 1MDB as well as a holding company in the British Virgin Islands, had been made to personal bank accounts with Najib’s name on them. The stories of payments into Najib’s personal accounts from 1MDB may be too much for the Malaysian public to stomach, which is why several of the prime minister’s current and former deputies have come out against him in just the past month. For instance, Deputy Prime Minister Muhyiddin Yassin harshly criticized how Najib has handled the 1MDB allegations, and on Malaysian social media, a tidal wave of comments is calling for Najib to resign. In all likelihood, the threat of a revolt by his own deputies was the reason why, during the last week of July, Najib sacked the Malaysian attorney general and the deputy prime minister, Muhyiddin Yassin---a move that, to Najib’s critics, only solidified their belief that Najib was desperately trying to hide something. Najib replaced the sacked ministers with some of his most loyal supporters. Shortly before the sacking, Asia Sentinel reported, the attorney general, Gani Patail, “was poised to charge Najib with corruption,” which would have been a devastating blow to the prime minister’s future. Meanwhile, Asia Sentinel reported Akhil Bulat, the head of the Special Branch of the Malaysian police, also had become critical of Najib and probably would have gone along with a case against him. In a move that shocked Malaysians, shortly after the sacking Malaysia’s anti-corruption commission announced that the prime minister had indeed received a payment of nearly $700 million into his personal accounts, but that the money was a donation from a supporter in the Middle East to fund the governing coalition’s political campaigns. Thus, the anti-corruption commission claimed, there was nothing illegal or unusual about the donation. Najib was supposedly holding the money in his personal accounts in trust for his party. The identity of the supposed donor has not been revealed, and many Malaysians were skeptical that the money was either a campaign donation or that it came from a foreign source, rather than from 1MDB. “This claim that Arabs donated billions [to Najib’s campaign] is what people describe as hogwash … Certainly I don’t believe it and neither can the majority of Malaysians," wrote Mahathir on his blog. For more on Malaysia’s leadership crisis and its implications for Malaysia’s foreign policy, you can read my latest article in World Politics Review.