Corruption

Brazil's President Luiz Inacio Lula da Silva holds up his oil-covered hands at the Cidade Angra dos Reis offshore platform (Ho New/Courtesy Reuters). Each day it seems Brazil finds more and more oil in the Santos Basin. Its estimated reserves almost doubled this year, totaling over 30 billion barrels (some expect them to rise as high as 50 billion barrels). This launches Brazil’s reserves to 9th in the world, just behind Russia’s. In the last months of the Lula administration, the government passed legislation that would make Petrobras, the state-controlled oil giant,  the operator of these new finds. It grants Petrobras at least a 30% stake in all future joint ventures, with contracts to be awarded to companies offering the largest share of output to the government. These changes, and the increasing role of the state, have led many to question whether the newfound oil may prove a curse rather than a blessing. Brazil has a better chance than most to achieve the vaunted Norwegian model of oil exploitation, and avoid the pitfalls of the Middle East (or closer to home in Venezuela).  In large part this is due to timing. Countries such as Venezuela, Saudi Arabia, or Nigeria found oil at the start of their process of state formation. Oil let them avoid hard choices – in particular the need for a broad based economy to tax (as well as subsequent demands for representation). Brazil already has a vibrant and diversified economy, which won’t easily fade, even with the oil influx. Second, Brazil has had significant experience in implementing national energy policies. During the 1970s, Brazil faced a situation somewhat similar to that the United States faces today – overreliance on foreign oil during years of volatile pricing. In an effort to limit its dependence, Brazil’s military government boosted hydroelectric power, and created Pro-Alcool, the National Alcohol Program. It created a now world class ethanol industry by offering low-cost loans and credit guarantees, mandating percentages in gasoline, setting government purchase prices, and guaranteeing monopolistic distribution by the state-owned energy company, Petrobras.  Forty years later, Brazil is second only to the United States in terms of ethanol production, which powers 20% of its transportation matrix. Now largely self-sufficient, its overall energy portfolio is one of the cleanest in the world. While the pre-salt finds will test this last achievement, Brazil’s history of energy management shows that it can conduct a successful long-term energy policy. Third, the pre-salt oil is hard to get at. Buried almost four miles below the ocean surface and a mile-thick layer of salt (the reason for the name), it is relatively expensive to extract. Unlike Mexico’s Cantarell fields, which were discovered by a fisherman as the oil seeping to the surface tangled his nets, extraction will require significant technology, expertise, and management. The time and effort needed to extract may work in Brazil’s favor, boosting local human capital and technology companies rather than the reverse. It may also mean that revenues enter the domestic economy more slowly, limiting the inflationary effects on domestic prices and other areas of the economy (avoiding the so-called Dutch disease.). Brazil already faces inflationary pressure—from both industrial expansion and natural resources like timber, iron ore, and beef—but prudent use of oil revenue could help not hinder their already impressive long-term growth prospects. Finally, and perhaps counterintuitively, Brazil’s vibrant (if messy) democracy may rescue it from a less attractive fate. Hardly immune from patronage, corruption, and the like, Brazil’s democratic politics provide a platform for a multitude of interests and a system of checks and balances between branches and levels of government. This true political back-and-forth and compromise has never fully operated in the Middle East (much to the region’s detriment), and arguably was never firmly established next door in Venezuela. This isn’t to suggest that everyone gets heard in Brazil or that special interests don’t have a louder say than others. But it does give a broader array of political and economic players a voice, something that doesn’t occur under non-democratic regimes. Taken together this suggests that the pre-salt oil can be what the Brazilians dream about— a means to tackle the big issues of poverty and structural inequality by boosting the social safety net, improving education, investing in infrastructure, and continuing to build foreign reserves to protect against inflation. The technological investment could also spill over into the broader economy, attracting engineers, scientists, and oilfield specialists. There are some positive examples from emerging economies— most notably Chile. Under its democratic leadership, it has managed its copper reserves (making up sixteen percent of GDP and nearly half of all exports—more than enough to curse instead of bless the nation) quite admirably. Let’s hope that Brazil follows a similar path.

Indonesian President Susilo Bambang Yudhoyono arrives at the Noi Bai airport for his return home in Hanoi on October 27, 2010. (Nguyen Huy Kham/Courtesy Reuters) On Friday, Asia Sentinel and the Australian newspaper corporation Fairfax published summaries of several Wikileaks cables in which American diplomats in Jakarta made serious allegations that Indonesian President Susilo Bambang Yudhoyono (SBY) and his close circle were involved in corruption and other abuses of power. The cables allege that Yudhoyono used his power to skew judicial investigations in order to protect political allies of his known to be corrupt, and that many of his political allies were involved in bribery and vote buying. That an Indonesian leader would be involved in graft and abuse of power isn’t, on the face of it, that surprising – Indonesia has one of the worst records for corruption in Asia, according to Transparency International, and graft is probably the biggest obstacle holding back greater investment in the country. But Yudhoyono has been portrayed in the United States, and in many other nations, as a kind of white knight, a reformer capable of cleaning up one of the world’s most diverse, troubled, and graft-ridden nations all by himself. During his visit to Indonesia last year, Barack Obama highlighted Yudhoyono’s role in Indonesia’s economic and political renaissance, while many other senior American officials, even in private, heap praise on SBY as the key figure in turning the country around. And there is the problem. Over the past decade, Indonesia has indeed made great strides from the chaotic era following Suharto’s downfall. It has built a real and vibrant democracy, ended some of its sectarian conflicts, and begun to reassert itself, for the better, in regional policy, such as in the recent dispute between Thailand and Cambodia over the Preah Vihear border temple. But Washington always wants to view reform in the person of one man or woman: Ellen Johnson-Sirleaf in Liberia, or Olusegun Obasanjo in Nigeria, or, in this case, SBY. This type of excessive personalization has major risks – if the one white knight turns out to be flawed, like Obasanjo, it makes the entire policy look foolish, and puts a stain on the overall reforms that country might be making. Yudhoyono actually has taken some positive steps toward reform, helping empower the anti-corruption commission at times, and at times standing up to retrograde elements. He has made strong speeches condemning terrorism and radicalism and has led what is generally considered a highly successful counterterrrorism strategy. He also at times has proven a timid and consensual politician, weakly allowing hard-liners to pass laws essentially outlawing heterodox Islamic sects, and allowing old-line tycoons to push some of the most important reformers out of his Cabinet. But Indonesia’s successes since the late 1990s are due to far more than one man: They are the result of a federalization of political power away from Jakarta, a determined media and NGO sector, an economy that is gaining the benefit of demographics, and many other changes. To put all the credit – or the blame – on one man makes for highly unwise policy.

Muhammadu Buhari, former Nigerian military ruler and presidential candidate for the Congress for Progressive Change (CPC) speaks during an interview with Reuters at a private residence in Lagos February 19, 2011. (Akintunde Akinleye/Courtesy Reuters) The American Association of University Women New York City Branch has conferred upon Muhammadu Buhari its “Legacy Ambassador’s Award” in recognition of the steps he has taken to empower women and ease their entry into public life. Buhari was head of state from 1983-1985. Then as now, he has a reputation for staunchly opposing the endemic corruption in Nigerian politics. He ran for and lost the civilian presidency in 2003 and 2007, elections that had little credibility. In the aftermath of those polls, he contested the largely fraudulent results in the courts–not in the streets. Buhari is now probably the leading candidate from the predominately Muslim North during the upcoming April presidential election, a contest in which the incumbent, Goodluck Jonathan, is tipped to win. Buhari is a Muslim who takes his religion seriously. For that reason, along with his intolerance for corruption, he is often viewed with suspicion, especially by Christian elites. The AAUW award is a reminder of his liberal record on gender issues. However, the AAUW is not widely known in Nigeria, so the award is unlikely to have much political impact leading up to the campaign. h/t to Jean Herskovits

I published a background piece that charts Mexico’s progress on economic and democratic reforms as a part of CFR’s new Civil Society, Markets, and Democracy Initiative.

Teodoro Obiang Nguema Mbasogo, Equatorial Guinea's President and new African Union (AU) Chairman, speaks during a news conference at the closing ceremony of the 16th African Union Summit, in Ethiopia's capital Addis Ababa, January 31, 2011. (Thomas Mukoya/Courtesy Reuters) The appointment of Equatorial Guinea president Teodoro Obiang as chairman of the African Union will likely hinder theAU’s ability to resolve the crisis in Cote d’Ivoire. Obiang, in power since 1979, has regularly been accused of corruption, election rigging, and human rights abuses. In November 2010, French courts opened investigations into his personal wealth, and the U.S. Senate issued a report early last year, “Keeping Foreign Corruption Out of the United States,” that includes a detailed case study on Obiang’s son’s suspected money laundering in the United States. The shift of AU leadership comes at a time when the unity among African leaders has also begun to fracture. Despite ECOWAS’ insistence that challenger Alassane Ouattara was the electoral victor in Cote d’Ivoire and early threats of military intervention from neighboring countries, Ghana and Nigeria have both backed away from the direct use of force. In southern and eastern Africa, South African president Jacob Zuma and Ugandan president Yoweri Museveni, supported by Angolan president José Eduardo dos Santos, have called for an investigation into the electoral results, which appears to be underway. Reports have also surfaced that Zimbabwe supplied arms to Gbagbo near the end of 2010. In the meantime, Cote d’Ivoire’s stalemate will continue with the accompanying violence and economic decline. h/t to Asch Harwood.

Two recently issued reports from the International Crisis Group (ICG) and the Center for International Policy’s Global Financial Integrity program (GFI) provide insight into Nigeria as it prepares for national elections in April 2011. The ICG report is a sophisticated analysis of Northern politics, ethnicity and religion in the North, which I highly recommend. Both at home and abroad, corruption is widely recognized to be a major hindrance to Nigeria’s political, economic and social development. Unsurprisingly, the GFI report ranks Nigeria in the top ten (the only African country to make the list) for illicit financial flows with an estimated $130 billion from 2000-2008.

Mikhail Khodorkovsky’s sentencing to another prison term was a foregone conclusion, underscoring both the continued power of President Putin and Khodorkovsky’s arrogance in trying to thwart him, says Russia expert Marshall Goldman.

We must ensure that security operatives at the gate to the convention venue are our people They should be identified and taken to Ghana for orientation and ware housing Should return to Nigeria for assigned duty not later than 2 days to Primaries Should have clear instruction not to allow money into venue from opposition camp, except from our own people Deliberate reduction in number of opposition delegates accreditation... Safeguard and closely monitor our delegates Provide secure accommodation and lock them up Prevent opposition from infiltrating our delegates ranks Provide welfare and logistics for delegates at the venue Suggested minimum per delegates should be between N1.2m-N2m We should have the on-the-spot available means to increase if it becomes necessary depending on feelers from opposition camps. Supervision and intimidation of delegates at the venue Sahara Reporters, a New York-based Nigerian Diaspora news organization, published on Christmas Day an alleged Goodluck Jonathan campaign plan to manipulate the presidential nomination and electoral processes using legitimate and criminal methods  This document – about 140 pages in length – can be read in conjunction with  former Cross River state governor Donald Duke’s analysis of how elections are rigged in Nigeria.  Together they provide a thorough and unflattering picture of Nigerian presidential electoral politics. The roadmap has produced a fire storm in the Nigerian media, with the campaign camps of Goodluck Jonathan and Atiku Abubakar each trading accusations that the document originated with the other.  Based on internal evidence, I think the roadmap originated with  Jonathan’s people, though I cannot tell how authoritative it is.  Nevertheless, it is an open secret that the tactics it advocates have been commonly used in Nigerian elections over the past decade and contribute to the alienation of so many Nigerians from the election process.

In return for dropping charges against former Vice President Dick Cheney and other top execs at Halliburton, the company has offered to pay fines upwards of $250 million to the Nigerian anti-graft agency, the Economic and Financial Crimes Commission. Halliburton has become for many Nigerians the unacceptable face of foreign investment. Many will suspect that the Halliburton offer is a payoff, the skids for which were greased by bribes to high level officials. I think that is too cynical.  Halliburton would be much too careful for that scenario.

The Dubai judicial system has rejected former Nigeria state governor James Ibori’s appeal against extradition to the UK where he is accused of corruption. His wife has already been convicted and sentenced to prison for money laundering in a British Court. Ibori, who served as governor of Delta state for eight years, is widely suspected of corruption involving his state’s enormous oil revenues. The fact that he will face a trial in the UK and possibly subsequently in Nigeria is a step forward in ending the impunity that Nigerian “Big Men” have seemingly enjoyed over the past decade. Stay tuned.

If you haven’t see it yet, Transparency International, a highly credible NGO, released its 2010 Global Corruption Barometer this week. While less than perfect, it is one of the best tools we have. To highlight some findings from Africa: -While a quick look at the data suggests that most respondents around the world thought political parties were the most corrupt of the nine institutions they were asked about (Political parties, Parliament/Legislature, Police, Private Sector, Media, Public officials/Civil servants, Judiciary, NGOs, Religious bodies, Military, Education system), of the ten countries surveyed in sub-Saharan Africa, all reported the police as the most corrupt, including Nigeria. -73% of respondents reported a perceived increase in the level of corruption in Nigeria. -Further, 63% of Nigerian respondents reported paying a bribe  to "receive attention from at least one of nine different service providers in the past 12 months." -Interestingly, 46% of Nigerian respondents believed that the Nigerian government’s fight against corruption is effective (compared to the 40% reporting ineffective and the 14% who said neither). Next has a short summary as well. You can read it here.

On their high octane visit to Mexico City yesterday, Secretary of State Hillary Clinton and senior administration officials formally announced changes in U.S.-Mexico security cooperation that had been in the works for months. The U.S. delegation--including chairman of the Joint Chiefs of Staff Admiral Mike Mullen, Defense Secretary Robert Gates, Homeland Security Secretary Janet Napolitano, Director of National Intelligence Dennis Blair, and top officials from the DEA, Justice Department, border security, and other agencies--met with their Mexican counterparts to officially unveil a "new stage" in bilateral cooperation.

On March 19, I joined KUER’s Radio West to discuss the drug war in Mexico in the aftermath of the deaths of three US consulate employees in Ciudad Juarez.

Philip Caputo paints a grim picture of Mexico’s current war on drugs in “The Fall of Mexico,” which appears in the December 2009 issue of The Atlantic. His pessimism reflects more than just skyrocketing murders in places such as Ciudad Juarez, or the seeming inability of the local police forces and courts to get to the bottom of these crimes. His chief concern revolves around Mexico’s military. However corrupt the military is today, there is a fundamental difference from the earlier parallels he poses, and these differences matter for Mexico’s future.

What are the 6 books you find most useful in thinking about Mexican politics? Foreign Affairs asked me for my list. I’d be interested in yours…