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CHILE
Widespread corruption in the political sphere
Arnaldo Pérez Guerra
11/26/2015
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Large economic groups “invest” in political campaigns to obtain privileges and prevent necessary economic and social changes.

Chile is considered one of the two countries with least corruption in Latin America, according to the Transparency International Corruption Perceptions Index.  However, the scourge grows rapidly.

In November 2014, a tax investigation revealed corporate corruption in the payment of the Utilities Tax Fund — created during the dictatorship of Augusto Pinochet (1973-1990) — so that large companies do not pay taxes on most of their earnings —, which led to other cases, revealing widespread corruption in public and private institutions. These cases have even reached President Michelle Bachelet.

What began as tax fraud ended up being a spiral of corruption that has involved major economic groups that illegally financed Congressional and presidential candidates.

In addition to the case of Penta — a company that issued false invoices and receipts for fees to evade taxes and pay for the campaigns of members of the far-right Independent Democratic Union (UDI) —, day after day there are new revelations of companies linked to large holdings operating in the financial and extractive sectors: Sociedad Quimica y Minera (SQM), Corpbanca, belonging to Saieh group, Corpesca, of Angelini business corporation, and transnational companies Aguas Andinas, Endesa and others.

These economic groups also financed the election campaigns of Andrés Velasco — former Finance Minister in Bachelet’s first term (2006-2010) —, the campaign of leftist legislator Marco Enríquez-Ominami, as well as Bachelet’s campaign. It has been revealed that Andrónico Luksic, who heads the country’s largest business group, generously contributed to Bachelet’s last campaign, although the exact amount is unknown.

Luksic is involved in the Caval case, which also involved Bachelet’s eldest son, Sebastián Dávalos. The Bank of Chile, owned by Luksic, granted a 6.5 billion pesos loan (equivalent to US$10 million) to Natalia Compagnon, wife of Dávalos. Requested through Caval, her company, the loan was approved on Dec. 16, 2013, the day after Bachelet won the presidential runoff, and it was negotiated by Dávalos and Compagnon directly with Luksic. The money was used to purchase agricultural land in the village of Machalí, in the center of the country, for real estate speculation. Dávalos and Compagnon are under investigation for influence peddling and use of privileged information.

The case provoked the collapse of the president’s popularity and a political crisis with unpredictable effects.

Allegations of collusion
It is not a mystery that transnationals and holdings hire and pay officials and politicians to obtain privileged information or preferential treatment.

In late October, the scandal of the so-called “cartel del confort” was uncovered, referring to one of the toilet paper brands. Two companies illegally fixed prices and shared 90 percent of the toilet paper market for over a decade. Similar cases include the collusion of pharmacies, a case that was revealed in 2008, and collusion of poultry companies, uncovered in 2011. But imprisonment for collusion was repealed in 2003 by then president Ricardo Lagos (2000-2006). Lagos replaced imprisonment with fines and ethics classes.

Academic Tito Flores, professor of Government and Public Administration, told Latinamerica Press that the main cost of the crisis is the deep mistrust and even despair that people now feel.

“For the people, elites conspired in order to generate benefits that favored them, not the general interest with a country perspective in mind. The hard part is that talking about trust is to talk about social capital and, at the same time, institutional strength. The corruption crisis has affected the two irreplaceable pillars of robust coexistence and social cohesion.”

“The spiral of corruption revealed an incestuous relationship between politics and money which accepts shady business as normal. Add to this a huge crisis of credibility and the lack of clear legislation. We urgently need a new constitution, transparency and probity laws that impose new rules of the game, tougher penalties and controls,” said political scientist Rodrigo Guerra to Latinamerica Press.

The social cost of corruption is evident in that today Chile is one of the most unequal countries. “According to the OECD [Organization for Economic Cooperation and Development] poverty affects almost a third of the population; the richest 10 percent receives an income 27 times higher than the poorest 10 percent, and the most affected group is children, the 23.5 percent of them. Poverty will continue to spread if citizens do not take into their hands the responsibility to change the system,” says Manuel Cabieses, journalist and director of the magazine Punto Final, in an editorial.

“This reality”, adds Cabieses, “hits like a slap in the face people who deal with precarious situations and even lack of public health services, education, social security, housing, transportation, etc. Meanwhile, large mining, fishing and forestry companies enjoy tax privileges that make Chile a capitalist paradise. We need very profound change that can only be carried out by a constituent assembly elected to draft and submit to referendum a constitution that encourages participation and that considers the dismissal of authority figures and jail time for those who give and receive bribes.”

According to Flores, a lesson from this crisis has been that “contrary to what international measurements indicated, Chilean exceptionalism on corruption is an illusion. We need to urgently repair and restore the damaged confidence and establish preventive measures to reduce the possibility of occurrence of similar cases. The judiciary must act independently and free from pressure, so that those responsible receive sanctions, no matter who falls. As to preventive measures, those announced by the government seem to be in the right direction. They involve improvements in transparency and clarification of the often opaque links between business and politics.”

Necessary citizen control
Bachelet created the Advisory Council Against Conflicts of Interest, Influence Peddling and Corruption. But the political leadership, from the center-left to the far-right, is transversely committed to big business. Many still do not understand how the New Majority Coalition, which brought Bachelet to the presidency, ended up eating from the hand of Julio Ponce Lerou, Pinochet’s former son-in-law and owner of SQM, or how the shady business of Bachelet’s daughter-in-law involved UDI members and former collaborators of the National Intelligence Directorate (DINA), Pinochet’s secret police. The truth is that between 2012 and 2013, SQM illegally paid more than $360,000 to finance Bachelet’s presidential candidacy.

The latest investigations revealed something new: the millionaire payment by the fishing industry (Corpesca) to politicians and congressmen so they protect the industry’s interests in Congressional discussions about the Fisheries Act.

During her first administration, Bachelet enacted the Transparency Law, but recent corruption cases show that it has done very little.

“The political groups represented in parliament have pledged support to the Advisory Board’s anti-corruption proposals. But no initiative proposes attacking the heart of corruption, that is, the system that reproduces corruption. Corruption is the salary paid by big business, avoiding economic and social transformations that Chile needs. The government evades pointing out how and why it occurs,” adds Cabieses.

Flores said that “for any effort to be sustainable, it is important to strengthen the ability of citizens to exercise control and audit the actions of public officials. This process, called accountability or citizen control, is essential to establish counterweight against the action of the state”.
—Latinamerica Press.


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Youth protest corruption in the streets of Santiago. (Photo: Arnaldo Pérez Guerra)
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