Argentina

Argentina Corruption Report

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Snapshot

Argentina_250x121.pngCorruption is a high risk for companies in Argentina and presents major challenges to business operations. While corruption exists in all levels of society, businesses should note the especially high risk in public procurement. Argentina’s anti-corruption provisions are largely contained in the Criminal Code (in Spanish), which prohibits the active and passive bribery of public officials and bribery of foreign public officials. The Code does not provide an exception for facilitation payments, and gifts are prohibited, but enforcement of anti-corruption provisions is lacking. Companies consider irregular payments and bribes to be a standard way of conducting business in many sectors.

Last updated: March 2016
GAN Integrity

Judicial System

Corruption, especially in the form of political manipulation, is a high risk in the judiciary. Companies report that exchanges of irregular payments and bribes to obtain favorable judicial decisions often occur (GCR 2015-2016). With the exception of the Supreme Court, the judicial system can be subject to political interference, especially in provincial courts (FitW 2015). In early 2015, Argentinians took to the streets in a huge march to demonstrate their discontent with the lack of judicial independence (Reuters, Feb. 2015).

Companies demonstrate a low confidence in the efficiency of Argentina’s judiciary in settling disputes and in challenging regulations (GCR 2015-2016). Despite the availability of local investment dispute adjudication through local courts or administrative procedures, many investors prefer private or international arbitration, likely due to judicial inefficiency (ICS 2015). Enforcing a contract is less costly and less time-consuming than Latin American averages (DB 2016).

Argentina has ratified the United Nations’ Convention on the Recognition and Enforcement of Foreign Arbitral Awards and is a member state to the International Center for the Settlement of Investment Disputes (ICSID).

Police

Interacting with Argentina’s police carry a high risk of corruption. The police force is among the most corrupt institutions in the country and its actions are cited as arbitrary and politicized (BTI 2016; GCB 2013). Businesses report that the police cannot be consistently relied upon to enforce law and order (GCR 2015-2016).

In an attempt to curb corruption, in 2014 the metropolitan police of Buenos Aires adopted a model of community policing that grants higher pay and benefits to its officers (Economist, July 2014). The Oficina Anticorrupción (in Spanish), Argentina’s anti-corruption agency, has an internal mechanism through which civil servants can complain about police actions.

Public Services

Companies face a moderate risk of corruption when accessing public services and acquiring licenses. Business executives report that undocumented payments sometimes occur when obtaining utilities (GCR 2015-2016). In economically burdened northern provinces, the delivery of public services is weak (BTI 2016). Getting electricity or dealing with construction permits takes more time than elsewhere in Latin America and the Carribean (DB 2016).

Land Administration

Corruption is a moderate risk in Argentina’s land administration. While property rights are well defined, corruption and judicial deficiencies make property rights vulnerable to political intervention, and many international investors resort to international arbitration (BTI 2016). However, the amount of time required to register property in Argentina is less than the Latin American average (DB 2016).

After the conviction of Marcelo Odebrecht, chief executive of Brazil’s largest construction company, for corruption and money laundering in the wide-ranging investigation into corruption at Petrobras, Argentinian investigators are putting infrastructure projects worth USD billions under fresh scrutiny by opening investigations (Mercopress, Mar. 2016). Investigations into the suspected bribery of government officials span nearly 100 companies, including Brazilian construction firms (Global Construction Review, Mar. 2016).

Tax Administration

Corruption in the tax sector is a high risk for companies. Businesses report that irregular payments or bribes in connection with tax payments are not uncommon (GCR 2015-2016). Dealing with taxes is cumbersome: A business executive spends on average 405 hours per year preparing, filing and paying taxes (DB 2016).

Tax evasion is rampant, and the state and the tax authorities have difficulties preventing it (BTI 2016). In a widely publicized and ongoing case, the bank HSBC allegedly helped tax evaders funnel funds worth as much as USD 3.5 billion to approximately 4,000 Swiss accounts (Bloomberg, Sept. 2015).

Customs Administration

The customs sector carries a high risk for companies. Businesses report irregular payments and bribes when importing and exporting goods (GCR 2015-2016). By international standards, export and import procedures are costly, lengthy and include many administrative steps (GETR 2014).

Public Procurement

There is a very high risk of corruption in Argentina’s public procurement sector. Irregular payments and bribes are routinely exchanged in connection to the awarding of contracts (GCR 2015-2016). The distribution of public funds follows particularistic, clientelistic and non-transparent criteria, and companies report that government officials show favoritism to well-connected firms and individuals when deciding upon policies and contracts (BTI 2016; GCR 2015-2016). In addition, public funds are reportedly often diverted due to corruption (GCR 2015-2016).

Former vice president Amado Boudou is currently on trial for a number of charges including the abuse of power, misuse of public funds and bribery (Panampost, Dec. 2015). Boudou allegedly awarded contracts to companies from which he received free plane and helicopter trips (Buenos Aires Herald, Feb. 2016).

Natural Resources

Corruption is a high risk for companies operating in the natural resource sector. Foreign companies trying to do business in agricultural industries should be wary of encountering favoritism shown to Argentinian competitors. This is illustrated by the recent case of an Argentinian company being the only company given a license to export rice and corn, at hugely inflated prices, to Venezuela in a trade agreement between the two countries; profits were reaped by middlemen (Panam Post, July 2014).

In 2014, an Argentinian prosecutor launched a formal probe into PAN American Energy (PAE) concerning alleged bribery of local government officials for an extension of PAE’s oil exploration rights (Bloomberg, Apr. 2014). The probe was triggered by leaked information that PAE self-reported to the US SEC; the investigation is ongoing (Buenos Aires Herald, Mar. 2015).

Legislation

A regulatory framework for curbing corruption in Argentina exists, but enforcement is lacking (ICS 2015). Public sector corruption is addressed in the Criminal Code (in Spanish), which criminalizes attempted corruption, extortion, active and passive bribery, bribery of foreign officials, and money laundering. Facilitation payments and gifts are also prohibited. A public official who accepts money to refrain from acting in the exercise of his or her duties can be punished with up to 6 years in prison. Argentine law does not specifically criminalize private sector corruption, but individuals can be prosecuted for conduct that results in economic detriment such as fraud and embezzlement (Baker & McKenzie, 2015).

Although it has ratified the OECD Convention, Argentina is the subject of harsh criticism by the Working Group on Bribery for its failure to prosecute foreign bribery (OECD, Dec. 2014). The Convention’s enforcement is very limited because Argentina’s legal framework and enforcement systems are inadequate, especially with regard to the lack of dissuasive sanctions for legal persons (OECD, Dec. 2014). Argentina has ratified the Inter-American Convention Against Corruption (IACAC) and the United Nations Convention against Corruption (UNCAC).

Civil Society

Freedoms of speech and press are guaranteed by Argentina’s Constitution, and the government generally respects these rights in practice (HRR 2014). A vast array of media outlets with different views are active, making it South America’s most lively media landscape (BTI 2016). Nevertheless, journalists reporting on corruption have, on occasion, received threats (FotP 2015). The media is considered “partly free” (FotP 2015). Argentina lacks a federal law on access to information, which is problematic because the government can manipulate key economic and other statistics—a pattern the IMF has condemned (FotP 2015). In the absence of reliable official data, journalists commonly use independent estimates from private economists and consultants, which led the secretary of commerce to issue fines to journalists who published independent data for “defrauding commerce and industry” (FotP 2015). The rights to freedom of assembly and association are generally respected by the government (FitW 2015).

Sources

The site provides a wealth of practical anti-corruption resources to support a solid preventative approach, covering subject such as processes, due diligence, practical tools to support compliance program implementation and also compliance and integrity training.

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