by CHRISTOPHER RAZO, JESSICA CRUZ, & MELANIE LANDA
The Panama Papers, the historic massive leak of documents exposing potential tax evasion and misuse of financial accounts, struck the entire globe this past April 4. The world turned its attention on the Panamanian law firm involved, Mossack Fonseca. In a blink of an eye, Panama was in the spotlight and the country was threatened to be included in a blacklist of tax haven and money laundering countries, which would “deal a heavy blow to Panama’s vital financial services sector.”[1]But the implications of such events suggest the ignorance of a much more expansive concern and reality: the ongoing corruption that is hugely embedded in Latin American democracies. While the banking system in Panama is being investigated and that country’s reputation is in jeopardy, there has not been much explanation and investigation about the Latin American leaders and high profile officials that have been involved in the scandal.
For the purpose of this analysis, data collected in 2015 by Transparency International, a credible organization that leads a global coalition effort against corruption, will be used. This organization works around the globe to evaluate each nation’s elected officials and their abuse of power for private gain. It focuses on a nation’s ‘transparency’: shedding light on government deals, law enforcement compliance, and illicit practices of businesses. The organization uses a scale from 0 (highly corrupt) to 100 (very clean) to rank each individual nation. The information subsequently obtained depicts evidence that Latin America as a whole has an immensely large issue with corruption in government. Although corruption is not a new foe for the hemisphere, there has been no strong attempt to systematically eradicate this formidable issue. Even though these Latin American governments are elected both democratically and legitimately, the exposure of the Panama Papers makes it possible to bring the required attention to reveal this systematic issue in the hemisphere as a whole. This leak further highlights the need to depurate corrupted governments in order to push for more legitimate democracies in the region.
Panama
In the ledger of Panama’s current president, Juan Carlos Varela, the president has vowed to uphold a strong anti-corruption agenda for the country. According to Transparency International, Panama has a corruption score of 39/100, indicating that the nation deals with high levels of corruption within its public sector.[2] Since Varela’s term began in 2014, he has sworn to “unmask” corrupt members of the previous administration including former president, Ricardo Martinelli. Throughout his term, Varela’s administration has managed to investigate and detain businessmen and high profile public officials, mostly accused of embezzlement. The authors of this analysis have previously contended in a recent publication in the Washington Report on the Hemisphere that, “It is believed that the political and financial machinations of the Martinelli administration were responsible for the growth in corruption levels, yet it was not until his term ended that the evidence began to fully surface.”[3] Moreover, Panama was ranked poorly in the Financial Action Task Force on Money Laundering (FATF) grey list due to inefficient procedures that labeled the country as non-cooperative, although they were recently delisted.
A Wilson Center event on “Panama: Combating Banking Secrecy through Financial Transparency” on April 14 revealed as an eye opener to the legal progress that the Central American country has achieved since the inauguration of President Varela. Ivan Zarak, Panama’s Vice Minister of Finance, contended that some of Panama’s recent major accomplishments regarding transparency includes negotiation with potential partners regarding the exchange of relevant tax information.[4] Furthermore, he explained that Panama has passed many laws to comply with international standards and follows due diligence procedures. This evidence shows the Panamanian government’s efforts to shift their banking system away from corruption that existed under previous administrations and their efforts to be more transparent according to international standards.
According to Chip Poncy, senior advisor of the Center on Sanctions and Illicit Finance (CSIF) at the Foundation for Defense of Democracies, “the delisting of Panama from the FATF grey list is a great accomplishment.” He continues, “This is a country that was grey listed under a number of strategic deficiencies […] less than three years ago, on June 2014.” He also contends that in the 11 years of working in the field he had never seen a country accomplish a delisting in less than two years as Panama did, establishing the country’s exponential betterment in financial transparency.[5] This increase in financial transparency is ignored or under represented within popular media and institution reports in regards to the Panama Papers scandal.
Council on Hemispheric Affairs for more