To Fight Corruption, Start Cutting Red Tape

Andres Oppenheimer

When I read two separate international rankings released in recent days that measure the world's most bureaucratic and corrupt countries, I was surprised by their coincidences: When it comes to Latin America, the same countries are placed at the bottom of both lists.

In both rankings, Venezuela ranks as the worst performing country in Latin America. Other countries in the region, such as Haiti, Honduras and Bolivia, are following closely behind on both studies.

Is it a coincidence? Or is there a correlation between a country's red tape and its corruption levels? Before we get to that, let's look at the two rankings.

DOING BUSINESS

The World Bank's "Doing Business 2011" ranks the ease of doing business in 183 countries in the world, among other things, by measuring the number of bureaucratic steps it takes to start a business in each country.

It ranks Venezuela last among all countries in the Americas, and in 172nd place in the world, alongside Uganda and Equatorial Guinea.

It's harder to open a business in Venezuela than in Iraq, or in the West Bank and Gaza, the report says.

If you want to start a business in Venezuela, whether it's a multinational corporation or a corner sandwich stand, you have to go through 17 legal procedures that take an average of 141 days to be completed, it says. Comparatively, it takes one legal procedure and about five days to start a business in Canada, and two legal steps that take two days in Australia.

Among other Latin American countries where it is a bureaucratic headache to start a business are Brazil and Bolivia, where it takes 15 legal steps, Argentina (14), Haiti (13), Honduras (13) and Ecuador (13).

Many of these countries also happen to be bad performers in the second ranking, Transparency International's "Corruption Perceptions Index 2010." The Berlin, Germany-based nongovernment group's ranking measures the levels of corruption in 178 countries based on surveys of national and international business people.

It lists Venezuela as the nation perceived as the most corrupt among 30 countries in the Americas, and 164th on the list of countries around the world that goes from the least to the most corrupt.

Not far away from Venezuela near the bottom of the list are Paraguay and Haiti (tied at 146), Honduras (134), Nicaragua and Ecuador (tied at 127), Bolivia (110) and Argentina (105).

Comparatively, Denmark is ranked No. 1, the country perceived as least corrupt, Chile 21st, and the United States 22nd.

Asked whether there is a link between red tape and corruption levels, Alejandro Salas, head of Transparency International's Latin American division, responded affirmatively.

'A CONNECTION'

"There is a connection," Salas told me. "The more legal procedures you have, the more interaction there is between a citizen and a public official, and the more possibilities of a corrupt transaction there are."

He added that one of the most effective tools to fight corruption is e-government, or the use of the Internet to fill out government-required paperwork. "When individuals interact with a computer, you reduce the chances that a government official will require a bribe to speed up the procedure," he said.

Daniel Kaufmann, an anti-corruption expert with the Brookings Institution, says that the causes of corruption go far beyond red tape.

"You have to look at the whole forest, and not just at one tree," he said.

"To fight against corruption, you need democracy, a free press, an independent judiciary and an effective police force, which help stem abuses by corrupt politicians."

My opinion: I agree that cutting government red tape alone will not eradicate corruption, especially if you have a political system without checks and balances to help keep the government honest.

But it can't be a coincidence that Venezuela ranks as the most bureaucratic and corrupt country in Latin America, and that several other Latin American countries are at the bottom of both rankings. Cutting red tape would certainly help reduce corruption in the region.

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