Evelina Burnett

/ Legal Issue 2017

In an ever-more-global society and one in which the demand for progress has reached almost a fever pitch, motivation to right wrongs, weed out corruption, and strive toward peace is stronger than ever. That sort of change is strongly coursing through one region in particular: Latin America.

The number of countries there tackling the “big” issues right now—corruption, constitution, conflict—is striking. So much of the conflict in the area—and around the globe, for that matter—has some rooting in unequal distribution of work, wages, and ability to attain a higher standard of living.

Brazil

Brazil has witnessed some wide-ranging changes on the legal front in just the past few years. The massive bribery scheme known as Operação Lava Jato, or Operation Car Wash, has shaken the country economically, politically, and legally and has also ensnared some of the country’s top political and business leaders.

Lava Jato was an estimated $3 billion bribery scheme involving the state-controlled oil company Petrobras. The scheme got its nickname because the investigation began with a money laundering investigation at a car wash. It has since led to more than 160 arrests.

“The Lava Jato investigation is definitely a landmark in terms of criminal procedures” in recent history, says Antonio Corrêa Meyer, a partner at Machado, Meyer, Sendacz e Opice Advogados in São Paulo. He says, prior to Lava Jato, there was a sense that powerful people weren’t punished for wrongdoing. Now, with influential politicians and business people in jail, that has changed.

“No one in good sense expects the Lava Jato to abolish corruption in our country,” Meyer says. “However, it is an important move toward a better society with a higher ethical level of behavior [in] its politicians and entrepreneurs.”

The controversy has also shined a light on corporate compliance. Brazil passed a Clean Companies Act in 2013, providing a guide to businesses about their legal responsibilities. But the law was not truly enforced until Operation Lava Jato, says Tania Maria do Amaral Dinkhuysen, a partner at Advocacia Amaral Dinkhuysen.

“With the Operation in progress, enterprises are investing more in corporate compliance, seeking to comply with the standards and to avoid future problems,” she says. According to a survey by Deloitte1, more than 60 percent of Brazilian companies now have internal legal compliance departments, twice as many as in 2013.

The investigation has also generated an increase in asset transactions, Meyer says, as the companies involved in the controversy shed assets to generate cash.

"With the Operation in progress, enterprises are investing more in corporate compliance, seeking to comply with the standards and to avoid future problems." Tania Maria do Amaral Dinkhuysen, Partner at Advocacia Amaral Dinkhysen

Finally, a new Code of Civil Procedure was approved in Brazil in 2014 and enacted last year. The code, which has been in force since March 2016, is intended to streamline the overloaded judicial system, which, according to some estimates, exceeds 105 million cases—that’s one case for every two people. It encourages mediation, underscores the importance of court precedent, and allows appellate courts to resolve similar cases at one time. Overall, it’s hoped this new code will help speed up the judicial process and make it more effective for everyone involved.

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1 http://www.reuters.com/article/us-brazilcorruption-compliance-insight-idUSKCN0WQ1G1

Mexico

Mexico, too, is tackling corruption head-on, though it’s too early to say if these efforts will have a large-scale impact. One of the main challenges will be overcoming the skepticism with which many see these efforts after years of debilitating corruption1. A survey earlier this year by the National Statistics Institute found that 51 percent of Mexican citizens are worried about public corruption. In 2014, a survey found that 78 percent of people think corruption is the most damaging factor to the economy2.

Still, there is some reason for optimism: the Secretary General of the Organization for Economic Cooperation and Development (OECD) applauded the reforms, noting that “perhaps the most important game changer of the reforms is that they reach beyond the federal level and include all levels of government. Indeed, the new legislation requires the Mexican states to follow suit with their own local anticorruption systems, thereby tackling some of the strongest footholds of corruption in Mexico.”

The anticorruption efforts began in Mexico in 2012, when the Federal Law Against Corruption in Public Procurement3 was passed. But this law offered little in the way of enforcement, and it was not until three years later that lawmakers passed a number of constitutional reforms that strengthened and expanded anticorruption efforts. This included the creation of a National Anticorruption System, which provided the mechanism for enforcement, including an independent prosecutor for corruption issues, a special court, and an auditing agency.

Mexican lawmakers had until this year to pass secondary laws to implement the new anticorruption system. A citizen initiative known as “ley 3de3,” or 3for3, gathered 630,000 signatures on a draft of these laws, five times the number needed for the initiative to be discussed by Congress. Lawmakers eventually passed a version of the legislation, but they had expanded the 3de3 requirement—disclosure of assets, interest, and taxes—to contractors and other private citizens. Mexican President Enrique Peña Nieto vetoed this version, and Congress approved a new version in July.

The final legislation limits the disclosure to public officials only, though it does allow them to disclose privately in some cases, which some supporters of 3de3 consider a way of getting around the intent of the legislation.

In fact, Alfonso M. Lopez Melih, an attorney with López Melih, Facha y Estrada, S.C., says the secondary legislation added “procedures, methods, and authorities that will complicate” the effectiveness of corruption prosecutions. Among these, he explains, the legislation says prosecutors in corruption cases will be appointed by the president, and judges on the independent court will also be appointed by the president and ratified by the Senate.

“For this and many other reasons, [the] National Anticorruption System has major challenges,” he says.

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1 http://www.forbes.com/sites/riskmap/2016/06/14/anticorruption-rhetoric-echoes-mexican-votersdisenchantment-
with-political-class/#7c1626a75b7a
2 http://www.as-coa.org/articles/five-pointsley-3de3-and-battling-corruption-mexico
3 https://www.morganlewis.com/pubs/fcpa_lf_mexicocracksdownoncorruptioningovtcontracting_12oct12

Colombia

In Colombia, a historic but uncertain peace deal could end 50 years of conflict, dramatically affecting the country politically and economically. The legal framework of this peace process, and the legal and legislative steps that need to be taken to make sure it holds if it eventually goes through, are the issues that attorneys in Colombia cite as among the most pressing today.

The peace talks between the government and the Revolutionary Armed Forces of Colombia, or FARC, guerillas began in 2012, in Havana, Cuba. In August, the two sides came to an agreement on a final deal that includes a timetable and a process by which some 7,000 former FARC fighters will demobilize and become a part of the country’s civilian life. There have also been deals on land reform, drug trafficking, political participation, and war crimes.

However, in a required referendum on the deal, 50.2 percent of Colombians voted to reject the deal, creating uncertainty about what will happen next. The country remains divided about the deal, with some against it because of the amnesty given to guerilla fighters. Those in favor argue it will end a half-century of conflict that has taken 220,000 lives and displaced millions of people.

If the peace process is able to continue, it could lead to massive transformations in Colombian society. Diego Felipe Valdivieso Rueda, a partner and labor law specialist at VS+M Abogados in Bogotá, notes Colombia currently has an unemployment rate of 8.8 percent. Informal employment is at 58.9 percent, and there are some concerns the peace process could trigger even higher rates of both, as guerillas and possibly soldiers find themselves unemployed. The peace deal is also supposed to mean the end of illegal mining, extortion, and drug dealing, as well as some international aid, pushing even more people into unemployment or informal employment. This has the potential, he says, to raise unemployment and informal employment “dramatically.” Valdivieso Rueda believes that the labor reform the peace process requires would necessitate a number of “structural transformations,” such as differentiating the minimum wage by region.

Tax and international trade specialist Carolina Rozo Gutiérrez, a partner at Philippi, Prietocarrizosa Ferrero DU & Uría in Bogotá, believes a tax reform will also be needed in order to finance reparations for victims, rural development, and the costs associated with reintegrating guerilla fighters into civilian life and the legal economy. But, she says, a tax reform is likely to be met with some concern.

“We have faced a tax reform every two years [over] the last 10 years,” she says. “The tax framework has no stability whatsoever, and both local and foreign investors who based their decisions on specific tax provisions are being surprised by new tax rules that are modifiable and uncertain.”

"The tax framework has no stability whatsoever, and both local and foreign investors who based their decisions on specific tax provisions are being surprised by new tax rules that are modifiable and uncertain." Carolina Rozo Gutierrez, Partner at Philippi, Prietocarrizosa Ferrero du & Uria

There remains a considerable amount of uncertainty in Latin America over whether the major changes sweeping through many
countries will hold. Will peace come to Colombia? Will corruption decrease in Mexico and Brazil? As we watch and wait to see how all of these changes unfold, one thing is clear: there are many people throughout the region, working with diligence, conviction, and passion every day to improve their countries, and we know that in the end, that is what will make the difference.