Americas Quarterly - Winter 2012

SPECIAL SECTION CHINA

EXPORTING
CORRUPTION
The real risk from China may not be its manufacturing exports,
but that traditional business practices of informality and
closed-door deal-making will find a welcome environment in
Latin America and undermine the rule of law and democracy.
By Ariel Armony

In 2008, when I was a Fulbright professor at Nan- kai University in Tianjin, China, the interna- tional school my children attended hired a local contractor to build a new classroom wing. As the building reached completion, the relation- ship went sour: the construction did not meet he criteria originally agreed upon.

As the parties began to fight about termination of the contract, the builder disclosed to the school that some municipal permits had not yet been approved and that he would use his personal contacts to block those permits. It soon became evident to the school’s authorities that the problem could not be solved by legal means.

It came down to a basic scenario: whoever had more influence with municipal authorities would win the scuffle over the new wing. There was no formal procedure to settle the dispute. After two years of wrangling to make connections with city officials, the school finally obtained the required permits.

Having grown up in Argentina, in a culture in which informal rules governed everyday life, this was nothing new to me. As a political scientist, I recognized that people in China, as in most of Latin America, move in a deep sea of informality, in which unwritten rules, bribery and/or personal connections are the gatekeepers to

104 Americas Quarterly WINTER 2012

resources controlled by individuals in positions of power.

Informal rules exist every where. People know them, know that everyone else knows them, and understand that there are incentives to comply with the rules as well as sanctions for not following them. This knowledge helps individuals understand how the system works and strategically navigate their environment.

But the prevalence and relative weight of informality vary across nations. Informality is notably high in both China and Latin America. Though the two regions have different values and attitudes, both have traditionally lacked transparency in government. They operate according to informal business dealings which, in turn, undermine or further weaken the rule of law and may institutionalize corrupt practices.

This increasingly matters to the Americas.

Given China’s increasing business operations and growing investment in Latin America, corruption at home is likely to have a significant impact on societies at the receiving end of Chinese expansionism. The relationship between China and Latin America is an “ encounter of informalities.” Latin America has for decades struggled with corruption and a feeble rule of law, and China’s expanding presence may only serve to entrench this feature of the domestic landscape.