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.