This Week in Markets and Democracy: Corruption in Iran, Africa, and Mexico

Iran’s Sanction Are Gone, but Not Its Corruption

Corruption presents a huge hurdle for Iran. It ranks 136 out of 175 countries in Transparency International’s Corruption Perceptions Index, and 118 of 189 in the World Bank’s Doing Business report. Despite earning $650 billion in oil profits over the last eight years, billions went missing, and little found its way into public goods such as infrastructure. Still, as international sanctions lift, European and Asian companies including Daimler, Airbus, Total, Eni, and Statoil have or are considering ventures. The UK government even published a guide on doing business in Iran, noting the prevalence of customs that violate its Bribery Act.

Corruption Undercuts African Defense Spending

A new Transparency International report documents widespread vulnerabilities to corruption in African defense spending.  Though risks vary by country, budget opaqueness (40 percent of countries surveyed fail to publish one), and lack of auditing or oversight for defense spending are common themes enabling corruption. A few examples of exploiting these weaknesses: Uganda’s military paid $740 million for six Russian fighter jets worth $327 million and disbursed $324 million in salaries to ghost soldiers over the past twenty years. Egypt classifies its estimated $4.4 billion defense budget as a state secret. A heavy uptick in African military spending exacerbates potential for graft, doubling over the past ten years to $50 billion in 2014. Many African states spend disproportionately on defense relative to Organization for Economic Cooperation and Development (OECD) nations, diverting money away from vitally-needed healthcare and education. Transparency International goes so far to suggest that corruption fuels extremism across the continent–all the more reason to require greater openness and accountability.

Taking on Mexico’s Corruption…in Spain

Spanish authorities detained Humberto Moreira, former chairman of Mexico’s ruling Institutional Revolutionary Party (PRI), on charges of embezzlement, bribery, and money laundering of €200,000 sent to Spanish bank accounts. The proceeds are allegedly from his time as governor of Coahuila, during which state debt grew from $27 million to $2.8 billion. Mexican investigations against Moreira were quickly dropped, though the United States indicted two of his top officials for money laundering—his former finance secretary pleading guilty. Mexico’s unwillingness or inability to hold public officials accountable contrasts sharply with other Latin American countries, notably Brazil and Guatemala, where arrests of high-level officials reflect growing activism in policing illicit cash flows. Yet Moreira’s arrest shows that even when domestic corruption investigations fail justice may be done, as foreign authorities are increasingly able and willing to step in.