Corruption adding up for many countries

Mexicans once smiled about the prevalence of corruption in their society,
so much so that a bakery ran a television ad 25 years ago that depicted a
motorcycle policeman stopping a motorist for a bribe.

``When he asks you for a `mordida', '' said the announcer, playing on the
Mexican word for bribe that literally means ``bite,'' ``give him our bread.''

No one runs such ads in Mexico any more. Corruption is no longer a joke.
``We used to say that corruption greased the bureaucratic system in Mexico
and made it work better,'' Mexican journalist Cesar Romero says. ``But now
we see that it is drowning the system.''

Mexico is not alone. Corruption has become so endemic in developing nations
and elsewhere that the World Bank and the International Monetary Fund have
decided to tackle the issue headon.

These two pillars of the world's financial and economic development
systems, which have tried for half a century to stay out of the internal
politics of nations, have concluded that corruption has grown too large to
ignore.

The two institutions have adopted guidelines under which they can refuse to
pay for or lend to programs or governments tainted by corruption, while
doing what they can to help those countries fight the abuses.

While that step may seem like little more than a dose of longoverdue
common sense, it is a major shift for institutions that operate in an arena
where corruption is so commonplace that many nations allow businesses to
take tax deductions for bribes they pay.

``In country after country, it is the people who are demanding action on
this issue,'' World Bank president James Wolfensohn said a year ago in a
surprise announcement signaling the new campaign against corruption.

``They know that corruption diverts resources from the poor to the rich,
increases the cost of running businesses, distorts public expenditures and
deters foreign investors.''

Kenya has felt the castigation first. The IMF, an agency that shores up the
currency of countries through loans and other assistance, suspended a
$220million (U.S.) loan to Kenya in August because of a scandal in the
gold and diamond export trade.

The government, as part of a program encouraging exports, had paid almost
$90 million in subsidies to a company for supposed exports of gold and
diamonds to Dubai and Switzerland. These exports did not exist, however,
and the $90 million disbursed amounted to embezzlement.

IMF officials also were furious that the Kenyan government had fired its
commissioner of customs and excises after he began investigating the
smuggling of a massive amount of sugar into the country by a member of
Parliament, who had thus cheated the government of a fortune in lost duties.

The IMF action hurt Kenya's economy, sending the value of the Kenyan
shilling down 18 per cent and raising the price of all imported goods.

Shortly after the IMF acted, the World Bank suspended a $76million loan to
Kenya for energy development because it could not ensure that contracts
would be awarded fairly and openly.

The new anticorruption campaign is sure to make some governments feel that
the two international agencies have started to meddle. But World Bank and
IMF officials deny this. They insist that battling corruption is an
economic issue, not a political one, and to back up their position they
cite the changing views of economists.

In the 1970s and early 1980s, some economists argued that corruption could
speed up the bureaucracies of Third World countries and make them more
efficient. But as corruption grew from small change to huge operations,
many economists began to see it as an impediment to economic development.
On top of this, many investors, finding it easier to deal with honest
bureaucrats, now tend to avoid corrupt societies.

The world's most corrupt nations today are Nigeria, Bolivia, Colombia,
Russia, Pakistan and Mexico, according to Transparency International, a
private organization formed in 1993 to assess the degree of corruption
throughout the world based on the perception of international business people.

In Nigeria, for example, one study says that $12.2 billion of government
revenue from 1988 to 1994 was diverted to ``extrabudgetary accounts'' for
which there are no records. In short, billions of dollars probably ended up
in the pockets of corrupt officials.

To discourage this kind of abuse, the Organization for Economic
Cooperation and Development, or OECD, made up of the world's most
industrialized countries, has recommended that its members make it illegal
for their businesspeople to pay bribes to foreign bureaucrats.

That would put them in line with U.S. law. At present, however, half of the
OECD countries allow businesspeople to deduct the cost of bribes on their
tax returns.

While World Bank and IMF officials say it is their duty to try to address
corruption, their new guidelines may prove more striking in rhetoric than
in action and may be fraught with contradictions.

It is easier, for example, to bully a faraway country such as Kenya than a
more strategically located country such as Mexico. So far, no other country
besides Kenya has been punished.

In August, the executive board of the IMF issued guidelines urging its
worldwide staff to strengthen ``the hands of those in the government
seeking to improve governance.''

But some IMF field workers are troubled. ``I really don't know what to do
with the guidelines,'' said one. ``We all know that two of the biggest
loans go to Mexico and Thailand, two of the world's most corrupt countries.
And we all know that no one is going to punish them.''

No international official, the field worker continued, wants to take steps
that might chop down the value of the currency of these countries, cripple
their economies and destabilize their regions.

The World Bank's approach is to punish sparingly, preferring instead to
provide countries with assistance to develop better accounting services,
decrease government control of the economy, create more public scrutiny of
government.

Many international officials believe those steps and others have struck a
significant blow against corruption simply by raising the issue.