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Highwire - Brazil 

Managing Risks in High Growth Markets
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”Nothing is doing more to roll back corruption in Brazil than an intense national desire to become a world player. And going global means cleaning house. It’s a very real consequence of policies which have opened this economy to the world”.


Humberto Salicetti should know: he has lived and worked in Brazil, Venezuela, Peru and Chile and is a Partner is KPMG Brazil, based in Sao Paulo.

 

”Brazil performs poorly in international corruption indices, but the biggest companies are determined to avoid the taint of scandal. This applies across sectors and is driving an increase in due diligence on partners and vendors too. Corporate integrity is now seen as a major factor in acquiring a true international presence”.

 

Corporate values now feature highly on the agenda. Codes of conduct, up until recently, were confined largely to foreign owned firms, but are now becoming widespread amongst bigger Brazilian businesses. The desire to lay down clear lines of permissible behaviour is also expressed in a surge of training to management and employees in values and behaviour.

 

The country is now combating negative perceptions through its own version of Sarbanes-Oxley. Self-monitoring of corporate functions is on the rise, for instance in the tracking of contract negotiations for tell-tale signs of bribery. “Surveillance can be taken too far”, says Salicetti. ”Some companies monitor all staff e-mails, a policy that is widely seen as an extreme response. But it at least sends a clear signal that integrity is not an optional extra.”

 

Gifts have been a traditional part of corporate relations with officers of the state and the political community. They are now seen as a danger area, not least because of a stronger governmental emphasis on fighting corruption. Corporate donations to political parties are increasingly avoided. Some companies have set up separate, closely-supervised units for dealing with state entities, and the latter are now compelled to apply special rules when buying from the private sector.

 

Adherence to international standards is seen as the way of the future for Brazilian business. But, warns Salicetti, there has to be sensitivity to cultural norms. “Whistleblowing programmes have become common during the last two or three years. But there is a lot of solidarity amongst workers and they have to be educated to appreciate that reporting does not equate to betrayal. A more amusing side of the cultural question came to light when some multi-national companies set up staff hot-lines answered by New Yorkers who did not speak Portuguese!”

 

Brazil has strong laws against corruption, though a draft measure which creates a corporate penalty has been stalled since early 2010. The level of government commitment suggests it will win approval, exposing companies to stiff civil and administrative sanctions, including loss of state contracts, exclusion from tender lists, loss of any public funding, and heavy fines. But that is only half the picture. Police investigations are slow and inconsistent, but this is not due simply to inefficiency. Salicetti notes that ”Brazil is a land of powerful vested interests and these often block investigations. Court proceedings can move at a snail’s pace – it’s not uncommon to wait five years for a ruling.”

It is in this context that the fear of US prosecutions under the Foreign Corrupt Practices Act (FCPA) is serving as a real spur to corporate reform.


“It has definitely helped give boards a new perspective - one where bribery and corruption are recognised as a major business risk.”

Contact

Humberto Salicetti

 

Partner
KPMG in Brazil

 

+55 11 2183 3316

hsalicetti@kpmg.com.br

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Assessing and Managing Bribery and Corruption Risks in High-Growth Markets

 

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