Mr. Clean.(Oil & Gas)(Interview)

Who's afraid of Peter Eigen? Central bankers and elected leaders everywhere, that's who. The former World Bank executive founded and is now chairman of Transparency International, which publishes an annual country corruption index. The list affects foreign investment decisions around the planet. Energy companies are especially prone to corruption, says Eigen. He spoke to LATIN TRADE News Editor Forrest Jones about Latin America, the second-most-corrupt region in the world after Africa.

How do energy companies rate in terms of corruptibility?

The worst sector is construction, and the second worst is arms and defense and the third is oil and gas. And, in the perception of people, the petroleum and gas and energy sectors in general are particularly corrupt.

Is it something about the industry, or is it just where oil is found?

It's something that has to do with the

amounts of money where they develop petroleum. It has to do with the fact that this is very often totally out of line with the general development in a country.

How has Latin America done?

In some areas, it has done well because it has really developed a very strong consensus that it should fight corruption. But it is still not yet really successful. I mean, you have now a number of governments ... that are really committed to fighting corruption. I want to mention President Fox, who is trying very, very hard; even his predecessor was already beginning to talk to us. Lula really wants to fight corruption. Kirchner wants to fight corruption. Toledo threw Fujimori out of the country. In Nicaragua and in Paraguay, there are new governments based on doing everything to control corruption. So all of this is extremely promising. But it's hard to translate into reality.

Has Argentina learned its lesson?

It's a strange thing. Menem was the darling of many of the international organizations because of the economic reforms, which he introduced. But in my opinion, he was notable to deal with corruption. Therefore, his government was deeply tainted with corruption. There are a number of cases that are now being investigated, including arms deals and secret accounts in Switzerland, this sort of thing, which makes it clear [why] ... people put Argentina very low on the corruption-perception index. These perceptions are correct. When this came out first, in 1995 or in 1996, Menem did everything to discredit us.... He started an international campaign claiming we were paid by the enemies of Argentina and so on. So, for us, in a way there was some satisfaction that Menem came under house arrest.

Many banks in the region are restructuring debts. Do you see risks there?

This in itself has nothing to do with corruption. It is vulnerable to corruption because it means you have to value assets and liabilities. There is a lot of discretion; huge amounts of money are involved. So you have to be careful that corruption does not enter the scene. I was in charge of Argentina from '83 to '88 as division chief of the World Bank. And, at that time, we [had] already tried to introduce reforms in the banking sector, and we tried to introduce [them] in the fiscal system, and in a number of other areas in macroeconomic management. And we were not successful at the time because [although] the Alfonsin government was very/brave and was very strong in terms of bringing democracy back to Argentina, they were not strong in terms of economic policy. They were so popular with many of the rich institutions in the world, [that] they were always able to avoid biting the bullet. Therefore, the IMF (International Monetary Fund), the United States, somebody gave them a lot of support and they were not really forced at the time to take the strong measures necessary, in contrast to Chile, which did not have friends internationally. It was still run by a bloody dictator and, therefore, the Chileans were forced to do the right thing. But Argentina was able to get away with poor policies.

Was Peruvian President Alberto Fujimori the worst when it comes to money stolen, at $600 million?

We have cases involving $30 billion stolen, [such as Indonesia's] Suharto.

Yet the perception of corruption is so much worse in Latin America. Why?

Suharto was in office I think 32 years and Menem was in office 32 months. And in a country that was not doing well, when Indonesia was doing well at the time. So the opportunity to enrich themselves was much larger for some of these Asian leaders.

What is your take on Venezuela?

I have a feeling that corruption there is so strong that it basically is the impetus for the political environment, [and the] violence and chaos. So this is from the people on the street. They don't have any confidence in the political leaders, so they are very happy when somebody comes and chases them away. I am not sure that is really going to help.

A civil servant takes bribes from foreigners to get their visas renewed so they don't have to go to the immigration office and she doesn't have to live in the slums. What's so wrong about that?

We call that petty corruption, and in many poor countries, petty corruption is tolerated by the government because it means they don't have to pay the civil servants.... [Yet] people see how petty corruption is very inhumane. You have situations in Africa where the nurses will extort money from the sick person on his way to the operating table. They would say 'Well, if want local anesthesia, then you better give me another US$10.'

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