Richard L. Cassin Publisher and Editor

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Bill Waite Contributing Editor

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Focus on Latin America: Brazil at a Crossroads (Part One)

 Wal-mart reporting has shone a spotlight on endemic corruption in Latin America. But although Mexico now dominates the headlines, that country is neither Latin America’s biggest economy nor its most urgent corruption story. The country that finds itself at truly critical moment in its anti-corruption effort is Brazil.

So many of us have read, so many times, that although Brazil has never been a member of the OECD, it was among the original 1997 signatories to the OECD Convention on Combating Bribery. That’s true, but it’s misleading. Brazil’s implementing legislation of 2002 conspicuously lacked a legal principle that has elsewhere proven a cornerstone of anti-bribery enforcement: corporate liability. Brazil at present only holds natural persons liable; hardly surprising, then, that the statute lays dormant.

All of that might now change. And it might not. On May 23rd, a special committee of Brazil’s lower legislative house is scheduled to vote on bill no. 6826/2010, the Clean Company Act. It’s an omnibus white-collar crime bill, but three provisions are especially critical to the international anti-bribery movement. First, it establishes the liability of legal persons for overseas bribery. Brazilian law traditionally doesn’t recognize criminal liability for corporations (just as common law countries historically did not), so the bill is limited to civil and administrative liability (which is fully consistent with the OECD Convention). Second, the bill would create, for the first time, cooperation credit for voluntary disclosure. Though another foundational piece of effective anti-bribery enforcement, voluntary disclosure is now almost unheard of in Brazil. Third, the Clean Company Act would establish a new policy of considering at the penalty phase of enforcement whether a corporate defendant had a compliance program in place. Supporters hope this provision could stimulate the growth of Brazil’s now-fledgling compliance industry.

The devil is in the procedural details. The special committee's affirmative vote would advance the bill to Brazil’s Senate, unless a small voting bloc is then able to force a plenary session of the lower house. Word on the street is that voting for a plenary session would be a stall tactic, and a highly effective one; it could delay further consideration of the bill for many years, all but killing it.

In this highly divisive political season, here’s an issue where both sides can find true common ground. U.S. businesses should support the Brazilian bill because it helps put its South American competitors (against whom U.S. companies may sometimes struggle to compete in countries like Mexico) on a so-called “level playing field.” Just as obviously, corruption law advocates should likewise support this extension of meaningful anti-bribery law.  

But the May 23rd vote has implications well beyond Brazil, or Latin America, or even the Western Hemisphere. We’ll spend a couple posts discussing why. Stay tuned. 


Andy Spalding is a contributing editor of the FCPA Blog. He teaches international business law at the Chicago-Kent College of Law. Effective June 1, he’ll be an Assistant Professor at the University of Richmond School of Law.

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