QUESTIONABLE PAYMENTS? NOTES ON BUSINESS PRACTICES IN LATIN AMERICA

• NCJ Number: 63783
• Journal: INTER-AMERICAN ECONOMIC AFFAIRS Volume: 31 Issue: 2 Dated: (AUTUMN 1977) Pages: 25-40
• Author(s): S G HANSON
• Date Published: 1977
• Length: 16 pages
• Corporate Author: Inter-American Affairs Press
• Publication Format: Article
• Language: English
• Country: United States of America

Annotation

THE ISSUE OF QUESTIONABLE PAYMENTS IN BUSINESS PRACTICE IS DISCUSSED IN THE CONTEXT OF LATIN AMERICAN CUSTOM; THE QUESTION IS RAISED AS TO WHETHER SUCH PAYMENTS CONSTITUTE BRIBERY OR EXTORTION.

Abstract

QUESTIONABLE PAYMENTS IS AN ISSUE IN PUBLIC POLICY BOTH FOR PRIVATE CORPORATIONS AND FOR SUCH GOVERNMENT AGENCIES AS THE EXPORT-IMPORT BANK IN THE U.S. WHICH HAS MADE LOANS TO BORROWERS OBVIOUSLY INVOLVED IN QUESTIONABLE PAYMENTS. GENERALLY, CORPORATE EXECUTIVES AND GOVERNMENT OFFICIALS OF BOTH THE COUNTRIES WHERE THE PAYMENTS ORIGINATE AND THE COUNTRIES WHERE THE PAYMENTS ARE MADE AGREE ONLY THAT THE RESPONSIBILITY FOR CORRECTION OF THE PRACTICE OF QUESTIONABLE PAYMENTS LIES WITH THE COUNTRIES IN WHICH PAYMENTS ARE MADE. STANDARDS OF CONDUCT OFFERED BY SUCH AMERICAN CORPORATIONS AS GENERAL TIRE AND RUBBER COMPANY, ITT, AND ANDERSON, CLAYTON AND COMPANY SEEM TO INVOLVE FOUR STEPS. FIRST, LOCAL OFFICES SHOULD AVOID DECISIONS AND DEPEND ON THEIR HOME OFFICES. SECOND, IF THE VOLUME OF BUSINESS CAN BE MAINTAINED WITHOUT GRAFT, THE HOME OFFICE WILL INDICATE THAT NO GRAFT IS TO BE PAID. THIRD, IF THERE SEEMS TO BE NO REASONABLE ALTERNATIVE TO GRAFT, THE HOME OFFICE IS TO DECIDE HOW MUCH CONSTITUTES A 'SMALL' AMOUNT OF GRAFT, SINCE 'SMALL' FACILITATING PAYMENTS ARE NOT OBJECTIONABLE. FOURTH, IT MUST BE DETERMINED THAT 'LOCAL CUSTOM AND PRACTICE' HAVE BEEN INSTITUTIONALIZED TO MAKE THIS THE PERVASIVE PRACTICE. HOWEVER, THE MORE PERVASIVE THE PRACTICE, THE MORE LIKELY THAT 'SMALL' CAN TRANSLATE INTO 'LARGE' PAYMENTS IF FOR NO OTHER REASON THAN COMPETITION. THE ISSUE SEEMS TO BOIL DOWN TO A SIMPLE FORMULA: IF THE BUSINESS OF LATIN AMERICAN COUNTRIES PROCEEDS ONLY IF GRAFT AND OTHER QUESTIONABLE PAYMENTS ARE EXECUTED AND THOSE COUNTRIES NEVER CHALLENGE THE PRACTICE, AND IF COMPETITION FROM OTHER COUNTRIES NARROWS THE ALTERNATIVES, QUESTIONABLE PAYMENTS APPEAR TO BECOME INEVITABLE. SEVERAL FOOTNOTES ARE PROVIDED.