Institutions and Governance

Efficient and transparent institutions are a key ingredient for economic progress and social development. Corruption is still a major issue in many Latin American countries and is a major drag on both growth and inclusion.  

There is little progress without sound institutions. They are crucial for implementing economic reforms and social policies, ensuring that all members of society participate in the development process. Among Latin America countries there is a large variation in institutional soundness; however, corruption remains an issue for most of them. Among the four institutional dimensions measured by the Global Competitiveness Index (property rights, security, government efficiency and corruption), corruption is the one where Latin America’s gap is the largest compared to the world leaders.

Across most indicators in this dimension, Latin Americas’s score is on average half that of the most virtuous countries. Bribes at customs appear to be the most frequent type of corruption, followed closely by bribes in tax collection, influencing judicial decisions, and to secure public contracts. Diversion of public funds is also severe, which affects public investments in much needed infrastructure and welfare programs.

In addition widespread corruption hurts progress on several other levels: it reduces trust in public management, and increases uncertainty and distortions, limiting investments. On a social level, it reduces inclusion as it represents exploitation of power by the haves against the have-nots.