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The Cost of Democracy: Campaign Finance Regulation in Latin America

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The Cost of Democracy: Campaign Finance Regulation in Latin America Latin America Initiative Foreign Policy at BROOKINGS The Cost of Democracy: Campaign Finance Regulation in Latin America 1 KEVIN CASAS-ZAMORA AND DANIEL ZOVATTO POLICY BRIEF, JULY 2015 CAMPAIGN FINANCE: BETWEEN When there is a failure to regulate money in the po- MOTHER’S MILK AND POISON litical process, or existing regulation is ineffectual, it can jeopardize the legitimacy of democratic pro- The use of economic resources is an essential in- cesses and practices, as citizens will perceive that gredient for democratic competition. More than a elections and governments fail to reflect their de- malady of democracy—as it is often cast in public mands and interests. The famous quote by Amer- debate—campaign finance is part of the normal ican politician Jesse “Big Daddy” Unruh, “money workings of democratic life. It is nonetheless indis- is the mother’s milk of politics,” only tells one side putable that money is capable of inflicting signifi- of the story. The fact of the matter is that the milk cant distortions on the democratic process. he speaks of contains poisonous elements, which must be purged or at least brought under control; An unequal distribution of money has a direct otherwise, they will destroy the living organism of bearing first and foremost on the ability of par- democracy. ties and candidates to effectively get their message out to voters. Secondly, money can create an un- These concerns are particularly relevant to Latin equal playing field, affording individuals and social America. This is a region plagued by an astonish- groups with the economic wherewithal an unfair ingly unequal income distribution, which gives rise advantage in participating in elections and exerting to biases in democratic processes. It is also a region their influence over candidates and parties. This is where organized crime has a major presence, trans- of critical importance for democracy. When polit- acts billions of dollars each year in illicit business, ical power is merely a mirror image of economic and has the potential to corrupt democratic institu- power, the principle of “one person, one vote” is tions. Campaign finance regulation in Latin Ameri- rendered meaningless and democracy ceases to be ca is therefore crucial to the preservation of democ- an “alternative power system, which can be used racy in the region. Political actors in the region—for to counterbalance the economic power.”2 Thirdly, the most part—agree, and there has been a prolif- the process of fundraising lends itself to quid pro eration of efforts to regulate campaign finance over quo arrangements between private contributors the past two decades. No matter how disappointing and public decisionmakers or, at least, creates the the outcome of those efforts has been, the prolif- appearance of lasting conflicts of interests for de- eration itself is a sign of democratic development. cisionmakers. Because Latin American democracies are much 1 The authors wish to acknowledge the research support provided by Ileana Aguilar, Andrea Milla, Alejandro Urízar, and Stephania Sferra-Taladrid, as well as the useful comments provided by Claudio Fuentes, Pablo García Arabehety, Humberto de la Calle, Nydia Restrepo, Arturo Núñez, Luis Antonio Sobrado, Juan Ignacio García, Harold Trinkunas, and Emily Miller. Any errors and omissions are the responsibilities of the authors alone. 2 Elmer E. Schattschneider, The Semi-Sovereign People (Fort Worth, TX: Harcourt Brace Jovanovich College Publishers, 1975 [1960]), 119. more consolidated than democratic systems in oth- In Latin America, the greatest risk is that drug traf- er regions, they are in a position to address highly fickers—and organized crime in general—infiltrate complex issues such as campaign finance regulation, political bodies in order to buy impunity through which remains an unresolved item still lurking on campaign finance.3 Examples of the penetration of the agenda of even the most developed democracies. drug traffickers into political campaigns are nu- merous, including the campaigns two decades ago This policy brief is intended to take stock of three of former presidents Jaime Paz Zamora of Bolivia, aspects of this subject: first, the risks to democra- Ernesto Samper of Colombia, and Ernesto Pérez cy in Latin America posed by campaign finance; Balladares of Panama; the more recently uncovered second, existing regulatory instruments and pre- close ties between paramilitary organizations and liminary lessons learned based on Latin American some Colombian political parties; and collusion and international experiences; and, third, practical between organized crime and local government in guidance for making regulation feasible and in- the states of Guerrero and Michoacán in Mexico.4 creasing its likelihood of success. These instances reflect only the most high profile side of a much more widespread and problemat- WHAT ARE THE RISKS? THE LATIN ic phenomenon, which poses a particular risk in AMERICAN EXPERIENCE countries such as Mexico, Colombia, and Brazil, where large-scale campaigns for national office take As has been the case in other parts of the world, place at the same time as fierce campaigns for local campaign finance-linked scandals have thrown and state/departmental offices at the subnational Latin American governments into turmoil, debil- level. It should also be noted that the processes of itated political parties, and eroded the confidence political decentralization, which have been wide- of citizens in democratic institutions. The next sec- spread throughout most of the region, make it rela- tions explain the five different forms of the most tively easier for organized crime to capture political serious and recurring risks in the region. institutions. Moreover, there is the added incentive that the price tag of local election campaigns is Spurious or illegal financing generally lower. Private financing is a legitimate and necessary tool Other examples of the wide range of question- for political parties and their candidates. However, able sources of campaign finance in Latin Amer- the ability to raise private funds to finance political ica include funding by paramilitary organizations activities opens the door to a wide range of threats of mayoral and congressional campaigns in Co- to democracy. The first and most serious is that the lombia; large-scale illegal financing operations proceeds of criminal and unlawful activities are by former president Fernando Collor de Mello in used for political purposes. Brazil; illegal diversion of funds from the state oil 3 An analysis of the relationship between campaign finance and corruption in Latin America can be found in Steven Griner and Daniel Zovatto, eds., From Norms to Best Practices: The Challenge of Political Finance in Latin America (San José, Costa Rica: Organization of American States [OAS]/International Institute for Democracy and Electoral Assistance [International IDEA], 2004), 299-302. 4 In addition to the case studies included in Kevin Casas-Zamora, ed., Dangerous Liaisons: Organized Crime and Political Finance in Latin America and Beyond (Washington, DC, Brookings Institution Press, 2013), see René Mayorga, “El financiamiento de los partidos políticos en Bolivia,” in La Financiación de la Política en Iberoamérica, ed. Pilar del Castillo and Daniel Zovatto (San José, Costa Rica: Instituto Interamericano de Derechos Humanos [IIDH]/Centro de Asesoría y Promoción Electoral [CAPEL], 1998), 35; David C. Jordan, Drug Politics: Dirty Money and Democracies (Norman: University of Oklahoma Press, 1999), 158-162; Mauricio Vargas, Jorge Lesmes, and Edgar Téllez, El presidente que se iba a caer: Diario secreto de tres periodistas sobre el 8000 (Bogotá: Planeta, 1996); Kevin Casas-Zamora, “Financiamiento de campañas en Centroamérica y Panamá,” Cuadernos de CAPEL no. 48 (2003), 46; “Drugs are back,” The Economist, May 25, 1996; and “Well I never, says the president,” The Economist, June 29, 1996. THE COST OF DEMOCRACY: CAMPAIGN FINANCE REGULATION IN LATIN AMERICA LATIN AMERICA INITIATIVE, FOREIGN POLICY AT BROOKINGS 2 company Petróleos Mexicanos to the campaign of Thus, it is no coincidence that construction com- the Institutional Revolutionary Party candidate panies in Brazil and Costa Rica and the lottery and in Mexico; the creation of parallel illicit financ- sports betting licensee in Uruguay are major con- ing structures within the National Action Party in tributors to campaigns, as all of these businesses Mexico in 2000; and the attempted secret transfer are heavily dependent on government contracts or of $800,000 in cash packed into a briefcase from regulation.8 The case of the private media is even Venezuela to the campaign of President Cristina more consequential, as preferential rates are of- Fernández in Argentina.5 fered by media outlets to parties and candidates; in doing so, they become crucial—and possibly the Buying influence and conflicts of interest largest—in-kind contributors in some countries of the region. The cases of Uruguay, Costa Rica, Gua- Even when the funding of party and campaign ac- temala, and Mexico have been thoroughly docu- tivities does not come from questionable sources or mented not only as potential breeding grounds for is not obtained through illegal means, it is clear that collusion between media owners and government private contributions can undermine the interests officials in charge of regulating the broadcast spec- of the public and, in extreme instances, “privatize” trum, but also as glaring examples of unequal
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