The Cost of Democracy Essays on Political Finance in Latin America Kevin Casas-Zamora Daniel Zovatto © 2016 International Institute for Democracy and Electoral Assistance © 2016 Organization of American States © 2016 Inter-American Dialogue International IDEA Organization of American States Inter-American Dialogue Strömsborg 17th Street and Constitution Avenue, NW 1211 Connecticut Ave., NW SE-103 34 STOCKHOLM Washington, DC, 20006 Suite 510 SWEDEN, USA Washington, DC 20036 www.idea.int www.oas.org USA www.thedialogue.org Parts of this publication were first published in Spanish inFinanciamento de los partidos políticos en América Latina (Mexico City: International IDEA/Organization of American States/Universidad Nacional Autónoma de México, 2011) The electronic version of this publication is available under a Creative Commons Attribute-NonCommercial- ShareAlike 3.0 licence. You are free to copy, distribute and transmit the publication as well as to remix and adapt it provided it is only for non-commercial purposes, that you appropriately attribute the publication, and that you distribute it under an identical licence. For more information on this licence see: <http://creativecommons.org/ licenses/by-nc-sa/3.0/>. Translation: Charles Roberts Graphic design: Catalina Rojas Piza Printed in Costa Rica ISBN: 978-91-7671-032-6 We dedicate this book to the memory of Rodolfo Cerdas, an essential intellectual, generous mentor, and dear friend of both authors. CONTENTS Preface by José Woldenberg ......................................................................................................9 Acknowledgements ....................................................................................................................13 Abbreviations ................................................................................................................................15 I. Getting there on time: notes on the regulation of campaign finance in Latin America ............. 16 1.1. Campaign finance: between mother’s milk and poison .........................................17 1.2. What are the risks? The experience of Latin America ...........................................19 1.3. A comparative look at regulatory instruments ........................................................26 1.4. Lessons of campaign finance reform .......................................................................41 1.5. Some proposed reforms ...............................................................................................48 II. Considerations on campaign finance practices in the Americas ..... 52 2.1. Introduction ....................................................................................................................53 2.2. The magnitude of electoral spending in the Americas ...........................................54 2.3. How is the money spent? .............................................................................................64 2.4. How are campaigns financed? ...................................................................................72 2.5. Conclusions ....................................................................................................................89 Appendix: Campaign Finance Regulation in Latin America (as of 31 December, 2014) ............................................................................................................93 References ....................................................................................................................................109 About the authors ........................................................................................................................120 5 TABLES Table 1.1. Direct state subsidies per registered voter in 25 democracies (approximately 1990s)...................................................................................................................33 Table 2.1. Campaign spending by political party in Mexico, 2006 elections (USD) ............57 Table 2.2. Total campaign spending and relative weight of direct subsidies in Central America and Panama, circa 2000 ............................................................................58 Table 2.3. Total campaign spending and per registered voter in some countries of the Americas. ............................................................................................................................63 Table 2.4. Estimates of campaign spending on advertising and television i n the Americas ..............................................................................................................................71 Table 2.5. Main characteristics of public financing systems in the Americas, 2011 .........73 Table 2.6. Total direct electoral subsidies as a percentage of GDP and per registered voter in some countries of the Americas ......................................................76 Table 2.7. State subsidy as a percentage of total spending .................................................77 Table 2.8. Campaign donations by business sector in Brazil, 1994–1998 (%) ...............................................................................................................................83 6 FIGURES Figure 2.1. Campaign spending in the United States, 1998–2010 ..........................................55 Figure 2.2. State financing for parties at the federal level in Mexico, 2000–2011 ..............58 Figure 2.3. Campaign spending and direct state subsidies in Costa Rica, 1978–2010 .......60 Figure 2.4. Campaign spending by category in the United States presidential elections, 2008 (breakdown of media spending) ...............................................66 Figure 2.5. Campaign spending in Canada reimbursed, by category, 2008 .........................67 Figure 2.6. Campaign by category for Mexican federal elections, 2006 ..............................68 Figure 2.7. Campaign spending by category in Nicaraguan elections, 2006 ......................69 Figure 2.8. Campaign spending by category in Costa Rica, 1990–1998 ................................70 Figure 2.9. Contributions by sector of economic activity, US presidential elections, 2008...................................................................................................80 7 CHARTS Chart A.1. Year public financing of political parties and election campaigns was introduced in Latin America ..........................................................................93 Chart A.2. Activities that receive direct public financing in Latin America .......................94 Chart A.3. When direct public contributions for electoral purposes are disbursed in Latin America...................................................................................................95 Chart A.4. Direct public financing in Latin America: conditions of access to financing and legal barrier......................................................................................................96 Chart A.5. Access to the media in Latin America ....................................................................99 Chart A.6. Prohibitions relating to the origin of private contributions in Latin America ...........................................................................................................................102 Chart A.7. Political financing oversight bodies in Latin America .........................................104 Chart A.8. Sanctions regime related to political financing in Latin America .....................105 Chart A.9. Accountability and dissemination in relation to political financing in Latin America..........................................................................................................107 8 PREFACE There is no politics without money, but money in excess can erode democratic politics. Political parties—without which democracy cannot exist in modern times—need financing to maintain their organizational structures (small or large), to wage electoral campaigns, to train their active members and sympathizers, to conduct research and education, and to disseminate and publicize their ideas and proposals, to appear in the major media outlets, and to pay their professional staffers. In summary, money is essential for carrying out a series of tasks essential to their very existence. Every country with political pluralism has attempted to adopt some type of regulation of political financing. At the same time, one gets the impression that this is still a pending matter, for the distance between the laws and regulations and the reality in campaign finance tends to be particularly tension-ridden and complicated. Several objectives can be pursued by the regulation of money in politics: making its flow transparent, evening out the conditions of competition, making the parties less vulnerable to the pressures of private corporations or ensuring such corporations that they will not be blackmailed by protecting both parties and candidates from resources from illicit or, even worse, criminal sources, and fostering accountability, among others. Yet the worst thing that can happen in political and campaign finance are the naive, uninformed, well-intentioned yet unsophisticated approaches. Since there has been a great deal of experience in this area, and too many experiences of trial and error, one should take stock of the relevant experiences in different parts of the world before attempting any reform or innovation. Given this context, this book by Kevin Casas and Daniel Zovatto