Latin America: The Compliance Challenge

BY RICHARD BURNS

WASHINGTON, DC--Latin America took center stage on April 1 in Washington, D.C., at the annual Dow Jones Global Compliance Symposium, which gathers chief compliance, legal and other senior officers of some of the world’s largest multinational corporations. The topic of the moment was: “Doing Business in Latin America: Steering Clear of Trouble.”

“You want to grow in Latin America?” asked Josie Jardim, General Electric’s General Counsel for Latin America to the conference’s audience.  "It’s a fine market. But you have to have people there. You can’t have compliance people in Atlanta. They need to be on the ground.”

Joined by Novartis’ Brazil General Counsel Isabella Maciel de Sá and Kroll Managing Director Andres Otero, Jardim talked to the complexity and challenges of maintaining GE’s tightly crafted compliance and financial guidelines in South America. "I wish that I could get rid of distributors and agents. I just want employees, because its easier to build the "compliance DNA" with employees. We spend a lot of time auditing our distributors and suppliers!” she added.

Asked whether GE had to “do as the Romans do in Rome” as it pertained to her Latin American market, Jardim demurred: “Not really. Suppliers who want to do business with us have already raised the bar. There is a corporate responsibility as a large company and have audit and procedures. We will audit them, and look at how they behave, and this starts a positive domino effect.”

She continued: “I spend a lot of time helping companies, clients, NGOs to build their compliance programs. Help them measure their programs. It’s actually in my job description."

The panelists all agreed that from outside the region, Latin America too often suffers by its countries all “being painted with the same brush” and there were a whole range of standards not just from country to country, but within each country. Assumptions that business and government played by the same rules or the same assumptions were false and that company compliance programs should be more realistic about those risks.

“Compliance in Brazil is an art, not a science,” said de Sá. “We are local and know the environment and culture in which we’re operating. We are best in class for putting in compliance programs. But today we are really discussing ethics and people now not just compliance.”

Otero believed that most in the business community were not thinking as much about compliance as hitting financial targets. But he conceded that American companies, contrary to what panelists had said earlier in the day, were at a disadvantage to others with no laws like the Foreign Corrupt Practices Act: “Simply put, Chinese, Iranian and multilatinas have a different view of ethics. A Mexican, Carlos Slim, is the richest man in the world and that says a lot.”

TARGETS

How did panelists deal with the subtle but not so subtle hints of federal and local government agents? How did the approach requests for “social payments” at times of review by tax or concession officials?  “No matter how good we are, every big company is a target for regulators," said Jardim

"I have had government tax auditors in our offices saying that they could be there a long time or a short time. I told them to make themselves at home and showed them where the cafeteria is….I added that the Christmas Party was going to be on December 14!” She did not see any reason for these questions to remain in a grey area where it might actually be a danger. “You feel that it's your duty to start a tax lawsuit, you should do it and I will defend the company."

Otero noted that some decisions were quite complicated, often depending on a firm’s industry. “What does an oil company do if a Venezuelan official asks for a ‘social payment’ and you’re operating in the Maracaibo Basin, they can’t suddenly leave and try drilling in Switzerland.”

“We’ve been working with the Colombian government and investment is coming in. They want to mitigate fraud and corruption risk,” continued Otero. “But then you have Venezuela, Ecuador, Bolivia where clearly that’s not the case. Every business question in Venezuela revolves around whether and how you can get our money out.”

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