EDITORIAL PAGE — Combatting corruption

A few years back, The Northern Miner sent a writer to visit mineral projects in Africa. While in one country, attempting to fly to another, the hapless geo-journalist was hauled off to a backroom of the airport by a customs official who demanded a tip for his services. Fortunately, a Canadian diplomat witnessed the incident and came to the rescue.

Minor shakedowns such as this were probably not what securities regulators from the Americas had in mind when they held a discussion on corruption at their recent annual meeting in Washington, D.C. But it does reflect the fact that, in some parts of the world, abuses of trust are part of daily life. The pervasiveness of the problem has prompted securities regulators to devise ways to enhance the integrity of the global marketplace.

At a meeting in late June, the Ontario Securities Commission and other members of the Council of Securities Regulators of the Americas adopted a resolution to combat bribery by developing laws that address illicit payments, ensuring that independent auditors design procedures to detect irregularities (including bribery payments) and enforcing securities laws.

Delegates came from Canada, the U.S., Mexico, Brazil, Argentina, Chile, Panama, Peru and elsewhere in Latin America.

The council says its objective was to develop ways and means to stimulate capital development and economic growth in the Americas. And it is encouraged by the fact that others are working to that same end, including the Organization of American States Inter-American Convention against Corruption, an initiative already signed by 23 countries in the hemisphere. International financing organizations and risk insurance firms are also drawing up guidelines to ensure that business is conducted fairly around the world.

The problem is that discussions of corruption tend to offend political sensibilities, and so, for the most part, the problem is rarely confronted.

But this has not prevented the establishment of an unofficial grading system that rates nations according to the perceived integrity of their politicians and bureaucrats.

Unfortunately for mining companies, some of the best opportunities for growth are in nations where business and ethics remain estranged from each other.

And that means a company “playing the game” may beat out an honest competitor better qualified to develop the project. Regulators are trying to level the playing field, but this will be difficult to achieve unless their efforts are matched by governments of the host countries.

Business is also grappling with the issue. Most larger companies make it clear that they will not “play the game,” because to do so, even in a small way, diminishes their stature and sets the stage for a never-ending parade of people demanding similar treatment. And few small companies have budgets that allow for this kind of discretionary spending.

Despite the good intentions, the battle against corruption will not be won by securities regulators fighting its symptoms from the sidelines. If it is won at all, it will be from within, as political leaders learn that corruption undermines their nations’ political stability, as well as their economies.

Corrupt politicians have little incentive to seek a fair judicial system or to invest in education and other basic social services. Resources are often misallocated and competition unfairly suppressed. As a result, private investment and growth suffer, citizens become disillusioned and impoverished, and crime becomes the only growth industry. Simply put, corruption is bad business.