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To attract new investors, Colombia must kick its corruption habit.
BOGOTA, Colombia — When contractors tore down the only gas station in Silvania, they promised a new one would go up as soon as they finished widening the highway that connects the farm town to Bogota.
Two years later, the road project sits idle and there’s still no service station in Silvania. Motorists have to drive to a neighboring town to fill their tanks. Even worse, the town government is losing $40,000 a month in sales taxes on gasoline and diesel.
“The consequences are enormous for the whole area” said Silvania Mayor Jorge Guevara.
The highway upgrade is one of a series of major public works projects plagued by cost overruns, shoddy work and epic delays largely blamed on government corruption. Grabbing most of the headlines are backroom deals allegedly involving Bogota Mayor Samuel Moreno, his politician brother and other city officials.
One construction company owner, Miguel Nule, said he was pressured to pay 2 percent kickbacks to the city comptroller in exchange for road-building contracts. He claimed Sen. Ivan Moreno demanded 6 percent payoffs plus control over several gasoline stations owned by Nule’s company. That prompted the media to dub the lawmaker “Ivan the Terrible.”
Unfortunately, greasing the palms of politicians is widely thought to be the rule rather than the exception in Colombia. The illegal payoffs for public works contracts mean there’s less money for roads, bridges and schools in some of the neediest areas of the nation.
In the impoverished northern state of Choco, for example, the regional government signed a $73 million contract to construct a 130-kilometer road connecting jungle villages to the rest of the country. Four years later, just 11 kilometers have been built.
But the damage goes beyond unfinished or never-built projects.
“The institutional cost is also very high,” said Elisabeth Ungar, who heads the Colombia chapter of Transparency International, which monitors government corruption around the world. “People lose confidence in their politicians and institutions which is a huge, if intangible, loss.”
In October, Transparency International ranked Colombia 78th of 178 countries in the organization’s 2010 Corruption Perceptions Index, a drop of three places over 2009.
Whereas kidnappings and car bombings used to scare away investors, these days the No. 1 concern for foreign businesses owners is corruption, according to Ungar.
Fueling the problem are campaign donations. Many businesses funnel money to political candidates as quid pro quo investments. These donors often recuperate their money and then some as winning politicians hand them lucrative contracts to build streets, sewers and hospitals.
In theory, government contracts are awarded through sealed bids. But politicians can favor well-connected companies by designing contracts with such rigid specifications that only certain firms are qualified to bid.