Dangerous Liaisons

Organized Crime and Political Finance in Latin America and Beyond

By Kevin Casas-Zamora

Brookings Institution Press

Copyright © 2013 THE BROOKINGS INSTITUTION
All rights reserved.
ISBN: 978-0-8157-2529-9

Contents

Acknowledgments……………………………………………………vii1 On Organized Crime and Political Finance: Why Does the Connection
Matter? Kevin Casas-Zamora…………………………………………12 Argentina: Two Cases Delia M. Ferreira Rubio……………………….223 Brazil: Crime Meets Politics Bruno Wilhelm Speck……………………424 Colombia: Coexistence, Legal Confrontation, and War with Illegal Armed
Groups Mauricio Rubio……………………………………………..765 Costa Rica: Four Decades of Campaign Finance Scandals Kevin
Casas-Zamora………………………………………………………1076 Mexico: Organized Crime and Elections Leonardo Curzio……………….1367 Bulgaria: Perception and Reality Daniel Smilov……………………..1658 Italy: The Godfather’s Party Donatella della Porta and Alberto
Vannucci………………………………………………………….195Contributors………………………………………………………247Index…………………………………………………………….249

CHAPTER 1

On Organized Crime and Political Finance:Why Does the Connection Matter?

The relationship between criminal syndicates and politicians has beenaround for a long time and has been the subject of endless fascination. The presenceof organized crime in the United States, for example, can be traced back tothe Puritans. As early as the 1680s, records from the Massachusetts Bay Colonymention organized groups participating in prostitution and selling stolen goods.These groups were as much a part of the landscape as local elections (which werecommon in some British colonies, such as Virginia, since the early seventeenthcentury). Peter Lupsha, a scholar of organized crime, writes that before the AmericanRevolution, “well-financed and organized criminal enterprises, using corporatebuffers, bribery, political payoffs and corruption, quite similar as a process tomodern organized crime, operated in the major port cities of the colonies.” Hedescribes an organization led by a father and a son who owned fleets of merchantships and who controlled the waterfront in colonial Boston: “Under this commercialcover, they were among the premiere contraband smugglers in the colonies.”

The family operation so described was that of Thomas Hancock and his sonJohn Hancock, the same John Hancock who would go on to sign the Declarationof Independence. The Hancocks understood well the need to make powerfulpolitical connections that could help shield them from the consequencesof their illegal activities. Indeed, in ways that resemble those of a modern-daydrug lord in a Latin American slum, they made themselves popular in Boston”through the selective use of bribery and political and charitable contributions.”Lupsha adds, “When the [British] crown finally indicted [them] … for smugglingover a ton of French wines valued at over 300,000 British pounds, theletters and testimonials of support from Boston’s business, religious, and localpolitical community were such that the British prosecutor was advised to dropthe charges for fear of open riot and rebellion on the Hancocks’ behalf.” That’spolitical protection of criminal activities at its best.

These are merely early episodes in a long history of political involvement bythe underworld in the United States. These came to include the shenanigans ofTammany Hall’s party machine, the political sheltering of alcohol smugglingand bootlegging during Prohibition, and the financial contributions by diversecrime syndicates to later campaigns, estimated by Alexander Heard to have beenabout 15 percent of total election expenditures at the state and local levels in1960s America.

Organized Crime and Latin American Politics

If the issue has become less prominent in the United States since then, the samecannot be said for Latin America. In the latter, the confluence of a vigorous,regionwide democratization process with the noticeable expansion of organizedcrime—especially drug trafficking—has attracted the attention of politicalreformers. Indeed, over the past two decades, Latin American countries haveenacted myriad reforms to regulate the role of money in political campaigns.While the traits and results of these reforms have been heterogeneous, the reasonsput forward to justify the regulation of political finance activities have beenremarkably homogeneous. The risk that money from organized crime, and drugtrafficking in particular, poses to the integrity of political parties and electoralprocesses has been cited in country after country.

This is a collective response not to an abstract danger but to one repeatedlyproven real. There is evidence that criminal syndicates began pouring money intocampaign coffers in Latin America a long time ago. As this volume shows, even thehighly regarded Costa Rican democracy exhibits very troubling examples of thisperverse relationship, dating back to the arrival in the country in the early 1970sof U.S. financier Robert Lee Vesco, a master swindler and fugitive who, accordingto the U.S. Drug Enforcement Agency, was involved in heroin smuggling.

By the 1980s the example of Costa Rican politicians cozying up to Vesco washardly exceptional. The campaigns of the Bolivian president Jaime Paz Zamorain the 1980s was tainted by accusations of links to drug traffickers, as was the1994 campaign of Panama’s president Ernesto Pérez Balladares. And then therewere the more serious cases of Colombia and Mexico, where the role of drugbarons in underwriting campaigns has been an open secret since the 1970s. InColombia, in particular, the election of the drug lord Pablo Escobar as congressmanin 1982 was a sobering as well as farcical moment. The day of reckoning,however, would come later, with the emergence of tapes showing that thecampaign of President Ernesto Samper had sought and received several milliondollars from the drug cartels in the run-up to the 1994 election. This revelation,the mother of all drug-trafficking-cum-campaign-finance scandals in LatinAmerica, not only doomed Samper’s administration but also rattled Colombia’sotherwise solid democracy.

Since then, the problem has not subsided. In fact, there are many reasonsto think that it has grown worse in some countries. The situation in Mexico,now in the middle of a drug-trafficking maelstrom, is an obvious concern. Oneexample should suffice to convey the gravity of the situation. In early February2010 the ruling Partido de Acción Nacional (PAN) decided to suspend allopen primaries in the border state of Tamaulipas, due to the systematic risk ofinfiltration into the process by criminal rings. The PAN’s national chairman atthe time, César Nava, bluntly said, “In the case of Tamaulipas everybody knowsthe possible influence of crime in candidate selection. Hence we won’t leave anyroom for that to happen.” Open primaries are a luxury that Mexico’s democracyseems unable to afford.

The case of Tamaulipas illustrates the very real dilemmas that beset democraticsystems in Latin America in trying to coexist with a huge illicit industrythat requires political protection as humans require oxygen. While not unique toLatin America, these challenges manifest themselves in the region with uncommonintensity. Notwithstanding considerable efforts to eradicate illicit crops andto interdict drugs, Latin America continues to be the world’s largest cocaine producerand plays a growing role in the production of synthetic drugs and opiates.Whether as producers of illicit crops, locations for the transshipment of narcotics,entry points to key markets, money-laundering locales, or large consumermarkets, nearly all countries in the region take part in a drug trade that involvestens of billions of dollars a year. These money flows—and the sophistication ofthe criminal networks that sustain them—feed many other illicit activities—andthus have transformed the region’s political and security landscape.

The funding of parties and candidates is merely one of the many fronts onwhich the battle between organized crime and democratic institutions is beingplayed out, but it is an important one. Investing in politics is a natural step foran industry that, to thrive, requires weak law enforcement and a measure ofcontrol over crucial public institutions, such as customs. Helping to elect friendswho can open doors and peddle influence through the state apparatus is oftenmore efficient than other methods, such as bribery, blackmail, and threats ofviolence. Even for drug traffickers, the old rule applies: violence is not a sign ofstrength but of weakness. Better the softer approach.

Beyond the immense amount of funds available to drug traffickers, severalpolitical factors add to the vulnerability of Latin American democracies to thepenetration of organized crime in campaign finance. Four such factors deservemention: competitive elections, weak enforcement of campaign finance rules,political decentralization, and feeble political parties.

Competitive Elections

In most Latin American countries, elections are more competitive than ever.In forty-three presidential elections held in eighteen Latin American countriesbetween 2000 and 2010, opposition candidates prevailed 53 percent of the time.Moreover, electoral volatility in the region is very high, comparatively speaking—andindeed reaches astonishing levels in countries such as Guatemala andPeru. Competitive elections and viable opposition parties may enhance politicaltransparency, but they also tend to raise the cost of politics.

While reliable information on the cost of campaigns is notoriously difficultto come by, available data paint a worrying picture. In the case of Mexico in2000 (according to data from the Federal Institute of Elections), paid advertisingon television by the three main presidential candidates amounted to $70million. A similar estimate for the 2006 election puts the figure well above$100 million. One should bear in mind that this number does not includeall the other expenses inherent in a campaign, notably organizational outlays,which tend to consume the lion’s share of campaign budgets in Latin America.

Nor does it include the cost of elections at the subnational level, which isconsiderable in large federal countries such as Mexico, Argentina, and Brazil.In Brazil a rough estimation of the cost of the 1989 general election put it atabout $2 billion. In 2006 it was $2.5 billion, according to Brazilian expert BrunoSpeck, author of the country’s case study in this volume (see chapter 3). Thesesums are often higher for smaller countries, proportionally speaking. The currentpresident of Panama, Ricardo Martinelli, a wealthy businessman, spent$19 million in his campaign, a remarkable figure in a country with barely 2 millionregistered voters. In short, competitive elections are a wonderful thing fordemocracy, but they also offer irresistible opportunities for crime syndicates tomake a political investment.

Weak Enforcement of Campaign Finance Rules

While Latin American countries have made significant strides toward regulatingcampaign finance, the enforcement of these rules continues to be extremelyweak. Legal provisions are rife in the region. Every country has either bannedcertain kinds of political funding or introduced contribution limits. Likewise,in nearly every Latin American country, political parties must submit regularfinancial reports to the electoral authorities, an obligation that also covers individualcandidates in several countries (Brazil, Chile, Colombia, Panama, Uruguay,and Venezuela).

Moreover, fines (in all countries except three) and penal sanctions (in sevenof eighteen countries) have been introduced to back up existing political financecontrols. Yet more often than not, this comprehensive legal apparatus meanslittle in practice. The region is home to many examples of poorly designed politicalfinance reforms and electoral authorities deprived of resources to enforcethe law. As detailed by the chapter on Argentina in this book (see chapter 2), thecomprehensive controls introduced by this South American country in 2002lost all credibility when ten days before the 2003 election the leading candidateand eventual winner reported, without any adverse consequence, that his campaignexpenses amounted to one dollar.

Similarly, the experience of the Central American countries shows thatdespite numerous cases of blatant violations of political finance laws in therecent past, not a single criminal or electoral sanction has ever been meted out.Mexico stands out as the only case in the region in which a powerful electoralauthority has made a genuine effort to enforce campaign finance laws, in somecases with extraordinary severity. The weak enforcement of campaign financecontrols in Latin America is old news for everyone, including crime syndicates.

Political Decentralization

Regardless of its merits, the regionwide trend toward political decentralizationmay be facilitating the penetration of organized crime, a point that the casestudies in this volume convey repeatedly. On the one hand, decentralizationprocesses open up new arenas of electoral competition that add to the cost ofpolitics. Very often, these new layers of competition are outside the scope of thealready lax campaign finance controls that operate at the national level.

On the other hand, the devolution of significant powers, even police powers,to local authorities creates an obvious incentive for the intervention of organizedcrime. Even in small countries, co-opting national institutions—throughcampaign contributions, bribes, or the threat of violence—is a much more difficult,expensive, and conspicuous option for drug traffickers than securing thecooperation of local authorities. Besides, the latter are often the ones with thepower to disturb or shield criminal activities in a particular locale. The experienceof Colombia, where vigorous decentralization has taken place since the1980s, is particularly relevant in this regard.

Weak Party Systems

The weakness of parties and party systems throughout the region also has troublingfinancial implications. The dearth of fee-paying party members and themodesty of most public funding systems in Latin America leave parties and theircandidates vulnerable in two ways: they become dependent on private contributorsand open to power grabbing by political outsiders, who may be supported bylittle more than a well-funded electoral machine. The cases of Panama’s presidentMartinelli, Colombia’s Alvaro Uribe, and Ecuador’s Rafael Correa, among manyothers, offer reminders of this shortcoming. The deficiency of parties points up aglaring risk: in many Latin American countries criminals don’t need to buy off anational party structure in order to have a fighting chance at electoral success. Allthey need to do is bankroll an electoral machine, which can be surprisingly flimsy.

Why It Matters

Thus when it comes to investing in politics, organized crime has it relativelyeasy in Latin America. Does it matter? Yes, it matters a lot. The capture of partiesand elected officials by moneyed interests is bad news for democracy in thebest of cases. At a minimum, it compromises the premise of political equalitythat supports the whole edifice of democracy, reflected in the principle of oneperson, one vote, and stunts the ability of parties and leaders to channel theirefforts toward meeting broader social demands. Such a loss of political autonomyis serious if it occurs vis-à-vis legitimate interests, business or otherwise. Itis, however, devastating when it involves organized crime.

The encroachment on the autonomy of elected leaders by the financial participationof organized crime in their campaigns has peculiar traits. Insofar as theycome from a donor with an uncommon ability to exert coercion, campaign contributionsfrom organized crime are far more than a mere bid to buy influencewith policymakers. The normal codes of etiquette and uncertainty that governinteractions between private donors and politicians, whereby quid pro quos areseldom articulated explicitly and elected politicians always retain the option ofnot fulfilling the donor’s expectations, do not apply in the case of drug traffickers.In the classic formulation that became Pablo Escobar’s trademark, platao plomo (buck or bullet) are often the only choices public officials face. Giventhese options, once recruited, any politician finds it is exceptionally difficult toescape this dynamic. If he tries to do so, plomo (or something subtler) may comehis way. Indeed, once a politician receives drug-related contributions, even if hedoes so unknowingly, this may be used to blackmail him once he is elected.

This is no Hollywood script. It is exactly what José Castrillón Henao, aCali cartel associate who contributed generously to the campaign of PresidentPérez Balladares in Panama, attempted to do when arrested on drug-traffickingcharges in 1996. He failed to secure impunity for himself in this case, but othersmay have succeeded in similar circumstances. And of course, he made good onhis threat: by going public with his contribution checks, he managed to embarrassthe president well beyond the borders of Panama. Quite simply, CastrillónHenao and the likes of him are not your run-of-the-mill business donors.
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