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Uncharted Territory: Investigations in Latin America

For those looking in from the outside, Latin America may be a great place to do business, but it can also be "uncharted territory," particularly when it comes to vetting potential partners or, indeed, conducting investigations of any sort. It's a tempting but very dangerous decision for, say, US or European clients to imagine that they can operate in this region as they would in their home countries and simply, "Google" their prospective partners, customers, or agents; or, even worse, simply trust them. The consequences--as we have seen with many of our clients who seek us out after transactions have gone bad--can be devastating. Bearing that in mind, here are a few points of which anyone interested in operating in Latin America should be cognizant.

1.) It's all politics: You need to understand the local politics of the country where you are operating/investigating. Without the context of politics it's much more difficult to understand and contextualize any information let alone investigative findings. In Latin America, politics usually play a role in just about everything, from which companies are awarded government contracts to who gets investigated for corruption. The context of politics helps us understand how party alliances in, say, Mexico, play into certain companies being awarded contracts and why certain former government officials are under investigation, say, Panama. It adds much-needed context to government actions; it helps us gauge certain risks and understand relationships. It is a sharpened sense of the political landscape that can help us understand the, "what," "why," and "how" of certain government actions (or lack thereof).

It's also worth keeping in mind that every country is different in this respect and one needs to understand not only the political parties at play but the relationships between key power players. In a country like the United States, there is a much "neater" division between political parties since there are only two major ones with fairly well-defined ideological principles. Not so in many countries in Latin America. Some countries have three or more major parties although, in some cases, their voting systems can lead to somewhat more ideological discipline than one finds in the US.

Mexico's Institutional Revolutionary Party (PRI), for instance, has been more institutional than revolutionary; while it's a member of the Socialist International, its policies have been largely centrist. The country's federal system of government means that local politics is often just as important (if not more important) a factor to be conscious of as national politics.

Brazil, for example, has a virtual "alphabet soup" of political parties and coalitions become very important in, for instance, the federal Chamber of Deputies. In addition, states have their own political dynasties and dynamics.

Finally, Panama has three major political parties but their ideological divisions in terms of the "left" versus "right" spectrum can be difficult to distinguish; ultimately, politics here is more about specific personalities and their relationships with one another. This factor is compounded by the small size of the country and its political class.

2.) The law is important: The law is important not in the sense that it's necessarily adhered to as a matter of course, quite the opposite. Rather, you have to understand something about legal procedure in the country in which you are investigating. For example, if your potential partner was close with the previous government, or key figures in that government, (again, point 1 above) and is now under investigation by the new government, which is circumventing (or not) certain procedural or constitutional protections, that may be a good indicator of the political motivation behind the investigation itself. This sort of granular analysis might also hold clues about just how keenly the subject in question is being pursued (i.e. are they really being investigated or is it more a question of optics).

3.) Don't believe everything you read in the papers: Open sources, particularly traditional media, will most likely not get you the full story. This is probably the most important takeaway from this blog post and it's due to a number of reasons.

First, the media "landscape" in a given jurisdiction can vary significantly with respect to size, diversity, and political polarization. It's dangerous to read a story in a newspaper in Latin America and simply accept it at face value without context. For example, is the newspaper in question considered reliable? Is it a major paper in terms of circulation? Perhaps more importantly, who owns the paper, what are the owner's political tendencies, who are the owner's allies, and what are the owner's goals?

It is not uncommon to have concentration of media ownership in Latin America by wealthy interests who have particular agendas. That context has to be "read into" any analysis of media sources. In fact, journalists themselves may have their own agendas or may be influenced by the editorial or political stance of the owners.

Second, journalistic standards are not always on par with those of traditional newspapers in North America or Europe. It's not uncommon to read a story (or several) about a given person being under investigation for, say, corruption and then see very little, if any, subsequent coverage about the details, progress, or conclusion of the investigation. This can be due to a variety of factors. For example, the particular matter may not have gained any traction, publishing certain details of criminal investigations may be restricted by existing laws, or, there may simply be a lack of interest in pursuing the story. It's also not uncommon to read different stories in different newspapers with contradictory, unclear, or incorrect details about the same event or set of events.

Third, journalists can be paid off to ignore details or, alternatively, to focus on, or invent, particular details or stories. We have handled cases where such strategies have been employed by subjects. In one particularly memorable case, a subject who held himself out to be a business broker had been featured in a number of stories in small, regional newspapers that referenced him as having brokered a government contract for the construction of a regional health facility. The stories contained pictures of what appeared to be a signing ceremony featuring the subject and a government official but there were no follow-up stories, no similar stories in other newspapers, no evidence that the facility had ever been built, and no official record of a government contract meeting the specifications initially reported in the newspapers ever having been issued. The sum total of these oddities, together with the other findings of the investigation, suggested very strongly that the story had simply been planted by the subject himself.

Anyone seeking to do business in Latin America should be investigating as necessary (potential partners, employees, competitors etc.) and those investigating in the region must realize that it is not monolithic in nature. Each industry, each country--and, oftentimes, even regions within particular countries--brings its own particular set of concerns; its own politics, its own media landscape, and its own legal concerns. Without proper attention paid to understanding and analyzing those factors in order to turn them into proper strategy, venturing into Latin America as an outsider can be a bit like wandering through a hall of mirrors, only with disastrous consequences.

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