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Transnational Corporations in the Architecture of Impunity: Power, Corruption and Human Rights

Transnational Corporations in the Architecture of Impunity: Power, Corruption and Human Rights

By Pedro Ramiro and Erika González

The modus operandi of transnational companies is made up of those illegal practices that are defined as economic crimes and, at the same time, of all those others that, without contravening current legislation, can be included within a category, corruption, which does not it refers both to a series of exceptions and to the rule itself. And, as shown when analyzing the historical evolution of large Spanish corporations, corruption cannot be characterized as a mere consequence of the "bad practices" of certain politicians and businessmen: it is a conception of political economy, a form of government, which has its roots in the very foundation of global capitalism.

The big four [1] helping hundreds of multinationals to set up complex corporate structures to transfer their profits to Luxembourg and thus pay almost no taxes. Volkswagen acknowledging that it manipulated the software installed in eleven million cars so that their emissions of polluting gases appeared lower than the real ones. Goldman Sachs hiring José Manuel Durão Barroso, former president of the European Commission, as an advisor, five years after the vice president of this investment bank, Mario Draghi, was appointed head of the European Central Bank. The construction companies FCC, Sacyr and OHL donating large sums of money to the Popular Party at the same time that they were awarded large contracts for public infrastructure works. Telefónica functioning as a great placement agency for the political-business class that governs us and successively signing Iñaki Urdangarín, Eduardo Zaplana, Rodrigo Rato and Trinidad Jiménez. These are just some examples of an endless list of proper names that show that, after all, what we have come to call corruption is nothing more than the usual way of operating of transnational companies.

Multinationals, corruption and human rights

"In their race for profit accumulation, all large corporations in all sectors are forced to break the rules at some point," they say in their bookThe criminal enterpriseProfessors Steve Tombs and David Whyte. [2] And, indeed, it is: in a context of strong competition in the world market and with constant pressure from shareholders and investment funds to increase their profits, large companies are in a continuous race to the bottom - devaluation of salaries, “flexibilization” of working conditions, outsourcing of less profitable tasks and responsibilities, etc. - which implies, when the situation requires it to defend their businesses, going beyond national legislation and international agreements. The history of the global expansion of multinationals, from the end of the 19th century to the present day, shows this.

Throughout the past century, in order for the process of internationalization of large industrial, extractive and financial corporations to take place, it was necessary to discipline governments, local communities and social movements that opposed this model of “development”. And transnational corporations, within the framework of a strategic alliance with the central states - not in vain, as Tombs and Whyte remind us, "the corporation is a creation of the nation-state and stands on an obscene variety of state activities" - [3] they did not hesitate to use all the means at their disposal to achieve their goals. United Fruit Company —today Chiquita Brands—, for example, was responsible in 1928 for what is known in Colombia as “the massacre of the banana plantations” [4] and, since then, it has been denounced for land grabbing, slave labor conditions and systematic bribery and corruption practices to control governments; Without going any further, her involvement in the overthrow of President Jacobo Arbenz in Guatemala in 1954 was accredited and already in this century she has been condemned in the United States to pay a fine of 25 million dollars for supplying weapons to Colombian paramilitary groups.

Table 1. Examples of human rights violations committed by transnational companies throughout the 20th century.


Source: self made.

The internationalization of the businesses of these companies, as various social organizations and study centers around the world have been investigating in recent decades, has led to a series of serious social, economic, political, environmental and cultural impacts. [5] In addition, the growing exploitation of workers, the continued destruction of ecosystems, the expansion of mechanisms of financial speculation and accumulation by dispossession as ways to sustain the increase in profits, the absolute priority enjoyed by the mechanisms of The reproduction of capital in the face of the processes that allow the maintenance of life, in short, have led to those who enrich themselves with this model not precisely the social majorities, but the large owners and the main managers of those same companies. [6] And the construction of all that economic, political, cultural and legal framework, on a planetary scale, is only explained through the systematic use of legal, illegal and illegal practices to benefit that small minority that controls corporate power.

The architecture of impunity

The political-economic link between the central states and multinational companies, as well as the pressure they exert on international economic-financial organizations, allow them to configure policies and legislation that are favorable to their own interests. In fact, the objective of what we have called the legal architecture of impunity —which in recent decades the transnationals, the institutions and the states that support them have been building— is precisely to ensure the businesses of the multinationals and protect their “rights ”, Going beyond the fundamental rights of the social majorities, the sovereignty of the peoples and democracy itself. [7]

Transnational companies protect their rights through an international legal system based on the rules on trade and investment, a new lex mercatoria made up of thousands of rules: exploitation and commercialization contracts, bilateral and regional trade agreements, investment protection agreements, investment policies. adjustment and conditional loans, arbitration awards ... It is a hard law - normative, coercive, sanctioning - that favors the interests of large corporations and, at the same time, offers the other side of the coin when regulating which are their obligations. And it is that these refer only to national laws - previously subjected to neoliberal policies - to an International Law of Human Rights that turns out to be manifestly fragile and, finally, to a "social responsibility" that is nothing but a Right soft law articulated around the ideas of voluntariness, unilateralism, legal non-enforceability and, ultimately, business self-regulation.

The construction of that armor of capitalism that privileges corporate business over the general interest, of course, would not have been possible without the decided participation of public institutions and multilateral organizations in the entire process. [8] Let us not forget that, at the same time that everything that could be unfavorable to the interests of transnational capital has been deregulated and “made more flexible” - putting into motion successive labor reforms and the pension system, the thinning of environmental legislation, the deterioration of the provision of public services such as water, health and education to facilitate their subsequent privatization, etc.—, the State has been essential for large companies with regard, on the one hand, to the repression of the social mobilizations against them and, on the other, the legislative production to favor those same companies. [9]

With this, transnational companies can circumvent practically any control, both public and citizen, thanks to the economic-financial power they possess, their transnational character, their legal versatility and the complex structures they use to circumvent the different national and international laws and regulations . [10] Likewise, the consolidation and expansion of the extraordinary power that they have accumulated is carried out through strong lobbying, setting up think tanks and dedicating many efforts to the construction and dissemination of a story that socially legitimizes their objectives of deal. At the same time, they grease the mechanism of the revolving doors, causing a whole succession of leaders and businessmen to exchange their positions between the public and private sectors and thus subordinating political decisions to the particular interests of the great powers. economical. [eleven]

Table 2. Dimensions and impacts of the activities of transnational companies, with examples of Spanish multinationals.


Source: Own elaboration, based on OMAL's database (www.omal.info) on conflicts generated by Spanish multinationals in the last decade.

The expansion of large Spanish companies

The businessman Javier López Madrid, a great friend of the kings of Spain and CEO of the Villar Mir Group - the conglomerate that owns OHL and with stakes in other companies such as Abertis, Fertiberia and Colonial -, investigated in the Púnica operation for the illegal financing of the Party Popular in Madrid and accused of misappropriation in the case of Caja Madrid's black cards. The president of FCC Construcción and the director of infrastructure of Acciona in Spain, arrested along with eleven other people for the alleged payment of commissions to executives of the state company Acuamed in exchange for infrastructure projects and surcharges. Among the private companies that made donations to the foundation of the Democratic Convergence of Catalonia, Agbar was the one that gave the most money, and it stopped doing so after not being granted the privatization of Aguas Ter-Llobregat. Day after day, hundreds of recent news such as these make corruption never cease to be current and, more than a mere sum of irregularities, what they come to show is the network of interests of a political-business elite that presides over the in which large Spanish companies operate.

In reality, far from being a novel situation, corruption as the usual modus operandi of what today are the large Spanish multinationals, as well as of a good part of the political-business class that governs us, dates back to the beginnings of Franco's developmentalism. And it is that it was mainly tourism and construction - also certain industrial and energy sectors -, with strong support from the large banks, which largely contributed to sustaining the economic growth model of the Franco regime and allowed rapid enrichment of the national oligarchies. This model of family capitalism still controls a significant number of large Spanish companies today.

In the forties and fifties of the last century, projects related to the construction of large infrastructures were the most direct way to favor the owners of the companies closest to the Franco regime. And in addition to having the support of the public budget to develop the works, they were able to count on slave labor, the republican prisoners, to build swamps and roads. This is how the Entrecanales family, owner of what is now Acciona, built a canal to evacuate waste from the wealthy neighborhoods of Seville. And in the same way, the Dragados company - later integrated into ACS - lowered the costs of the construction of the Mediano reservoir in Huesca, [12] like Coviles - later part of OHL - in the Cenajo reservoir in Murcia, [ 13] among many others. A handful of large corporations and owner families that, since then, have a privileged position in the Spanish economy. [14]

With the end of the Franco dictatorship there was no break; On the contrary, the Moncloa Pacts and the economic reforms of the 1970s laid the foundations for establishing a line of continuity with the privileges and properties controlled by the dominant classes since the postwar period. In this way, the business bosses and the key names of Spanish family capitalism maintained control over their sectors and continued to be very influential in deciding who led the Transition and how the first governments elected in democracy were to act. As the historian Emmanuel Rodríguez recalls, "by 1975, two hundred families, with a presence on the boards of large banks and large Spanish companies, controlled more than a third of the shares listed on the stock market." [fifteen]

"This is the country where you can earn more money in the short term from all of Europe and perhaps also from the whole world", Carlos Solchaga, Minister of Economy and Finance and exponent of the culture of the ball, stated in 1988 of businesses that were opened in the eighties with the expansion of the economic policies initiated in that period. Thus, with the entry of Spain into the European Economic Community, a multitude of reforms were imposed that configured the neoliberal economic model that has survived to this day. It was in the "socialist" governments of Felipe González (1982-96) when the greatest "liberalization" of the economy was promoted, the increase in the "flexibilization" of working conditions and the accelerated privatization of state companies. A task that José María Aznar took up with force in his years as Prime Minister (1996-2004), deepening and extending all these policies with his "Modernization Program of the business public sector". To close the circle, both leaders were hired a decade later as a director and advisor to Gas Natural and Endesa, respectively, multinational companies from public companies privatized precisely by their own governments.

With all this, many businessmen friends of the governments of the day were placed in the boards of directors and the directorates of what would later become the largest Spanish multinationals: Telefónica, Gas Natural, Argentaria (BBVA), Repsol, Iberia, Endesa ... thus a renewed political-business class, complementary and well related to the historical clans of family capitalism, which would be the one that would direct the internationalization process at the end of the nineties and the beginning of this century. In permanent and constant tune, yes, with all the rotating politicians who, from the armchairs in public institutions or from the seats in the boards of directors of large companies - since 1977, 40% of the ministers of the governments of Democracy has been incorporated into the leadership of large private corporations—, [16] they were added to collect the benefits that this model of economic growth provided to those who managed to place themselves at the top of the political-economic power structures. The parallel trajectories of BBVA, Telefónica and Repsol, for example, constitute paradigmatic cases to understand how the political-business machinery has been working since the late 1990s, the golden age of privatizations, to date. [17]

The "second landing" in Latin America

The large Spanish companies and their main executives were thus very well positioned to make the leap to new markets where they could continue with their logic of growth and accumulation. In addition, the threat of purchase by some European capitals, through operations led by large and capitalization corporations, was gaining strength, so the best defense was to continue expanding to other regions. They had the tools to do so, they had acquired the size and financial capacity to expand outside the Spanish borders; at the same time, Latin America was under the orthodoxy of the Washington Consensus and was experiencing a wave of privatizations and corporate mergers.

"Establishing and enforcing a framework of clear rules that reduce uncertainty is the best vehicle to channel investment to Latin America", recommended Manuel Pizarro, then president of Endesa - later a national deputy of the PP -, at the Latibex Forum in 2006 A statement that is paradoxical when we know that Spanish investments in the region reached record levels precisely in that period, in which there were continuous changes in regulation and government and business non-compliance with those same rules was evident. The fact is that the privatization boom that Latin America experienced in the 1990s represented a perfect context to make corruption not only an economic policy but also the best way for the massive entry of transnational capital.

Along these lines, the governments that opened the Latin American economies to foreign investment were characterized by creating an economic context that deepened inequalities, strengthened a privileged relationship between the private sector and the political sphere, and promoted the enrichment of national elites and also transnationals, through both legal and illegal channels. This was the case in Brazil and the executive of Fernando Henrique Cardoso, who saved banks implicated in millionaire fraud with public money - and then the "favor" was returned with illegal donations - sheltered numerous cases of corruption and even bought votes for his re-election. A similar panorama was lived in Argentina with the government of Carlos Menem, described as the most corrupt president in the country's history due to a long list of irregularities in his terms. And what about the examples of the Mexican government of Ernesto Zedillo, that of Alberto Fujimori in Peru, etc. As shown by the way in which the second landing of Spanish multinationals in Latin America was carried out, the networks created by the alliance between big capital and the government not only benefited corrupt public officials, but above all transnational companies that, thanks to the privatizations, established their positions of control over the strategic sectors of the region's economy.

In this reformulation of advantageous conditions for transnational companies, a wide range of policies has been contemplated which, although it cannot be said that they have been illegal, undoubtedly entailed serious damage to the social majorities. And when, through legal channels, they have not been able to obtain the desired profitability, multinationals such as Telefónica, Repsol, BBVA and Endesa, to name just a few cases, have not hesitated to expand business possibilities towards the exchange of favors, bribes, tax evasion and money laundering. This is how, in short, the large Spanish companies transformed into multinationals and came to dominate the key sectors of the Latin American economies.

Table 3. Chronology of some of the main privatizations and sales of Latin American companies to Spanish companies.


Source: self made.

In 2012, King Juan Carlos, on a diplomatic visit to Brazil, praised the work of the Dilma Roussef government because he had “understood well that the most open economies that best respect the principle of legal security are the ones that offer the most welfare to their citizens ”. He said this at a business meeting in which he was accompanied by the presidents of Banco Santander, Iberdrola, Repsol and Telefónica. The monarch, yes, overlooked that one of the companies present there —Iberdrola, Neoenergía's main shareholder— is responsible for the destruction of the Amazon by the construction of the Belo Monte hydroelectric mega-dam; [18] Nor did he make any mention of the payments that Telefónica was making to the former Brazilian Minister of the Presidency, José Dirceu, to guarantee the obtaining of contracts. [19] "Legal security", in this context, seems to be a concept only referred to ensuring the operating conditions of transnational capital, above other considerations such as human rights and nature.

Using corruption to guarantee a lucrative business has not only been an episode related to the sales of Latin American companies; It has been established as a form of government and a currency in common use in the development of large business activities. It is just one part of the political-business framework that places the public function and State resources at the disposal of transnational companies, where economic diplomacy and even military interventions act with a prominent role in the consolidation and expansion of businesses throughout The balloon. This confusion between private interests and the general interest has been manifest when some Latin American governments have tried to change the conditions from which multinationals have benefited so much in recent decades; Let's see, without going any further, what happened in 2006 with the decree of nationalization of hydrocarbons in Bolivia and, in 2012, when the government of Argentina expropriated Repsol's shares in YPF. "Wherever there is a Spanish company, the government will be defending its interests as its own," concluded President Mariano Rajoy on a tour to promote the Spain brand.

Control proposals and alternatives

Prohibit the unhindered movement of high officials and political representatives between the public and private sectors, the co-optation of the decision-making process of public policies - regulatory cooperation, the co-writing of legislation, the elaboration of standard norms or draft laws -, the bribery and other corrupt practices. Force governments and parliaments to submit to consultations —both online and in public hearings— with companies, pressure groups, social movements, unions, NGOs and indigenous peoples, among others, decisions that affect their interests. Regulate the complex network of banks, companies, groups of investors, agencies, consultants, commission agents and other actors that operate in the financial markets. Approve rules on the transparency of financial practices; the control of capital and financial services; the control of investment funds (hedge funds), fraud and tax avoidance, rating agencies, the remuneration of senior managers and bank secrecy; the sanction of illicit capital flows.

These are, along with many others that are already being made by a good number of civil society organizations, some proposals to control the activities of large companies that, from today, could be applied without major technical impediments. legal if there was the political will to do so. The fact is that, given the lack of democratic controls to curb the corruption that runs through the entire current socioeconomic system, the need to establish mechanisms has once again been placed at the center of the debate - although this has been at least since the 1970s - [20] of regulation to oblige transnational corporations to comply with democratic guarantees and respect human rights anywhere in the world.

It is true that some measures already exist in relation to the democratic control of large companies, but in our opinion they turn out to be partial and ineffective. We are talking, for example, about the registries for lobbies, like the Lobbying Disclosure Act of the United States and the Transparency Register of the European Union; While the first is mandatory, the second is voluntary and does not include penalties when corporations do not register or do so with inaccurate data. On a Spanish scale, three years ago the approval of a registry of lobbies by the Congress of Deputies was considered, with the declared intention of “improving the mechanisms of transparency, accountability and responsibility of the institutions” -, [ 21] something that to date has not happened. Likewise, there is an obvious weakness to stop revolving doors: in the Spanish State there is a law that establishes a minimum period of two years between the cessation of public positions and activities in private companies “related to the position held”; in the European Union this period of time is further shortened and only lasts up to a year and a half for former European Commissioners. And despite the fact that it is a very lax regulation, it is not even complied with: before the term stipulated in the regulations became effective, the former vice president Elena Salgado was hired by the Endesa subsidiary in Chile.

In this context, to counteract the force of the lex mercatoria and the enormous political, economic, cultural and legal power of transnational companies, the normative pyramid has to be inverted, placing the rights of the social majorities instead of the interests at the apex. deprived of the political-business class that governs us. Thus, we need a new model where people and the environment take precedence over corporate profits and interests. In this sense, the approval of a legally binding international regulation to oblige multinationals to respect human rights has been demanding for a long time, wherever they operate, as well as the creation of an international court to try transnational companies and the implementation of a center to keep track of its operations. All these initiatives that may be proposed are, in turn, complementary to others such as the International Treaty of the Peoples for the control of transnational companies, “an alternative proposal of a radical nature - elaborated thanks to the work of social movements and social networks. international solidarity -, whose objectives are, on the one hand, to propose control mechanisms to stop human rights violations committed by transnational companies and, on the other, to offer a framework for exchange and the creation of alliances between communities and social movements to reclaim public space, now occupied by corporate powers ”. [22]

Pedro Ramiro YErika Gonzalez are researchers from the Observatory of Multinationals in Latin America (OMAL) - Peace with Dignity.

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