Pandora papers: LatAm

Leafing through the Pandora Papers with a Latin American filter.

The publication of the Pandora Papers megaleak, revealed by the International Consortium of Investigative Journalists (“ICIJ”), unveiled a complex network of offshore corporations controlled by powerful politicians, businessmen and artists. The leak is based on 11.9 million files with information from 14 offshore service providers. More than 600 journalists worked for months to publish the findings of the leaks.

Three active heads of state and 11 former Latin American presidents featured in the new ICIJ Pandora Papers leak. Sebastián Piñera, in Chile; Luis Abinader, in the Dominican Republic; and Guillermo Lasso, in Ecuador are the three incumbent heads of state mentioned in the leak. Furthermore, within the ten nationalities that appear the most in the papers, four are Latin American countries, namely Argentina, Brazil, Venezuela and Guatemala.

Although bank accounts in tax havens are not necessarily illegal, the leak evidences the real problem in Latin America: inequality. Thus, the files suggest that public officials with offshore accounts hide their wealth to avoid paying tax, costing government millions in lost revenues, which will most likely cause political upset among a population enduring social and economic hardship exacerbated by the COVID-19 pandemic.

An investigative journalist in Brazil commented, “In Brazil, the scandal touched the Minister of Economy, Paulo Guedes, and the President of the Central Bank, Roberto Campos Neto. Even if there was no criminal activity, there is a flagrant indecency in the holding the top financial offices in the country and paying not tax on more than USD 9 million in offshore accounts in the British Virgin Islands.”

“There is a fragrant indecency in the holding the top financial offices in the country and paying no tax on USD 9 million in offshore accounts in the British Virgin Islands.”

Investigative journalist, Brazil

“Both Guedes and Campos Neto legislated in their own favour,” exclaimed a local political analyst, “In July 2020, the National Monetary Council of Brazil, of which both are active members, approved a regulation which raised the minimum for declaring offshore accounts from USD 100,000 to USD 1,000,000. Furthermore, Guedes has opposed taxing remittances from offshore entities. Tell me, how can you justify that this is in the public interest?”

Latin America is one of the regions with the largest number of offshore accounts appearing in the Pandora Papers. According to El País, USD 40 billion is diverted on an annual basis to tax havens in the region. In 2017, a study of the University of California revealed that some 27% of Latin American wealth is stored in offshore accounts.

Combatting tax havens is a complex task in a globalised world where countries aim to attract capital by offering financial incentives, low tax rates and lax regulations in a race to the bottom of financial regulatory loopholes. However, these havens attract wealthy individuals, multinationals and criminal groups wanting to escape taxation, generating the idea that there is a trade-off between democracy and prosperity.

Nevertheless, the recent tax leaks and tax havens revelations have led to increasing unhappiness about damaging tax practices, which become evident in times of economic recession and budget constraints. Cross-border mobilisation against tax havens is proving powerful, as local tax-related processes help advance the anti-tax haven agenda.

Thus, in Chile, the national Prosecutor’s Office just started a criminal investigation into President Sebastián Piñera following the Pandora Papers revelations. The Prosecution has launched a probe into a controversial 2010 mining deal in which the Piñera family could have been exposed to bribery and tax-related crimes in the sale of stakes in the Dominga Chilean mining project. Piñera denied all charges and said that the deal had been investigated already in 2015.

The Pandora Papers revealed that the President of Ecuador, Guillermo Lasso, has had ties to ten offshore companies and trusts in Delaware, Panama and South Dakota. Although Lasso claims that he did nothing wrong, he is facing increasing political pressure: the president of the National Assembly’s Audit Commission has demanded that the President clarifies the details of his investments, while opposition parties openly ask for his resignation and a criminal investigation.

In addition to Piñera and Lasso, former regional presidents mentioned in the papers include César Gaviria and Andrés Pastrana from Colombia, Pedro Pablo Kuczynski of Peru, Porfirio Lobo of Honduras, Horacio Cartes of Paraguay, and Juan Carlos Varela, Ricardo Martinelli and Ernesto Pérez Balladares, of Panama.

“Brazil’s Faria Lima [the name for Brazil’s financial elite] all have offshore accounts too, so they will be hiding rather than calling for Guedes head.”

Investigative journalist, Brazil

The investigative journalist concluded, “The whole affair is politically embarrassing but I don’t think much will come of it as it’s not illegal to have offshore accounts. Brazil’s Faria Lima [the name for Brazil’s financial elite] all have offshore accounts too, so they will be hiding rather than calling for Guedes’ head. The people are not going to protest on the streets because of some politicians evading tax but it does contribute to the growing social anger against the elites.”

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