Paraguay has been incrementally redressing its judicial independence, but s still at the bottom of its income group and region. An nearly every component, its progress over the past ten years has been below average, explaining what it remains the absolute laggard. However, a decent, although by no means overwhelming mass of critical citizens and some press freedom will continue to put some demand for good governance. Unlike other Latin American countries, which have exhausted preventive tools and must absolutely reform their judiciary, Paraguay can progress still a lot by administrative simplification, removal of legal privileges and increased transparency.

How Does Political Finance Regulation Influence Control of Corruption? Improving Governance in Latin America

In this paper, we address the question of how political finance regulation affects control of corruption in Latin America from a quantitative perspective. We present a Political Finance Regulation Index with panel data from 180 countries over 20 years (1996-2015). This index was developed using the IDEA Political Finance Database, and once created, was applied to assess the relationship between political finance regulation and control of corruption.

In order to do this, we use the equilibrium model of control of corruption developed by Mungiu-Pippidi (2015). We also included judicial independence and public investment, considered as a constraint and an opportunity to corrupt, respectively. Lastly, we use control variables for level of development.

Results show that, in Latin America, increases in political finance regulation are related with a deterioration of control of corruption. This relationship is statistically significant in the panel estimations. Inversely, the negative relationship between regulation and control of corruption becomes positive in countries with high levels of judicial independence. In a similar way, increases in opportunities to corrupt, represented by levels of public investment, have a significant and negative effect in control of corruption.