Peru has experienced some progress on several IPI components over the last decade. At the same time, it has seen four successive presidents indicted for corruption due to an investigation started in the neighboring country of Brazil. While there is still room for improvement regarding reducing administrative burden and remodelling the Contraloría on the Chilean model, Peru needs to emulate Uruguay’s soft formalisation techniques to integrate the 70% of its workforce consisting of vulnerable workers into its economy. Furthermore, repeated meddling in the judiciary by successive presidents with the declared aim of reforming it has only added to the politicization and lack of accountability of magistrates. With high popular demand for good governance, Peru formed new political parties which acceded to the Parliament in January 2020 and largely support a presidential reform agenda
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.