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3 E&C themes for multinationals doing business in Latin America

For ethics and compliance standards to evolve anywhere in the world, certain conditions are needed. These include the existence of a robust rule of law, strong and trustworthy institutions, and active and fair enforcement of regulation. 

However, given Latin America’s political, economic, and social instability, there are ups and downs in its journey toward better compliance standards. This context presents significant challenges for multinationals with substantial operations or activities in the region. 

As has been the case with other geographies, Latin America will likely elevate its ethics and compliance standards in the long term—partly because this is an era of globalized business with international anti-corruption cooperation and hyper-transparency. There’s simply no other way. Regulators, investors, and—more importantly—civil society are demanding higher standards. But until the region gets to where it needs to be, what can companies doing business in Latin America do to mitigate risks while being consistent with their values and policies?  

That’s the main question I asked Patricia Kosa, Gold Fields Legal and Compliance leader for the Americas, and Mariano Gojman, Regional Compliance Officer from Siemens, in LRN's recent webinar “Ethics and compliance challenges (and opportunities) for multinationals doing business in LatAm.” A recording of the webinar is available in Spanish (Passcode: v9Rk#7i%). Here are the three key themes that emerged from our subsequent discussion. 

Ethics and compliance should reflect cultural nuances 

Panelists agreed that one key aspect is to tailor the ethics and compliance program to the region’s environment and culture. Although ethical standards are not adaptable, tools such as training and communication are. For instance, Gojman told the audience that Siemens follows what he calls a balanced approach:

“While the headquarters sets the standards and we have a single compliance system, global offices have participation when it comes to updating the code of conduct or what we call ‘the house of risks’. The company has zero tolerance to corruption but Siemens E&C leaders from around the world provide input regarding tools to prevent it, and each country office is responsible for translations.”  —Mariano Gojman, Regional Compliance Officer, Siemens

Kosa added that Gold Fields believes their employees are the heart of the company from a business, HR, and compliance perspective. “In our people sits a permanent risk but our people are also our biggest strength and competitive advantage. We realized that we had to make the examples and scenarios  relevant to the employees working in our mines. You need to tailor the training and communication to their realities. That’s the only way to convey that even what may be a normal business practice in the region, for us, as a company, could be unacceptable.” 

In Latin America, context matters to corporate culture 

Even though corporate culture can be measured and managed, it’s undeniable that there are external historical, sociological, and even religious factors that help shape the culture of a company’s local office. While there are always exceptions, some geographies are known for having a tendency toward more hierarchical, top-down cultures. Other regions favor more open, flat, and collaborative environments. In Latin America, for instance, several studies show that there are cultural traits that make it particularly challenging to foster a speak-up culture. In many countries, the recent socio-economic context (for example, authoritarianism, influence of religious institutions, tremendous income inequality, and such) have a profound impact on company culture.  

Gojman said “We live in countries with very low levels of trust. So, I’d say that most of my work is related to help our people understand that our system works. That’s the key to build a speak-up culture. For instance, we see our reporting channels not only as hotlines but as a way to raise concerns and make questions and improve the system.”  

Businesses should engage local stakeholders in Latin America 

Multinational companies are in an ideal position to engage with local stakeholders. It is in a company’s interest to do business in a market with similar ethics and compliance standards to that of where it is headquartered. Kosa told the audience, “We endeavor to persuade local stakeholders, like communities and authorities, of the benefits of higher ethical standards. It is not just due to international regulations, or because that’s ‘the Gold Fields way.’ Corruption is harmful, and higher ethical business standards will bring more investment and progress. That includes sharing these concepts with local competitors and providers, explaining what’s at risk when local businesses engage in corruption. It’s about helping them understand that doing the right thing also protects them.”  

The key takeaway 

Latin America is in a curvilinear journey toward best compliance standards. Hopefully, it will be a matter of years and not decades. In the meantime, companies don’t have to compromise their ethical standards to do business in the region. But they need an effective and tailored compliance program to make this successful.   

You watch the full webinar in Spanish by clicking here (Passcode: v9Rk#7i%). To learn more about anti-corruption policies and the greater E&C space in Latin America, check out these additional resources: