Jan 29th 2014, 21:40 by J.P.
AT FIRST blush, it is just what the doctor ordered. Brazil’s new “Law to Combat Corruption”, which went into effect on January 29th, honours the country’s commitment to curb palm-greasing under the OECD’s anti-bribery convention. By focusing on the corruptors—which could be any firm operating in Brazil, including foreign ones without a permanent presence—it complements the “Administrative Improbity Law” of 1992 that targeted crooked public officials. And it comes at an auspicious time, as the government prepares to dole out more contracts linked to the football World Cup in June and the 2016 Olympic Games in Rio de Janeiro—and against the backdrop of scandals involving alleged backhanders paid by Alstom andSiemens, two European engineering giants, to Brazilian officials.
In many ways the Brazilian statute is harsher than similar remedies elsewhere. Fines slapped on firms can reach 20% of their gross annual revenue or, if turnover is hard to determine, 60m reais ($25m). Unlike America’s Foreign Corrupt Practices Act (FCPA), it requires no proof of bosses’ intent or knowledge: so long as the charged firm benefits from corrupt acts committed by an employee (even one acting through a subsidiary or a subcontractor) it is on the hook. Unlike Britain’s Bribery Act, it does not regard robust internal safeguards as a statutory defence (only as a potential mitigating factor). Unlike either, it allows courts to dissolve a company in particularly egregious cases.
But then graft is a bigger ill in Brazil, which ranks 77th out of 177 countries in the corruption-perceptions index compiled by Transparency International, a Berlin-based lobby. Bribes discourage domestic as well as foreign investment, according to José Ricardo Coelho or FIESP, São Paulo state’s main business lobby, which has embraced the new law with gusto. If accompanying regulations are implementation are clear and consistent, Mr Coelho argues, the law will be a boon for business.
That remains a sizeable “if”. The Brazilian constitution gives not just the country’s 27 states but also its 5,570 municipalities the right to interpret the law as they see fit. That is a recipe for confusion. Different local authorities may, for instance, adopt differing definitions of what counts as an adequate compliance scheme. If they adopt them at all, that is. Claudio Weber Abramo, director of Transparência, an advocacy group, notes that half the states have yet to issue regulations pertaining to the freedom-of-information bill, passed three years ago.
Worse, Mr Weber Abramo adds, the anti-corruption law vests the power to pursue firms for alleged misdemeanours with local authorities. Perversely, he says, this may prompt bent mayors to blackmail businesses bidding in municipal tenders to pay backhanders or risk being dragged into protracted proceedings. (In the United States, another federal country, most FCPA proceedings are initiated by the stock-market regulator and the Department of Justice.) Even the upbeat Mr Coelho concedes that if local governments do not follow clear federal guidance in implementing the law and instead do it their own way, which is their constitutional prerogative, the upshot could be more corruption, not less.
Igor Tamasauskas, of Bottini and Tamasauskas, a São Paulo law firm, points to another snag. The law envisages co-operation with investigators in the administrative proceedings as grounds for leniency. But it does not, as in the case of the FCPA, forestall separate criminal proceedings against bosses in the event of such co-operation. This may make firms reluctant to collaborate. And the law’s focus on penalties, Mr Tamasauskas thinks, may prove counterproductive.
As with physicians’ prescriptions, then, the law is well-intentioned but hard to read. Brazil certainly needs the treatment. It will take years to see whether it actually works.