Comment

Democracy has made impressive progress over the last thirty years in Latin America. Since the beginning of the so-called third wave of democratization in 1978, the UNDP’s index of electoral democracy has risen from below 0.3 in 1977 to above 0.9 in 2002, confirming that most citizens in the region live in highly electoral democratic countries.¹ That positive situation, however, has repeatedly been upset by political challenges. Over the thirteen-year period 1990–2002, Latin America registered twelve cases of elections with significant irregularities.² Moreover, cases of illicit political funding through hidden accounts or covert line items have ignited several crises and placed many a president and former president in situations of impeachment or even imprisonment, including Brazil’s Fernando Collor de Mello, Ecuador’s Jamil Mahuad, Guatemala’s Alfonso Portillo, Nicaragua’s Arnoldo Alemán, and Venezuela’s Carlos Andrés Pérez.³

The concern about political corruption in Latin America has called attention to electoral campaign finances. Academics and policymakers have renewed the debate on the appropriate form of campaign financing regulation.⁴ On the policy front, Transparency International analyzes seven Latin American countries from July 2002 to June 2003 (namely, Argentina, Brazil, Chile, Costa Rica, Guatemala, Nicaragua, and Peru).⁵ Four of the seven countries modified their political campaign financing law in that short period (Argentina, Brazil, Chile, and Peru). Moreover, Costa Rica witnessed a clear call for such reform, leading the Constitutional Court to rule that “the movements and balances of current accounts held by political parties in state or private commercial banks or in any other nonbank financial entity can, in principle, be accessed by anybody.”⁶ Thus, five of the seven countries studied in the report made significant changes to their electoral campaign financing procedures.

While Latin America stands out as a region of frequent campaign legislation reforms, more traditional democracies also display their share of procedural changes. Public financing of electoral campaigns was implemented in the United Stated in 1904, and several additional rules have since been established, mainly motivated by fundraising scandals (such as the Watergate investigations) or the increasing cost of electoral campaigns. An important recent change was the 2003 Bipartisan Campaign Reform Act, which prohibits transfers from parties to candidates (soft money) if the money was obtained from illegal sources.⁷

Germany initiated public electoral financing in 1959, but the system was reformed in 1992 in response to a concern that public financing might reduce incentives for financial support from party members and sympathetic citizens.⁸ The original Parties Financing Act set government disbursement levels for parties based on the number of votes received. A 1994 revision to the Law established that public financing is based on party membership and private contributions, as well as the number of votes received.⁹ Moreover, anonymous private donations must not exceed U.S.$500, and detailed information must be provided on donors of more than U.S.$10,000.¹⁰

In 2003 Canada’s House of Commons passed a bill limiting corporate and union donations to political parties to a maximum of US$1,000 and allowing them only at the riding association level, not at the level of direct donations to federal parties. Individual donations were also limited, with a maximum of US$5,000 per person. A new system of public funding has been established to compensate for the funding shortfall, based on the number of votes received by a party in the previous election, in the form of US$1.75 per taxpayer subsidy.¹¹

In Latin America, Brazil’s recent history presents a clear example of the region’s electoral reform. In 1971, Law 5682 imposed a total ban on direct private political donations to parties and created a public fund for supporting electoral campaigns. Eighty percent of the total amount of the fund resources were distributed among existing parties according to their proportional representation in congress, while the remaining 20 percent was shared equally among all parties.¹² In late 1992, the congress impeached Brazilian President Fernando...