Portugal sell-offs opaque, carry graft risk: study

LISBON,  (Reuters) – Portugal’s privatisation programme – part of its push to comply with the terms of a 78-billion euro bailout from international lenders – is being managed in an opaque fashion that risks stoking already rife corruption, a report warned today.

The Portuguese unit of anti-corruption organisation Transparency International (TI) accused the government of sacrificing regulatory standards in order to raise funds swiftly.

“In the name of efficiency, these processes have been run in a rushed fashion and in total obscurity, sacrificing legality and transparency… Certain state asset sales may not only fail to reach their goals, but could also trigger corruption and illegal enrichment by those with access to privileged information,” the report said.

Portugal’s heavily-indebted government has raised taxes, cut public spending and begun selling off state-owned companies in order to comply with the terms of a 78-billion euro three-year European Union/International Monetary Fund bailout.

It is also in the throes of drawing up an anti-corruption bill that will make illicit enrichment a criminal offence.

It has already sold major stakes in utility EDP – Portugal’s largest company – and in power grid operator REN , mostly to Chinese investors, and is preparing other privatisations.

The opposition recently questioned the planned sale of a stake in cement maker Cimpor by state-controlled bank CGD to Brazilian company Camargo Correa.

However, the government says the sell-offs have been fully transparent and corruption-free.

But the report, prepared jointly with the think tank INTELI and the Institute of Social Sciences of the University of Lisbon, said its evaluation of the country’s overall integrity under Transparency International criteria, “revealed lower results than would have been expected from a developed, industrialised country that is part of the European Union”.

It scored the integrity of public administration at just over 40 points on a 100-point scale, government transparency at 50 points, and its overall integrity at 60 points. It said it was the first time it had compiled such a detailed study and it was impossible to compare the figures with previous ratings.

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TI said that state corruption had contributed to the country’s financial crisis in the first place via mismanagement of public finances, ultimately forcing Portugal to borrow more than it would otherwise have had to.

The report also said that budget cuts and the diminishing quality of public services increased the risk of corruption.

“Facing the difficulty or the impossibility of getting goods and services, citizens are more tempted to resort to an exchange of favours or even bribes,” it said.

A renegotiation of public-private partnerships and a restructuring of the armed forces could also “open opportunities for corruption, especially given the strong mingling between public and private interests in Portugal and the low moral and legal costs of illicit deals,” it added.

Portugal’s past governments came in for criticism with the report saying they had been guilty of sealing “ruinous” public-private partnerships as the state at the time had assumed all the risks and costs, guaranteeing revenues for the companies concerned.

TI said it had met representatives of the “troika” of creditors when the bailout programme was being prepared last year to voice its concerns and recommendations. But it said “none of the recommendations were taken into consideration in the processes that have been launched so far.”

The troika is made up of the European Central Bank, the European Commission and the IMF.

Portugal is ranked 18th in the EU and Western Europe according to the Corruption Perception Index, worse than Spain, but much better than Italy and Greece.

TI said a survey earlier this year had shown that 68 percent of Portuguese citizens thought corruption has worsened in the past three years and that 98 percent considered graft a grave problem for the Iberian country.

The country’s existing anti-corruption efforts were being hindered by poor coordination, lack of specialised law enforcement authorities and a lack of political will, it added.

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