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1/22/96

The heat is on Latin America to reform its courts

STANFORD -- Pressures to reform courts in Latin America are at an all-time high, but no one should expect corruption to end overnight, say Hoover Institution fellow William Ratliff and two World Bank co-authors in an essay summarizing recent research on the subject.

Complete reform will take generations to achieve and won't happen unless those devising reforms take into account the short-term costs and benefits of the reforms to powerful interest groups, say the authors. Ratliff's co-authors are Edgardo Buscaglia Jr., vice president of the Latin American Law and Economic Association and a consultant to the World Bank, and Maria Dakolias, a judicial sector specialist at the World Bank.

"Judicial reform is essential in Latin America today if the domestic and international economic changes that have drawn world attention are to succeed," the authors say, because law is "the underpinning of true democracy and lasting economic reform."

A well-functioning judicial system is important to economic improvement, they say, because it enhances economic efficiency and reduces the opportunity for the "predatory role of the state" - such activities as bribe taking by judges and politicians who use their official positions as an unofficial source of income.

In many Latin American countries, poorly trained and poorly paid judges are allowed to spend part of each day meeting separately with lawyers and parties to a case, and this provides "almost unlimited opportunities for corrupt behavior and a lack of accountability within the courts," the authors say. "Predictably, there are accusations and indications that cases are decided in these meetings in exchange for payoffs." Court reforms, therefore, need to promote "uniformity, transparency and accountability."

History may be partly responsible for the situation, they say, in that Latin American legal systems generally have been imposed by outsiders - first by the colonial powers and more recently as a result of doing business with the United States. The international economy is likely to keep the pressure on Latin America to adopt more internationally accepted practices, particularly those in use in the United States.

The authors note that East and Southeast Asian countries have been economically successful without major reform of their judicial systems, but they claim that is because "these countries have depended on fairly credible bureaucracies or on informal personal/institutional relationships" for resolving disputes. Over time, they say, "the more these [Asian] countries interact with the world in general, the more they also will have to develop and abide by more formal legal systems."

Studies by the World Bank and others indicate that "the quality and availability of court services in Latin America affect private investment decisions and economic behavior at large, from domestic partnerships to foreign investment," the authors say. While the prevailing legal principles in Latin American countries recognize individual property rights, these rights frequently are ignored or violated in practice. "Only consistent enforcement permits the development of a stable institutional environment where the long-term consequences of economic decisions can be assessed."

The authors assemble a number of recent surveys of international business people, Latin American business people, judges and average citizens to paint a picture of low confidence in the region's courts. Some of the evid