The Cost of Internal Control and Corporate Governance in Latin America

As organizations hope to take advantage of Thomas Friedman’s flattened world, they must increasingly recognize that corporate governance and internal controls are no longer tools that are solely important for large multinational corporations in the European Union and the United States. This paper explores the interplay between Country Governance and Corporate Governance and how this interplay is critical for successful economic development in Latin America. In particular, it investigates the degree to which the impact of government corruption on the development of disclosure practices by both Multinational Corporations and Small and Medium sized Entities (SMEs) impacts on foreign direct investment. Moreover, these policies often affect the relationships that foreign corporations can facilitate under laws such as the US Foreign Corrupt Practices Act. Internal control and Corporate Governance are examined as tools that organizations implement rather than merely talk about.