Background and rationale
In 2014, MACN recognized through its anonymous incident reporting mechanism frequent recurring reports of cash demands made during the vessel clearance process in Argentina. Shipping companies operating in Argentina faced challenges in connection with the inspections of holds and tanks, customs declarations, and on-board inspection practices. Failing an inspection was costly, since it meant ships were considered off-hire. Depending on market conditions, port costs and commercial delays accrued from each extra day in port could amount to more than US$50,000 per day. Data from MACN member companies highlighted a systemic issue with cash demands for payment for unclean grain holds, including cases of extortion.
To address this challenge, MACN sought to understand the root causes and devise solutions with a coalition of champions. MACN and local partner Governance Latam (now Bruchou & Funes De Rioja), in collaboration with other industry stakeholders, catalyzed a collective action initiative to investigate the root causes of the problem and support the government in reforming its procedures to tackle systemic corruption.
After three years of public-private collective action efforts, an integrity-driven regulatory reform was adopted in 2017. The new regulatory framework modernized the inspections system in line with international standards, balancing the government’s responsibility to ensure the cleanliness of vessels exporting agricultural products with the necessary conditions for integrity in the context of foreign trade relations. After the regulation entered into force, MACN has been training and raising awareness throughout the industry about the new requirements to support broad adoption of the new practices.
Outcomes and impact
As a result of the collective action, MACN has seen a 90 percent drop in reported incidents, and a dramatic decrease in cash demands. MACN continues having a close dialogue with government stakeholders, MACN members and external industry partners to monitor the situation on the ground and ensure that integrity standards are being upheld by all parties during inspections. The monitoring is supported by the incident data collected by MACN and input from the industry peer dialogue from MACN’s members.
The reform achieved has contributed to increase the efficiency, integrity, and transparency of inspections, reducing the possibility of ship delays for unclear or unfounded reasons and facilitating the smooth passage of vessels to the benefit of frontline crew, global trade, and the Argentine economy.
MACN’s local Partner
In 2014, MACN members established a collective action initiative to promote the reform of the vessel clearance process for loading grain in Argentina, which had been flagged as an issue by MACN members. MACN partnered with Fernando Basch and Guillermo Jorge – two well-recognized lawyers and integrity champions —to drive this effort.
Basch is still MACN’s “voice on the ground”, engaging with authorities, local stakeholders, and industry players, and has been responsible for training relevant stakeholders, including inspectors, government officials and port agents, and leading the initiative to success.
Fernando Basch is a Partner at Bruchou & Funes De Rioja – a leading full-service firm in Argentina with recognized experience in governance, transparency, and compliance.