How to Capture States and Influence Policies: Insights on the Political Economy of State Capture in Latin America

State capture represents a systemic and pervasive form of corruption where elite interest groups manipulate institutional frameworks and public governance mechanisms to serve private ends. While corruption is often understood as a discrete act, state capture highlights the structural and enduring nature of elite influence over law-making, policy implementation, and institutional accountability. This research seeks to explore the dynamics of state capture as both a cause and consequence of weak institutionality, focusing on its impact on governance and the balance of power within states. Using a multidisciplinary framework, the study examines state capture as a continuum that varies across institutional contexts. In settings with robust institutions, state capture operates through legal mechanisms such as lobbying, campaign financing, and regulatory loopholes, often blurring the lines between legality and ethical governance (Kaufmann et al., 2003). Conversely, in fragile or weak institutional contexts, other forms of corruption become the primary tool for elite groups to establish informal rule-making processes. This duality underscores the adaptability of state capture to differing levels of institutionality, with significant implications for governance and inequality (North, 1990; Harvey, 2003). The research builds on theoretical contributions from governance studies, institutional economics, and critical political economy. It employs an empirical approach integrating macro-level indicators from Daniel Kaufmann’s database on state capture (Kaufmann, 2023) with case studies of notable episodes of state capture in Latin America. The analysis leverages data from sources such as Kaufmann’s State Capture Index (SCI), V-Dem’s indicators of judicial independence and accountability, and World Governance Indicators (WGI), enabling a comparative evaluation of the mechanisms, scope, and impact of state capture across different governance systems. Examples such as the “Lava Jato” corruption scandal in Brazil and Peru illustrate how state capture can distort public procurement, fiscal policy, and regulatory frameworks, with long-term consequences for democratic accountability and institutional resilience (Durand, 2019). These cases also reflect what Harvey (2003) describes as "accumulation by dispossession," where public resources are appropriated for private gain, exacerbating inequality and undermining institutional capacity. This study advances the discourse on corruption and governance by reframing state capture as a systemic challenge rather than a mere byproduct of weak governance. It seeks to identify actionable strategies to strengthen institutionality and counteract state capture, emphasizing the importance of transparency, accountability, and participatory governance (Ostrom, 1990). The findings aim to inform policy interventions and international efforts to combat state capture, providing insights relevant to both academic and policy-making communities. By analyzing state capture as a multifaceted and adaptive phenomenon, this research highlights its significance in shaping governance outcomes. It bridges theoretical and empirical insights, offering a comprehensive understanding of state capture’s mechanisms and its implications for institutional development.