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Stephen Wunker shares an older but relevant and interesting post published in Forbes that identifies lessons to be learned when investing in emerging markets.

Largely due to the huge corruption cover-up unearthed by the New York Times, Wal-Mart and Wal-Mart de Mexico have lost over $20 billion in value over the past two days.  That’s an expensive lesson about the perils of corruption in emerging markets.  Yet these countries offer tremendous growth prospects, and corruption may be ingrained into everyday business dealings.  How can companies deal with it?

I once managed a Zambian subsidiary of the pan-African cellular network Celtel.  Even in our most challenging environments, such as DR Congo, the company won consistent praise for its honest dealings and abstention from corrupt practices.  Celtel and other firms that succeed in these settings offer four lessons:

A big company that stayed clean

A big company that stayed clean

1. Plot Your Strategy– A company defending itself against the demands of corrupt politicians has powers that compromised firms do not.  One of the first priorities for a new Celtel country director would be to befriend the embassies of our headquarters countries.  A call from an Ambassador could do wonders to halt shake-downs in progress.  Then we would meet officials for dinner, again and again.  A wide network of friends in government, who often could be rivals of each other, would help to stop any one ministry from acting too aggressively.  If all else failed, a convenient leak to the press could derail some schemes.
2. Have the Right Business Partners — In some countries, it is impossible to get anything done without making small payments here and there.  Your office furniture will never get beyond the port.  This is why many Western firms go into business with local business partners who earn their equity through making sure these everyday things get taken care of.

There is a difference between partners that get everyday things done and outsourcing corruption to a third party.  If the partner is making significant payments, top officials will draw few distinctions between the local firm and the Western one.  The advantages of previous principled stands will melt away.

Key points include:

• Administrative concerns
• Appetite for risk
• Containing risk

Read the full article, Four Lessons for Wal-Mart on Corruption in Emerging Markets, on NewMarketsAdvisors.com.