corruption related to the implementation of the laws and regulations, but also undue and illegal influence in shaping such laws and regulations. The results from the BPS survey point to a high prevalence of state capture in transition economies. In countries such as Moldova, Russia, Ukraine, and Azerbaijan, well over 30 percent of the firms reported that they had been significantly (or very significantly) affected by the prevalence of state capture in their industry.<sup>33</sup> The econometric results based on this large multi-country enterprise survey indicated that captor firms (which engage in illicit activities to shape the state laws and regulations) do, in fact, derive very large benefits from such strategies. Captor firms exhibited much higher output and investment growth than their noncaptor counterparts, controlling for other factors. In contrast, firms that were coerced into paying bribes for administrative corruption derived little private benefit from these bribes. Yet while the captor firms benefit in terms of growth from their private purchase of policies, regulations, and law and order, public provision of rule of law is further undermined by these capture strategies. Indeed, the statistical evidence suggests that public protection of property rights for the overall enterprise sector was substantially lower in countries in which capture was prevalent. This evidence suggests a pattern in which the large private benefits derived from capture provide an insidious built-in incentive for the persistence of such capture, as the growing economic might of powerful captor firms supports even more capture and further deteriorations in overall governance. **34** Do similar patterns apply to Latin American countries? In contrast with the work already undertaken in transition economies, a comprehensive cross-country empirical investigation of the phenomenon of state capture has yet to be undertaken in the Latin American region, though it is part of the upcoming research agenda. At this stage, the empirical evidence is of a select nature; it is mainly derived from the recent country governance diagnostics in a small number of countries in the region. The results of these diagnostics suggest that the challenge of state capture is also present in Latin America.

The emerging results from diagnostics in Colombia, Honduras, and Peru point to capture by influential forces outside the state as a major governance challenge. Further details on the particular forms of state capture can be found in the responses of public officials and enterprise managers. For example, figure 6 summarizes results for Colombia and Peru as reported by the public officials survey, with enterprise managers reporting similar results independently (not shown). Both enterprises and public officials consistently point to pervasive capture of legal and judiciary institutions. In Peru, survey data 33. The empirical analysis of this issue was made possible thanks to the BPS survey design. Yet the notion of state capture was far from alien for the media and politicians. One notable illustration was the statement by Russian President Vladimir Putin in his opening remarks to a roundtable of twenty-one top Russian companies and banks: "I only want to draw your attention to the fact that you have yourselves formed this very state, to a large extent through political and quasi-political structures under your control. So what you should do least of all is blame the mirror" (president.kremlin.ru/text/APPTemplAppearld 10623 .shtml [July 2000]) 28