Economy & Trade, Headlines, Latin America & the Caribbean

Tangled Web of Corruption Debilitates Mexico

MEXICO CITY, May 10 2012 (IPS) - Although Mexico has signed several multilateral anti-corruption agreements, so far these instruments have yielded few concrete results in combating the rampant bribery, extortion and embezzlement, according to experts.

“We have the necessary legal instruments, but they are rarely used. More laws will not reduce the risk of corruption,” Eduardo Bojórquez, head of Transparencia Mexicana, the national chapter of the Berlin-based watchdog Transparency International, told IPS.

“We are concerned that there are companies that are larger and more powerful than many nation states, which confront governments at different levels of institutional development,” Bojórquez said.

The most notorious recent scandal in Mexico involves U.S. retail giant Walmart, which has been under investigation by the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC) since December 2011.

Walmart’s Mexico branch was the subject of a report published in April by The New York Times, which alleged the company paid 24 million dollars in bribes to facilitate the construction of new stores, in violation of the Foreign Corrupt Practices Act.

The report said that the company had engaged in widespread and systematic bribery in this country. But the Mexican Attorney-General’s Office only opened an investigation after it was published.


Mexico has ratified the United Nations Convention against Corruption and the Inter-American Convention against Corruption, as well as the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

It is also a member of the U.N. Global Compact (UNGC), the world’s largest corporate responsibility initiative. Launched in 2000, the UNGC has over 8,000 participants, most of them businesses, in more than 135 countries, and local networks in over 90 nations. The 10 universal principles it upholds relate to human rights, labour law, environmental standards and the fight against corruption.

The UNGC is a voluntary agreement which in Mexico has 302 members, counting companies, NGOs, foundations and academic institutions.

“It is important to use these mechanisms to expose human rights violations committed by companies, and to demonstrate that regulations need to be stricter,” Valeria Scorza, head of the Economic, Social and Cultural Rights Project (ProDESC), a Mexican NGO, told IPS.

But “we criticise the lack of mechanisms to sanction member companies for non-compliance, or to secure reparations for damage. The principles should be reformulated to pack more punch, although this is a fairly difficult collective process and companies usually have no interest in it,” she said.

ProDESC has persistently denounced violations of labour rights at Walmart, which was founded in the United States in 1962 and entered the Mexican market in 1991, originally in alliance with a local company.

But Walmart is not the only company to have been involved in corruption scandals. Various studies in the past few years have revealed the tangled web that is debilitating Mexico with enormous economic and social costs.

Transparency International’s Corruption Perceptions Index for 2011 ranks Mexico in 100th place out of 183 countries – the worst result among the 34 member countries of the OECD, known as the “rich nations club”.

The index is based on 17 surveys covering topics like enforcement of anti-corruption laws, access to information and conflicts of interest. Countries are assigned a numerical index of perceived levels of corruption on a scale from 10 (very clean) to 0 (highly corrupt). Mexico was given a grade of 3 in 2011.

The 2011 Bribe Payers Index, also produced by Transparency International, found a particularly strong culture of bribery and illegal commissions in Mexico, China and Russia.

Based on a survey of 3,000 members of the business community in industrialised and developing countries, the index ranks 28 of the world’s largest exporting countries according to the likelihood of firms from these countries using bribes to obtain commissions and contracts when doing business abroad.

In order to compile an independent report on the implementation of the Inter-American Convention against Corruption in Mexico, in December 2011 Transparencia Mexicana asked for information from the comptroller’s offices of the 32 Mexican states, and only 10 replied.

“The institutional capacity of anti-corruption bodies is vital for controlling corruption, so that further analysis of the capabilities of these bodies at sub-national level in federal countries such as Mexico is essential,” says the report, released in January.

Due to the proliferation of free trade agreements in the past two decades, like the North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico, dozens of foreign companies have ventured into new markets, coming into contact with the institutional weaknesses they may find there.

Paradoxically, the most serious cases of corruption linked to Mexico have come to light as a result of investigations by authorities in the United States, as companies listed on U.S. stock exchanges are required to meet stringent accounting and reporting provisions designed to prevent concealment of improper transactions.

In late April, the Mexican Congress approved the Federal Anti-Corruption Law, which created a special prosecution service and established fines for businesses found guilty of wrongfully procuring a contract. The fines can total up to 35 percent of the value of the contract. Reduced punishments were approved for persons cooperating with investigations.

“We have reached the point where corruption can no longer be covered up or overlooked as a minor problem. What we need to see now is how to articulate the national oversight and regulatory system with internal and external public administration bodies, the judicial branch and state parliaments,” said Bojórquez.

 
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