The ‘titanic task’ of combating Mexican corruption

Baker Institute expert examines pervasive problem

Corruption has “expansive effects” on Mexican society, politics and businesses, according to a new issue brief from Rice University’s Baker Institute for Public Policy.

Skyline of Mexico City. Credit: 123RF.com/Rice University

“Understanding the Problems and Obstacles of Corruption in Mexico” was authored by Jose Rodriguez-Sanchez, postdoctoral research fellow in international trade for the Baker Institute’s Mexico Center. The brief examines the complexities involved in defining, understanding and measuring corruption – the first steps in dealing with this pervasive problem, Rodriguez-Sanchez said — and uses Mexico, where such venality has increased in recent years, to illustrate these complexities.

“Mexico is a prime example of how corruption has expansive effects on a society and how it is subsequently normalized by society,” Rodriguez-Sanchez writes. “Cases of corruption in Mexico have increased in recent years in both the public and private sectors. However, analyzing corruption in Mexico is still a new research focus, and researchers need to further investigate this topic and how to avoid further normalizing corrupt acts. The common Mexican phrase ‘el que no tranza no avanza,’ or ‘the one that does not cheat, does not succeed,’ must be extinguished from Mexican society.”

Mexico has had several well-known cases of corruption in the public and private sectors in the last several years, Rodriguez-Sanchez said. For example, in 2012, Walmart paid local government and public officials $24 million in bribes for permits and zoning approvals to build new stores. In addition, Petróleos Mexicanos (PEMEX), the state-owned oil and gas company, signed and paid problematic contracts in exchange for $11.7 billion from 2003 to 2012, according to the brief. These firms overcharged PEMEX for their work, and in some cases, the work was poorly done or never completed.

The list of firms involved in corrupt acts is extensive, Rodriguez-Sanchez said. It includes Oceanografía S.A. de C.V., Hewlett Packard, ABB, Paradigm, Zimmer Biomet and Odebrecht.

The Mexican government has also been rocked by major cases of corruption in which government officials have spent years diverting public funds for their own benefit. Javier Duarte, the governor of Veracruz from 2010 to 2016, is a prime example of the country’s corrupt state leaders, Rodriguez-Sanchez said. Duarte diverted approximately $35 million to phantom companies and increased the state’s debt by more than $5.18 billion. The Mexican Institute for Competitiveness reports that evaluations of the cost of corruption vary depending on which national or international agency calculated them, but the estimates range from 2 to 10 percent of Mexico’s GDP per year.

“This range is very broad, and the methods used to create these figures are unclear, so a more comprehensive calculation of the cost of corruption in Mexico is needed,” Rodriguez-Sanchez writes.

“Combating corruption is a titanic task,” he writes. “It begins with defining corruption and identifying corrupt acts and their costs. It ends with the establishment and implementation of corresponding public policies to prevent and combat corruption. The main objective should be to modify the behavior of agents so that they can realize that it is not ‘normal’ to have corrupt acts in a society. The aim should be to prevent corruption from becoming systematized. To avoid this, countries have to increase the probability of being caught, as well as increase the penalties. Countries must also enhance transparency in their economies and reduce or regulate market power, in addition to implementing other policies depending on how they define corruption.”

Rodriguez concludes, “Finally, scholars and institutions must understand and analyze corruption and inform societies about its actual cost and economic consequences. They must also identify new methods to evaluate corruption and calculate its costs to help identify new ways of facing this global problem.”