Corruption in Mexico

Corruption in Mexico

Corruption in Mexico: The law comes to life,

by Alejandro Aurrecoechea.

As public opinion against corruption in Mexico surged from a simmer to a boil, Congress in June 2016 passed key enabling legislation to implement a new National Anti-Corruption System (NAS). This wide-ranging legal and institutional framework – which involves federal and state governments, as well as civil society – has the potential to completely change the way companies do business. The NAS formally starts operations in 2017, a year that may mark the beginning of the end for business as usual in Mexico.

New hope

The struggle against corruption has long been the subject of national debate and public complaint. Mexican think tank Transparencia Mexicana estimates that 14% of all household income is devoted to making unofficial payments of one form or another. Licensing, permitting and bidding for public contracts are all notorious for influence peddling and bribery. But the last two years have brought hope that national frustration would provoke institutional change.

Unlike previous anti-corruption efforts, the NAS strengthens existing institutions and creates new ones with the authority and – crucially – the independence to force prosecutions of individuals accused of corruption. Even though the NAS currently exists largely on paper, it represents Mexico’s greatest chance to undo a pervasive culture of unfair advantage and abuse of public position for private gain.

The potential for change is there. Genuine transformation, as ever, will come more slowly.

Force of public opinion

The move could not have come at a better time. In many other respects, Peña Nieto has made significant strides, having enacted crucial structural reforms in areas such as energy and telecoms. But without better governance and respect for the rule of law, these economic reforms will sooner or later falter. The inconsistency of contract enforcement by the judiciary risks scaring off FDI, a vital driver of new jobs in a country where both the population and its expectations are rapidly expanding.

In the end, public opinion forced the government to move. Widespread intolerance of corruption – channelled mainly through civil society organisations – drove the issue on to the national political agenda and forced Peña Nieto and Congress to act. Although civil society activism is still largely based on formal groups, rather than on the grassroots anti-corruption activism typical of Brazil and Indonesia, it has proven a turning point in the debate over corruption.

This sentiment, together with public resentment at lacklustre economic growth and continuing insecurity, fuelled a growing sense of discontent against the political class and dragged Peña Nieto’s approval ratings to historic lows of around 23%. High-profile scandals like the ‘Casa Blanca’ (White House) affair, in which Peña Nieto’s wife bought a luxurious home from a government contractor at below-market value, only made things worse. There was no shortage of corruption scandals below federal level too. The president then sparked public anger when he dismissed corruption as a ‘cultural phenomenon’ that ‘exists at all orders and levels of society and thus no one can hurl the first stone’.

Corruption outside the capital city also explains in part why Peña Nieto’s Institutional Revolutionary Party (PRI) floundered in state-level elections in June 2016, losing seven out of 12 contested governorships, and why it will face an uphill battle in the four state elections due in June 2017.

Strong new system

The NAS will get to work in earnest in 2017. It has a hefty mandate. The law establishing the NAS orders public officials to disclose their assets, credit and tax statements, and creates specialised courts and a special prosecutor’s office with enhanced powers to prosecute corruption cases. The Federal Comptrollership Unit (ASF) received enhanced authority, gaining the power to impose sanctions. The Ministry of Public Administration (SFP) will now be headed by a minister ratified by the Senate. The NAS also mandates state governments to create similar institutions at state level. Notably, the private sector will also face enhanced scrutiny. The NAS establishes stiff sanctions for individuals and private companies that engage in bribery, influence peddling or obstruction of justice.

With an ambitious agenda and a problem that even the president thinks is a cultural attribute, it is perhaps not surprising that the NAS has its share of doubters. The critics’ main question is legitimate: ‘What will be different this time?’ In a similarly unsurprising vein, the answer lies in politics – or, perhaps, the lack thereof.

In contrast with all of Mexico’s past anti-corruption efforts, the NAS includes clear and specific provisions to insulate it from political pressure. For example, the Senate can block the arbitrary removal of the special anti-corruption prosecutor. The NAS will also have at its core a Citizen Participation Committee. This body, comprising academics and civil society representatives, has the right to request information on current anti-corruption investigations. This gives it the ability to mobilise public opinion against impropriety. The committee can also propose guidelines for the NAS’s operations and co-ordinate its actions with local governments.

2017: Business as usual?

Mexico’s latest anti-corruption effort will be a story of managing expectations. Businesses will still confront a high threat of bribery and corruption, particularly at state and municipal levels. Do not expect Mexico to be home to Latin America’s next ‘Car Wash’ – the kickback scandal that has paralysed the Brazilian business community and its political elite. Institutional differences between Mexico and Brazil, including the existence of a less independent judiciary and prosecutor’s offices, will not change significantly during this period, making such a wide-ranging investigation unlikely.

mexico-corruptionFull implementation of a reform as ambitious as the NAS will take enormous time and effort. It will be 2019 before the NAS is fully embedded as a part of Mexico’s anti-corruption efforts. Several by-laws, implementing legislation and empowering regulations remain to be published. States will also have to catch up with changes on the federal level, and history shows that Mexican states are slow to heed federal dictates. Vested local and state interests will resist the NAS.

As ever, it comes back to politics. Without consensus and support, the NAS will go nowhere. The signs are encouraging, bolstered by public opinion across the entire political spectrum. For example, both the PRI and the centre-right National Action Party (PAN) have suspended former governors accused of corruption and mismanagement. In a rare move, the attorney general (from the PRI) issued indictments for representatives of front companies receiving illegal public contracts in PRI-controlled Veracruz state.

Few things focus the public mind more than a general election. Mexico next goes to the polls in 2018, and corruption will be a key campaign issue. Watch the presidential candidates line up to express their support for the NAS. And then watch the public hold them to their word.

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Image accreditation: Press Association - Mexico's President Enrique Peña Nieto, Nov 2016.
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