Mexico Corruption Report
Corruption is a significant risk for companies operating in Mexico. Bribery is widespread in the country’s judiciary and police. Business registration processes, including getting construction permits and licenses, are negatively influenced by corruption. Organized crime continues to be a very problematic factor for business, imposing large costs on companies. Collusion between the police, judges and criminal groups is extensive, leading to widespread crime, theft, impunity and weak law enforcement. Gifts and hospitality are not forbidden by law and may be permissible, depending on intent. Attempted bribery, extortion, abuse of office, bribery of foreign public officials and facilitation payments are criminalized under Mexico’s Federal Penal Code (Código Penal Federal, in Spanish). However, Mexico’s anti-corruption laws are almost never enforced, and public officials are rarely held liable for illegal acts. New anti-corruption laws were passed in 2017, but their effectiveness has not been proven yet.
Last updated: July 2018
Businesses face a high corruption risk when dealing with the judiciary in Mexico. Businesses indicate that they perceive that bribes and irregular payments are commonly exchanged in return for favorable judicial decisions (GCR 2015-2016). Businesses furthermore express low confidence in the independence of the judiciary and the efficiency of the legal framework in settling disputes and challenging regulations (GCR 2017-2018). In addition, half of households believe most or all judges and magistrates are corrupt (GCB 2017). In practice, the judiciary has limited independence from the executive (BTI 2018), but it has never launched an independent investigation into corruption (BTI 2018). At the state level, the judiciary is bound to the executive; all governors accused of corruption have so far escaped trial (BTI 2018). At the local level, the judiciary in some places has been infiltrated by the drug organizations (BTI 2018). Mexico introduced a new accusatory trial system in 2016, which is intended to combat corruption and increase the system’s efficiency and transparency (ICS 2017). However, reporting suggests that the system so far has not led to the desired outcomes and that political support for the system is disappearing (The San Diego Union-Tribune, Aug. 2017).
Enforcing a contract in Mexico takes less than half the time required on average in the region while costs are roughly in line with the average (DB 2018). Mexico is not a member state of the International Centre for Settlement of Investment Disputes (ICSID), despite the fact that many investment agreements signed by Mexico include provisions for ICSID dispute resolution (ICS 2017). Mexico is a signatory to the 1958 New York Convention.
The security apparatus carries a high corruption risk for businesses operating in Mexico. Businesses report very low confidence in the reliability of the police services and businesses indicate that they face high costs due to crime and violence (GCR 2017-2018). Nearly two-thirds of Mexicans believe most or all police officers are corrupt (GCB 2017). The police are highly corrupt and often operate with impunity in many regions of the country (BTI 2018). Corruption is most prevalent at the municipal and state levels, but it is also a problem at the federal level (BTI 2018). The police have also frequently been involved with drug organizations and accused of other law violations (BTI 2018). Previous attempts to improve the situation, including the dissolution of the Federal Police and reforms including the centralization of police forces, have not shown results (BTI 2018). Clientelism is widespread in Mexico and local and state governments have used the police to serve their clientelistic agendas (BTI 2018).
In September 2014, dozens of Mexican police officers were accused of kidnapping 43 students in the town of Iguala and handing them over to a local drug gang to later be killed under the order of a high-level politician (Independent, Nov. 2014). The case is indicative of the high-level of corruption and impunity within Mexico’s law enforcement authorities. Independent investigations into the role the government played in killings were ongoing as of the time of review (The Intercept, Sept. 2017).
The public services sector carries a high corruption risk for companies operating in Mexico: More than two-thirds of businesses claim that corruption is part of the business culture and that it affects their daily operations (EY 2018). Companies indicate that bribes and irregular payments are frequently paid in the process of obtaining public services (GCR 2015-2016). Almost half of all surveyed companies report that they experience delays upon refusal to pay facilitation payments (Control Risks 2015). On a more positive note, an overwhelming majority of companies in Mexico believe that resisting demands of bribery by corrupt officials has a positive effect, as officials eventually become less likely to issue demands in the future (Control Risks 2015). Roughly two-thirds of Mexicans believe most or all local government officials are corrupt (GCB 2017). The regulatory system is generally transparent and consistent with international norms, but corruption hampers the equal enforcement of some regulations (ICS 2017). Corruption has reached endemic proportions in Mexico; several state governors have been ousted from office and face enormous corruption charges: Many of them have fled the country (BTI 2018).
The government established Tramitanet (in Spanish) to allow for the electronic processing of transactions within the bureaucracy and to thereby reduce the risk of bribery (ICS 2017). Starting a business in Mexico is less time-consuming and less costly than the regional average, as is dealing with construction permits (DB 2018).