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Corruption in Mexico: The elephant at the North American table

As North
American leaders meet in Ottawa this week, David Agren reports from Mexico,
where citizens are losing patience with a system that allows for bribery and
kickbacks. Will new anti-corruption laws make a dent?

By: /
28 June, 2016
Mexico's President Enrique Pena Nieto looks on at the Citadelle in Quebec City, Canada June 27, 2016. REUTERS/Mathieu Belanger
By: David Agren

Freelance correspondent in Mexico

When Mexicans went to the polls in a regional election earlier this month, they were in an angry mood and obsessed with corruption.

President Enrique Peña Nieto’s Institutional Revolutionary Party (PRI) lost seven states, including four where the party had wielded power for 86 straight years and governors were accused of gross human rights violations, mismanagement and corruption.

“Clearly the voters are into kicking the bums out. And they are bums,” says Federico Estévez, political science professor at the Autonomous Technological Institute of Mexico. “Two-thirds of the states switched governments. That’s a very high rate in a democracy.”

Not on the ticket but taking blame for the losses is Peña Nieto, who arrived in Ottawa on Sunday for a state visit and this week’s North American leaders’ summit, where issues such as energy, climate change and visas for Mexicans are on the agenda. But while the conversation between leaders is expected to focus on regional cooperation and opportunities, there is a single issue dogging Peña Nieto back at home, and which no doubt brings into question the effectiveness of his government: corruption.

Peña Nieto, elected in 2012 and serving a single, six-year term, is the most unpopular Mexican president in the past 20 years, in spite of achieving a suite of structural reforms in areas like education, energy and telecommunications. Two-thirds of Mexicans disapprove of his administration, according to a poll in the newspaper Reforma. This disapproval is the result of corruption scandals involving himself, his wife and his closest cabinet members, along with an aloof handling of the 2014 attacks on 43 teacher trainees and allegations of attempts at hindering the outside experts assisting with the investigation.

The president took a small step last week toward restoring creditability on corruption by partially vetoing an attempt by the PRI and its Green Party allies to weaken a civil society initiative known as #3de3, which proposed that politicians make their personal assets public. 

“This hasn’t happened in a PRI government since the revolution,” Viridiana Ríos, an analyst at the Wilson Center, a think tank in Washington, D.C., says of the president reversing course.

“Clearly the voters are into kicking the bums out. And they are bums.”

Mexican society appears to have lost patience with corruption – an old vice only worsening since the country cast aside one-party rule in 2000. Anti-graft watchdog Transparency International puts Mexico at No. 95 in its annual Global Corruption Perception Index, down from No. 63 in 2004.

Analysts attribute the decline to a confluence of factors, including, ironically, increased transparency, which allows wrongdoing to be more easily exposed and public dismay to grow as corruption goes unpunished. The country’s political opening over the past 25 years also contributed as party competition increased, especially on the local level; elections became more expensive (along with the cost of buying votes and maintaining patronage groups); and governors went from serving at the pleasure of the president to being unaccountable powerbrokers without independent congresses, courts and auditors to oversee them.

“You don’t only have to give one bribe to the federal official,” Ríos says of the increased costs of corruption. “You have to give bribes to the local authorities. It becomes more expensive because you have more mouths to feed.”

Additionally, the cost of “moches” – commissions paid for permits and the kickbacks from contracts given to politicians – also increased from the traditional 10 percent, Ríos says, driving discontent in the business sector, parts of which have taken up the anti-corruption cause.

As one businessperson in the city of Monterrey put it: “Time is money,” and licensing officials know investments have been made, prompting desperate developers to pay. “It’s a very powerful weapon the authorities have to extort you,” the businessperson says.

Still, there are signs of progress. The #3de3 initiative attracted 634,000 signatures – enough to launch an anti-corruption party in most countries – and advocated for three things from government officials: a declaration of assets, a statement of conflicts of interest and a tax return. Proponents say it would act as a tracking system for politicians, some of whose net worth inexplicably explode while they’re in office, even as they rule impoverished pockets of the country.   

The PRI and Green Party eventually approved a version of the initiative (part of an anti-corruption package) in which public officials would make their net worths public on a voluntary basis – something critics say helps politicians avoid unwanted scrutiny.

“It wasn’t that special interests were buying policy or votes or special treatment, but rather they were pocketing a lot of money. … That was always part of the game,” says Estévez. “To reveal your patrimony — your accounts and your properties and the rest of it — is a way of saying how much you really screwed everybody.” 

Congress, in putting together its anti-corruption initiative, included a last-minute provision in which anyone doing business with the government or receiving funds would have to file a declaration – an act of revenge on the private sector promoting #3de3, according to critics, though ultimately vetoed by Peña Nieto.

The veto was seen by some as a weak president bowing to business interests, but analysts say the anti-corruption cause and support for #3de3 carries broad social support.

“I can’t remember any petition receiving 600,000 signatures,” says Rodolfo Soriano Nuñez, a sociologist in Mexico City.

Pena Nieto in Toronto
Canadian Prime Minister Justin Trudeau, far left, raises a glass with Mexican President Enrique Peña Nieto, far right, in Toronto, June 27, 2016. Credit: Presidencia de la República/Mexican Office of the President

The costs and consequences of corruption

To be sure, corruption costs the country billions. The World Economic Forum estimates corruption costs Mexico’s economy two percent of GDP. An Ernst & Young survey says corruption costs Mexican firms five percent of sales.

It has also impacted foreign investors operating in the country. Allegations of corruption cloud several of the agreements with automakers opening plants in Mexico – most notably in Nuevo León state, where independent Gov. Jaime Rodríguez (better known as “El Bronco”) has refused to honour his predecessor’s promise to give Kia a 20-year payroll tax exemption and accused the last government of improperly providing land for the Korean automakers’ plant.

Transparencia Mexicana, the Mexican arm of Transparency International, says corruption hits the poor hardest as extra-official payments – everything from mordidas (small bites) paid to police to involuntary tips given to garbage collectors and letter carriers – chew up 14 percent of poor households’ incomes.

But curbing corruption is no small matter in Mexico, where expressions like: “Si no tranzas, no advances” (“if you don’t do something shady, you won’t get ahead,)” are common. A 2012 exposé in the New York Times showed Wal-Mart de México bribing its way to becoming the country’s biggest retailer.

Mexico’s politics also present problems as acts of graft often go unpunished, while those who encounter legal problems either “broke unwritten rules” or went against their party leadership, says Gerardo Priego, a former congressman and regional candidate for the right-leaning National Action Party (PAN) in the southeastern state of Tabasco. He says corruption is used to reward party loyalty: those wanting to run, but unable to do so, are often compensated with concessions for taxi or public transport liquor licenses. Those losing elections can be co-opted with money from the public purse. Stories abound of opposition lawmakers in heavily PRI states simply being bought off. The press in many places is kept in check through government advertising, which is withdrawn if coverage is critical, Priego adds. 

Corruption also crosses party lines. A PAN leader from one of Mexico’s northern states recalled how his colleagues once proposed splitting a C$1 million surplus towards the end of their term, figuring the incoming PRI would simply steal it. As the writer and intellectual Gabriel Zaid opined more than 30 years ago, corruption is not a disagreeable characteristic of the Mexican political system. It is the system.”

“We used to ask, ‘What issue is important to you, the economy or security?’ Now we also ask about corruption.”

What changed to make Mexicans so upset about corruption is uncertain, but anecdotal signs of discontent are abundant.

“In exit polls, we used to ask, ‘What issue is important to you, the economy or security?’ Now we also ask about corruption because people would spontaneously say it,” says Francisco Abundis, president of the polling firm Parametría. Exit polls this year showed 12 percent to 24 percent of voters, depending on the state, listing corruption as the most compelling issue in the recent elections, second only to insecurity, according to Parametría.

Some see the anti-corruption sentiment in Mexico as part of a trend for the population to pin its hopes for fixing the country on a singular issue. Previously, those issues were open markets and free trade and later democracy and reforms. The attempts at implementing those ideas often did not live up to expectations, though the process produced some improvements.

“Corruption has become that new promise that will fix everything,” says Arturo Franco, senior non-resident fellow at the Atlantic Council. “If we just get corruption under control everything will be great,” he says of the current thinking.

Others posit that factors such as more independent media (usually operating online only) offering scrutiny of corruption scandals caused increased awareness. There was also discomfort – especially in recent years – with a steady devolution over the past 15 years of power and money to the local level. “The difference today is that no matter the level of corruption in the federal bureaucracy, the money that counts is out in the boonies and people can see it,” says Estévez, the political science professor.

Analysts also point to the return of the PRI, which ruled for 71 straight years until 2000 and regained power federally in 2012. The party, which has stayed dominant on the state level, never presented itself as clean or reformed or even repentant, but sold itself on the idea, “The PRI knows how to govern.” It was an attractive message to Mexicans weary of the drug war and decades of subpar economic growth.

Yet the PRI that returned to power came of out Mexico state – where Peña Nieto governed from 2005 to 2011 – which surrounds Mexico City like a horseshoe and developed a political culture of business and political interests mixing. It was infamously encapsulated in a maxim coined by ex-governor Carlos Hank González, who explained his fabulous fortune with the slogan, “A poor politician is a poor politician.” Opponents, meanwhile, were paid off or coopted, while civil society and the press were kept under control.

“We quickly realized, the PRI is the same as always. There isn’t a new PRI,” says Salvador Camarena, director of journalistic investigations for the new non-governmental group Mexicans against Corruption and Impunity.

Mexico Protest
Businessmen hold balloons forming the word that reads ‘Corruption’ during a protest by members of the Mexican Employers’ Confederation to demand senators to approve the original proposal of the National Anticorruption System, in Mexico City, Mexico, June 16, 2016. REUTERS/Ginnette Riquelme

The shaming of la Casa Blanca

For his part, Peña Nieto has called corruption “cultural,” drawing a strong response from critics, who point to the millions of Mexicans living abroad and how they obey the law upon crossing the border. “It’s a deceptive discourse because instead of aspiring or working toward change, they’re inviting us to conform and telling us, ‘The system works better if we assume that this is part of the culture,’” Camarena says.

The president’s own actions perhaps caused the most controversy. Reporters revealed Peña Nieto, his wife Angélica Rivera and Finance Minister Luis Videgaray purchased luxury properties from prominent contractors who had ties to the federal and Mexico state governments. The properties included the extravagant “Casa Blanca,” or White House, which was purchased by Rivera with credit provided by a contractor. Peña Nieto subsequently appointed a friend of Videgaray’s to the Comptroller’s Office and tasked him with investigating.

To no one’s surprise, the comptroller found no wrongdoing in his more than 60,000-page report since none of the parties were public officials at the time of the purchases, though Videgaray was heading up Peña Nieto’s transition team. The reasoning failed to find many supporters. “It’s the difference between formal and serious,” Eduardo Bohorquez, director of Transparencia Mexicana, told the magazine Expansión. “When you’re formal, you seem to be very respectful of the law, but you’re not very serious and people can distinguish that.”

Journalists who had investigated the first lady subsequently lost their jobs – part of a broader problem of press freedom in Mexico since Peña Nieto arrived in office, press advocacy groups contend. Freedom House now puts Mexico No. 139 in its list of press freedom rankings.

“Public shaming can be more powerful than whatever penalties or fines are imposed.”

Next month, Peña Nieto is expected to sign laws for the functioning of an anti-corruption system. It will include increased auditing, an anti-corruption prosecutor and special tribunals for corruption cases. Whether it works as designed remains to be seen, but proponents express high hopes. “Transparency has grown, but not accountability,” Bohorquez says. “The logic of the national anti-corruption system is that it has two subsystems. One is transparency and the other is fiscalization, which is basically accountability.” 

In the meantime, Mexicans are taking to social media to expose bad behaviour, abuse of power and corruption – with the hashtag #Lord and #Lady trending every time there’s an excess – such as #LadyProfeco, whose father headed the country’s consumer protection watchdog (Profeco) and tried to close a trendy eatery through inspections after being denied a table. In another case last year, a quick-witted neighbour busted the director of the National Water Commission using a government helicopter to fly his family to the airport for a ski vacation by uploading photos to social media sites.

Public shaming is taking the place of an inept justice system – a trend some analysts see as producing results (however modest) and another sign of the country’s increasing intolerance for impunity and corruption. 

“Public shaming can be more powerful than whatever penalties or fines are imposed on these people,” says Franco, the Atlantic Council fellow and author of the book Merit: Building a Country that is Ours. “We live in a culture where no one respects the law, where the law is merely seen as a suggestion, where everyone who can break it, breaks it.”

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