CORRUPTION EPIDEMIC HAMSTRINGING MEXICO’S ECONOMY AND SECURITY

Mexico’s economy and security are being severely impacted by widespread corruption, which has become an epidemic in the country. The consequences of this corruption are far-reaching and devastating, affecting not only businesses but also consumers, entrepreneurs, and even national security.

Distorting Market Competition and Harming Consumers

• 30% of businesses surveyed in Mexico have lost bids for public contracts due to their failure to pay bribes
• This highlights the pervasive nature of corruption that is distorting market competition and harming consumers

The Mexican economy has also been suffering from a massive informal sector, with:

Informal Sector Denying Tax Revenue

• 60% of workers and two-thirds of businesses operating outside the legal framework
• Denies the government significant tax revenue, creating additional challenges to fiscal solvency and restricting expenditures

Corruption is not only harming the economy but also stifling entrepreneurship. Research has shown that corruption:

Deters Entrepreneurship and Fosters Informal Sector Activity

• Corruption deters entrepreneurship in the formal sector and fosters activity in the informal sector
• Adds costs and complexity to licensing processes and procedures for starting a business

The situation is further exacerbated by frequent corruption in bureaucratic procedures, with over 15% of Mexicans experiencing an act of corruption when dealing with public servants.

Blunting Public Expenditures and Investments

• Corruption blunts the effect of public expenditures and investments aimed at promoting economic growth and development
• In government procurement processes, including embezzlement and kickbacks, firms are often rewarded for engaging in corrupt practices, rather than being chosen based on merit or efficiency

The impact of corruption is not limited to the economy. It also:

Undermining Security Cooperation

• Undermines security cooperation between the US and Mexico
• Corrupt officials, particularly in Mexico’s security forces, empower drug cartels to grow and engage in massive drug trafficking operations, leading to a surge in violence and organized crime

As homicide rates in Mexico continue to rise, it is clear that corrupt security officials are playing a significant role in empowering drug cartels.

US-Mexico-Canada Trade Pact and Corruption

• The US-Mexico-Canada trade pact dedicates a chapter to corruption issues
• Its effectiveness will depend on implementation, which has historically been a pitfall for anti-corruption initiatives

In conclusion, tackling corruption must be a top priority if Mexico is to overcome its economic and security woes.