Corruption Undermines Economic Growth in Mexico
A culture of corruption in Mexico’s bureaucracy is stifling entrepreneurship in the formal sector and driving activity to the informal sector. According to a recent survey by Mexico’s National Institute of Statistics and Geography, over 15 percent of Mexicans who reported contact with a public servant personally experienced an act of corruption.
Corruption in Business Registration
The survey found that corruption was particularly prevalent when attempting to register a new business, with 7.6 percent of respondents experiencing corruption in this process. Additionally, over 22 percent reported corruption when dealing with municipal governments, including securing permits to sell products on public roads.
The Impact of Corruption on Economic Growth
Corruption not only deters entrepreneurs from formalizing their businesses but also blunts the impact of public expenditures and investments aimed at promoting economic growth and development. Public procurement processes are particularly vulnerable to corruption, with embezzlement and kickbacks being common practices.
- A firm may inflate the price of a public contract or siphon off funds meant for construction materials and workers, giving them as kickbacks to corrupt officials in exchange for securing the contract.
- This not only leads to overpriced and poor-quality projects but also undermines competition and efficiency.
The Cumulative Impact on the Mexican Economy
The cumulative impact of corruption on the Mexican economy is significant, adding barriers, costs, and inefficiencies that affect major firms and fledgling entrepreneurs alike. Corruption also limits Mexico’s economic development and undermines its role in international supply chains and North American integration.
Corruption Empowers Cartels, Undermines Security Cooperation
Furthermore, corruption plays a central role in the rise of violence and organized crime in Mexico. Corrupt officials, particularly in the security forces, empower drug cartels to grow and engage in massive trafficking operations. This not only affects the US through the flow of illicit drugs but also undermines the effectiveness of US-Mexico security cooperation.
The Rise of Cartel Violence
As violence and organized crime spiral out of control in Mexico, the central role of corrupt security officials in empowering cartels has become undeniable. The rise of cartel violence has spread to previously secure regions, including parts of the Mexican capital, with record highs in homicide rates being recorded in recent years.
Addressing Corruption-Fueled Violence
The corruption-fueled violence is a major concern for the US and Mexico, as it threatens regional stability and undermines efforts to combat organized crime. To address this issue, both governments must prioritize anti-corruption efforts and strengthen their security cooperation.