Anticorruption Update – Reform Stalls, Scandals Intensify

As of the last update, it seemed like the anticorruption reform – one of the last unfulfilled promises of the Pacto por Mexico – was close to being passed and certainly during the current legislative session. Alas, the reform is still in legislative purgatory. Ironically, since the last update the political crises stemming from corruption have only intensified, making this reform more important than ever.

Reform Stuck in Chamber of Deputies

Currently, the anticorruption reform is still stuck in the Mexican Congress. The PRI and PAN continue to debate certain details of the reform, including the role of an independent commission in fighting corruption. It seems unlikely the reform will pass in this legislative session, and will almost certainly be pushed off until next year.

Fiscalia – No Shortage of Candidates, but No Nominee

At the same time, the appointment of a Special Prosecutor for Corruption Crimes has not fared any better in the Senate. The Special Prosecutor will be located within the office of the Prosecutor General, and the President may object to the Senate’s nominee. The Senate was presented with 33 options for the position (see below), but negotiations broke down.

It is unclear why the negotiations have broken down. Most recently, Minister of the Interior, Osorio Chong, asked the Senate to nominate someone to the post and pass the anticorruption reform as soon as possible.

Civil Society Weighs In

A number of Mexican civil society groups recently held a meeting to discuss the anticorruption reform, in particular the Special Prosecutor. In their view, the Special Prosecutor will be too beholden to the President, who will eventually use it to pursue political enemies. Instead, the groups put forward their own anticorruption proposal, with the following elements:

  • Auditors Tribunal – for imposing sanctions and making recommendations on fight against corruption (something like the Anticorruption Commission)
  • Special Prosecutor for Corruption Crimes – independent/autonomous, in contrast to its present status as a member of the executive branch
  • Reformed Secretary of Public Administration (SFP) – with more powers to ensure legality in public service, etc.
  • Reformed Supreme Auditor of the Federation (ASF) – with more autonomy and independence
  • New Anticorruption Law – establishing anticorruption bodies and corruption crimes
  • New Law on Inspections – to coordinate the work of the ASF, SFP, and other enforcement bodies

Here’s a video of the NGOs discussing their proposal:

Political Will is the Problem

Although the NGOs’ proposal seems great, it does not differ significantly from the other proposals on the table. Perhaps the one exception is the increased ‘independence’ of the Special Prosecutor and ASF. Still, it is not clear how this would work. To which branch would the Special Prosecutor be accountable? It is a bit scary to think of a prosecutor who can pursue cases without any oversight from the executive, legislative, or judicial branches. Indeed, the whole idea of branches of government is meant to facilitate both independence and accountability. Currently, the President can block the Senate nominee for Special Prosecutor. But, the Senate can simply choose not to nominate anyone if the President is overstepping.

The problem with the demands for a new, ‘independent’ body tasked with fighting corruption is the underlying assumption those demands reveal: that the existing branches of government are hopelessly corrupt and cannot be trusted to oversee anticorruption efforts. Still, it is these same corrupt branches that need to pass and implement the legislation. The problem is not with the wording or technical details of the reform. Rather, the key question is whether the political will exists among Mexico’s political elites to genuinely fight corruption.

Where Does Political Will Come From?

If the real problem is political will, it begs the question of how Mexico can harness this vague, mist-like power. In the United States, efforts aimed at fighting corruption, fraud, and the like have typically arisen from the ashes of a scandal. The Watergate scandal gave us the FCPA. Enron gave us Sarbanes-Oxley. The 2008 financial crisis gave us Dodd-Frank.

There are some analogues in Mexican history. For example, the bank nationalization in 1982 prompted the rise, albeit slow-moving, of the PAN. The problem with corruption in Mexico is that is often viewed as a natural – even beneficial – condition, including by business and political elites. Thus, Mexico probably needs a major corruption-related scandal to generate the political will necessary for real change.

Will Recent Scandals Tip the Scales?

Just in time for the anticorruption reform debates, Mexico has been rocked by a series of major corruption-related scandals:

  • 43 Normalistas Disappearance – as previously covered here, 43 student teachers disappeared after an apparent conflict with local police and a drug gang in Iguala, Guerrero. The outrage against the government has only intensified over the past two months, most recently amid media investigations indicating that the police who attacked the students were Federal, not local. 
  • Higa Group – just as the protests about the disappearances grew more intense, a local media group – Aristegui – released an investigative report detailing how a company affiliated with a Mexican Company named ‘Grupo Higa’ built a $7 million mansion for Pres. Pena’s wife. The house was left off Pena’s assets declaration because ‘he and his wife keep their assets separated.’ Shortly before the story was published, the government reversed the award of a $3.7 bln contract to construct a train from Mexico City to Queretaro to the China Railway Construction Corp. China Railway bid for the project in a consortium led by none other than Higa Group. Major western competitors like Siemens and Bombardier boycotted the auction due to complaints about fairness. Also, Higa Group companies have won billions of dollars in contracts, both with the State of Mexico when Pena was governor, and with the Federal government since Pena took office. Most recently, the Wall Street Journal released its own investigative report on Minister of Finance Luis Videgaray, who received a loan from a Higa Group-affiliated company of about $600K to purchase a house from … the owner of Higa Group. Videgaray made the purchase in October 2012, after his future role in the government was publicly-announced. Notably, Videgaray is considered the ‘architect’ of Mexico’s economic reforms, was Pena’s campaign manager, and was rumored to be a favorite to become the PRI’s candidate in the next presidential election.

It is unclear whether these scandals will generate sufficient political will within the political class to truly fight corruption. It seems that the general population has the requisite political will, as illustrated in a recent opinion survey on corruption. The survey revealed overwhelming opinions that corruption has and will worsen in Mexico, and that corruption has penetrated virtually all public institutions. Despite this perception of the existence of corruption, most Mexicans disagree with the ideas that corruption is a necessary evil or is part of Mexican culture. It also seems that economic elites are growing increasingly uncomfortable with how quickly Mexico’s international image has fallen from ‘dream investment destination’ to ‘den of corruption and violence’.

Mexico’s Impunity Problem

Indeed, the disappearances and the corruption scandals go hand-in-hand, in that they reveal the core of Mexico’s political system: impunity. When asked about the loan, Videgaray replied that there could not have been a conflict of interest because he had not yet assumed office (it was a few months before). The disappearance of the 43 students in the middle of a medium-sized city – regardless of who did it – indicates a belief that nobody would care. It is the same mentality that explains why so many PEMEX officers can be caught stealing from the company – from the property of the Mexican people – and yet never be prosecuted. It is why the brother of ex-Pres. Salinas was recently acquitted of corruption charges, despite having accumulated hundreds of millions of dollars in secret offshore bank accounts during his brother’s term.

The ideal scenario for Mexico’s way out of this trap is that the agreement among the general population and economic elites on corruption will force the government to change. The pessimistic scenario is that political elites will maintain the status quo until the pot boils over and the federal government is threatened by significant instability (as several states are already experiencing).

This entry was posted in corruption, economy, Guerrero, Iguala, investment, legislation, normalistas, Pact for Mexico, reform, rule of law, SFP. Bookmark the permalink.

1 Response to Anticorruption Update – Reform Stalls, Scandals Intensify

  1. Pingback: As it Turns to 2015, How Can Mexico Put 2014 Behind? | The Mexico Monitor

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