Mexico: Anti-Corruption Developments In Mexico

2013 was a crucial year for Mexico. With the return to power of the Partido Revolucionario Institucional (PRI), through the election of President Enrique Peña Nieto, a series of profound reforms were enacted in a number of sectors including telecommunications, energy, education and labour. There were also considerable political reforms, all of which were pushed through via the Pact for Mexico (Pacto por México), a political agreement between the three most important political parties in the country to expedite the issuing and approval of the required reforms. The aim of the reforms was to modernise and promote Mexico as an optimal destination for international investment. Two years since then, the everyday application of some of these reforms has yet to be determined, but a key topic all of the reforms share has proven to be a bigger challenge than expected – corruption.

Until April 2015, aside from the Criminal Code Mexico only had a couple of laws addressing corruption; one concerned public procurement and the other governed the administrative liabilities of public servants. In addition, a lack of adequate public prosecution, little or no compliance with legal formalisms, and the considerable amount of investigative work required for the integration of a corruption case, resulted in very few successful investigations, let alone indictments.

The scenario for the private sector, particularly following the investigation by the Department of Justice (DOJ) into Wal-Mart's activities in Mexico, based on the extraterritorial capabilities of the US Foreign Corrupt Practices Act, changed rather vigorously. Companies doing business in Mexico understood that they needed to react quickly and efficiently to implement anti-corruption policies of their own to regulate their national and international activities. The fear of an international investigation derived from the FCPA or the UK Bribery Act translated into enhanced auditing between business partners, which in itself resulted in a business culture more oriented toward transparency and ethical standards, aiming to minimise corruption. Notwithstanding, these changes arose mainly from international corporate politics, rather than national laws.

In 2013, as a consequence of a series of international commitments, in particular with multilateral bodies such as the FATF-GAFI and the OECD, Congress passed a national Anti-Money Laundering Legislation which targets specific 'high-risk' commercial operations. Even though financial institutions already had in place strict controls for preventing and identifying possible money laundering activities, there were still numerous activities – such as gaming and sweepstakes, trading of art, purchase of real estate, armouring of vehicles, issuing of credit lines, rendering of specific professional services and donations to non-profit organisations – which still required equally strict controls.

Even with these new corporate and legal controls in place, or in the process of being established, corruption scandals, particularly with government officials, decentralised governmental agencies and state-owned companies at all levels, were becoming more common – as well as increasingly coarse and absurd. Indeed, excess has been a key element of corruption in Mexico. Freedom of expression, particularly through social media outlets, has granted journalists, non-governmental organisations and even common citizens with a never before seen power to come forward and denounce acts of corruption with hard evidence, such as videos and private investigations.

Society became tired of hearing about yet another corruption scandal. What was more frustrating was that these scandals usually faded away after a couple of months, ultimately leading to the impunity of the people involved. Little by little, social groups, universities, non-governmental organisations and intellectuals, among others, started to demand that the fight against corruption be made a priority in the country, and took an active role in pressuring the government at all levels to move toward the regulation and legislation of a national anti-corruption system (NAS).

Even though diverse anti-corruption initiatives were filed for the consideration of Congress as early as 2012, it was not until February 2015 that the Chamber of Deputies voted in favour of a constitutional reform to combat corruption by establishing a national anti-corruption system. With 409 votes in favour, the initiative was turned over to the Chamber of Senators for its review and approval. After a public consultation with various different social actors, on 21 April 2015 the initiative was approved. Considering that the proposal referred, in this first stage, to constitutional changes, it was also necessary to obtain the approval of half of the states' local congresses. On 27 May 2015, the constitutional reforms that facilitated the creation of the NAS were published in the Federal Official Gazette.

Where do we go from here?

The easiest part of creating the NAS has now been achieved, largely due to the attention of social groups and organisations pushing for transparency. However, the biggest challenge still lies ahead. Following the publication of the constitutional reforms, Congress has a period of one year to discuss and approve the creation of all necessary general legislation for the operation and faculties of all participating members of the NAS, and at least five different legislative packages will be required to achieve this objective.

The NAS will be integrated by a Coordinating Committee, a National Council for Public Ethics and a Citizen's Participation Committee. The Coordinating Committee will have to include the President, the President Justice of the Supreme Court, the President of the Tax and Administrative Tribunal and the state governors.

In terms of the approved and expected reforms, the Audit Office of Congress (Auditoría Superior de la Federación) currently in charge of reviewing past years of public finances to determine possible misuse of public resources, will now be able to investigate the possibility of existing corruption cases along with the Ministry of Public Function (Secretaría de la Función Pública) whose facilities were removed in 2012, only to be returned as product of the reform. Prior to the reforms, the Auditoría could not review present corruption cases, or inappropriate use of Federal funds as they developed, and had to wait until the fiscal year was closed to carry out such investigations. The Auditoría will also be able to audit local funding for the states (which was not previously possible).

The Federal Tax and Administrative Tribunal will be transformed into the Federal Administrative Tribunal and will be the competent court to study and rule in grave corruption investigations carried out by the Secretaría de la Función Pública and the Auditoría Superior de la Federación in order to obtain an objective and independent resolution. It is expected that this Tribunal will be able to establish sanctions that may even lead to the suspension of activities, or the dissolution of a company in confirmed cases of corruption.

As with any new system, the laws, regulations and other implementing practices will be crucial. The NAS will require adequate training, education and tools to permeate all day-to-day aspects, transforming Mexico into a strict, modern and efficient administration system.

The stakes are higher than ever, but achieving the NAS is also one of the highest priorities, not necessarily for all governmental actors at this time, but definitely of a great number of social actors who will not stop pushing the government until the objectives are met. As with the incipient achievements in education reform, this is a topic that Mexicans as a society are unwilling to relinquish. Mexicans now understand that the cost of doing so will impact generations to come, and are more convinced than ever that it is a time to invest in better days through effort and hard work. Impunity of governmental officials elected to serve, who abuse such power for personal use, hurts even more than corruption.

Originally published by Financier Worldwide, 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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