The World Economic Forum has estimated that the cost of corruption in Mexico is between 7% and 9% of its gross domestic product. As part of the fight against corruption, and within the scope of the 2007 to 2012 National Development Plan, in March 2011 President Felipe Calderon filed a decree proposal on the Federal Anti-corruption in Government Contracting Law, and also a decree proposal which will amend and expand various provisions of the Federal Law of Administrative Accountability of Public Officials. Both proposals are being analysed and debated in Congress.
These initiatives are a consequence of a real demand for a transparent legal framework for the large infrastructure projects being developed in the telecommunications and energy industries, including oil and gas. They are also a consequence of international conventions executed by Mexico, including:
- the Inter-American Convention Against Corruption, ratified by the Senate on June 2 1997;
- the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, ratified by the Senate on May 27 1999; and
- the UN Convention Against Corruption, ratified by the Senate on April 29 2004.
The new initiatives draw on the principles established in these international conventions and are also influenced by foreign legislation such as the US Foreign Corrupt Practices Act and, more recently, the UK Bribery Act.
The Federal Anti-corruption in Government Contracting Law establishes the liability and penalties applicable to individuals and legal entities, whether national or foreign, and in whatever capacity they may act - as shareholders, partners, legal representatives, clients or agents, advisers, subcontractors, employees or others. Such liability arises from participation in irregular conduct during direct or indirect participation in federal government contracting - including preliminary acts, bidding processes and any other act or proceeding deriving therefrom - or in international commercial transactions.
In terms of government contracting, the legislative proposal highlights the following points:
- Irregular conduct that is subject to penalties includes:
- offering or paying money to a government officer in order for him or her to carry out (or omit to carry out) an action related to his or her function,
- carrying out acts to obtain an improper benefit or advantage in federal government contracting processes;
- participating in public bids despite being prevented from doing so by law or by an administrative resolution; or
- in any other way evading the rules or requirements of federal government contracting.
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- Individuals may be fined from 1,000 to 50,000 times the general minimum wage in Mexico City (approximately $5,000 to $250,000) or between 30% and 35% of the amount of the government contract. For legal entities, the fines range from 10,000 to 2 million times the general minimum wage in Mexico City (approximately $50,000 to $10 million) or between 30% and 35% of the government contract. In additional, individuals and legal entities may be debarred from federal government contracting processes for between three months and eight years.
The provisions of the Federal Law of Administrative Accountability of Public Officials are amended and expanded to establish:
- protective measures for individuals who denounce and provide information about breaches of duty by government officials, and the ability to file anonymous reports;
- greater means of discovery for federal government controllers and the heads of the relevant auditing and complaints and responsibilities functions;
- an increase in penalties for administrative offences, including the suspension of public officials for up to 20 years and their removal from office in the case of serious offences;
- the means to encourage officials to provide anti-corruption information, including a substantial reduction in administrative penalties in recognition of their collaboration;
- improved supervision of government officials' personal wealth; and
- the right to reward citizens who denounce acts of corruption.
This legislation could become a powerful tool for strengthening the anti-corruption framework. It creates effective financial deterrents and places significant responsibility on the public as a key instrument in identifying corrupt procurement practices at federal level.
For further information on this topic please contact Humberto Morales Barrón at Sanchez-DeVanny Eseverri SC by telephone (+52 81 8153 3910), fax (+81 8153 3901) or email ([email protected]).