1. What is the current state of corruption in Mexico and what risks does this pose to foreign companies?

Mexico is ranked 88th out of 197 countries on the TRACE Matrix, which measures business bribery risk by country. With an overall risk score of 54, Mexico represents a moderate bribery risk, with especially low scores for ratification and implementation of its anti-bribery laws. However, companies operating in Mexico continue to express concern over high levels of bribery in various sectors of the economy. According to the 2014 TRACE Global Enforcement Report, since 1977 there have been 18 concluded enforcement actions brought by foreign countries involving bribes paid to Mexican government officials.

Foreign companies with a presence in Mexico may be exposed to a wide range of corruption risks, such as requests for political donations or demands for bribes to obtain permits, licenses and reduction fees. Bribe demands to expedite customs clearance are also common. Companies that participate in public contracting may be exposed to corruption when bidding for projects or to keep large contracts.

Recent legal reforms and increased government involvement in the economy further complicate these risk areas. A time-consuming tax system also exposes companies to corruption risks should they attempt to expedite the process. Finally, extortionate demands from police and criminal organizations continue to put companies at risk, although paying them may not violate anti-bribery laws, if they are accounted for appropriately.

2. Have the recent structural reforms in Mexico improved the situation or made it worse? 

Mexico has a patchwork of laws that cover bribery of both domestic and foreign officials. There are also numerous federal agencies in Mexico, which share responsibility for the country’s anti-bribery law enforcement. In 2015, President Peña Nieto created the National Anti-Corruption System, which coordinates efforts between the primary institutions to combat bribery. Structural reforms have been slow to address bribery and recent bribery scandals involving President Peña Nieto’s wife and Finance Minister have reduced public confidence in the government’s ability to tackle the country’s corruption problems.

Many have complained that Mexico’s foreign bribery laws, which are limited to corruption in public procurement, do not go far enough to meet international commitments. Also, while there are several investigations of corruption, prosecutions are generally unsuccessful.

3. What action can foreign businesses take to protect themselves from corruption in Mexico?

Since the use of intermediaries in government procurement in Mexico is neither regulated nor prohibited, there is a serious risk of indirect payments to government officials related to regulatory requirements. As such, businesses should require detailed due-diligence information from third parties, including suppliers, customs brokers, consultants, attorneys, public notaries, gestores (middlemen) and any other type of agent that may be interacting with government customers, as well as evidence of an anti-bribery compliance program and completion of anti-bribery training.

Companies should tailor their compliance programs based on their risk profile (industry, government contact, level of exposure to corruption) and implement internal controls to detect and prevent bribery. Country managers should be trained to report and escalate compliance red flags and concerns. Management should encourage and reward whistleblowing, since Mexican laws do not protect whistleblowers.

4. How can companies ensure they engage ethical business partners in Mexico?

Companies should carefully vet new business partners, as well as heritage third parties, and require evidence of a compliance program and completion of anti-bribery training. Working with TRACE Certified companies can provide businesses with the assurance that the entity has completed a rigorous due-diligence process based on international standards. Companies should use contractual clauses to address corruption and known areas of concern.

Companies may also refer to TRACEpublic, the first global register of beneficial ownership information, which allows companies to share and search for beneficial ownership information at no cost. The database supports the efforts of companies seeking to conduct business ethically.

This Q&A article was originally produced for ExportWise.ca, Export Development Canada’s online magazine.