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The Americas

Mexico risk report


Corruption is a significant risk for companies operating in Mexico. Bribery is widespread in the country's judiciary and police. Business registration processes, including getting construction permits and licenses, are negatively influenced by corruption. Organized crime continues to be a very problematic factor for business, imposing large costs on companies. Collusion between the police, judges and criminal groups is extensive, leading to widespread crime, theft, impunity and weak law enforcement. Gifts and hospitality are not forbidden by law and may be permissible, depending on intent. Attempted bribery, extortion, abuse of office, bribery of foreign public officials and facilitation payments are criminalized under Mexico's Federal Penal Code (Cรณdigo Penal Federal, in Spanish). However, Mexico's anti-corruption laws are almost never enforced, and public officials are rarely held liable for illegal acts. New anti-corruption laws were passed in 2017, but their effectiveness has not been proven yet.

Judicial system Very high risk

Businesses face a high corruption risk when dealing with the judiciary in Mexico. Businesses indicate that they perceive that bribes and irregular payments are commonly exchanged in return for favorable judicial decisions (GCR 2015-2016). Businesses furthermore express low confidence in the independence of the judiciary and the efficiency of the legal framework in settling disputes and challenging regulations (GCR 2017-2018). In addition, half of households believe most or all judges and magistrates are corrupt (GCB 2017). In practice, the judiciary has limited independence from the executive (BTI 2018), but it has never launched an independent investigation into corruption (BTI 2018). At the state level, the judiciary is bound to the executive; all governors accused of corruption have so far escaped trial (BTI 2018). At the local level, the judiciary in some places has been infiltrated by the drug organizations (BTI 2018). Mexico introduced a new accusatory trial system in 2016, which is intended to combat corruption and increase the system's efficiency and transparency (ICS 2017). However, reporting suggests that the system so far has not led to the desired outcomes and that political support for the system is disappearing (The San Diego Union-Tribune, Aug. 2017).

Enforcing a contract in Mexico takes less than half the time required on average in the region while costs are roughly in line with the average (DB 2018). Mexico is not a member state of the International Centre for Settlement of Investment Disputes (ICSID), despite the fact that many investment agreements signed by Mexico include provisions for ICSID dispute resolution (ICS 2017). Mexico is a signatory to the 1958 New York Convention.

Police Very high risk

The security apparatus carries a high corruption risk for businesses operating in Mexico. Businesses report very low confidence in the reliability of the police services and businesses indicate that they face high costs due to crime and violence (GCR 2017-2018). Nearly two-thirds of Mexicans believe most or all police officers are corrupt (GCB 2017). The police are highly corrupt and often operate with impunity in many regions of the country (BTI 2018). Corruption is most prevalent at the municipal and state levels, but it is also a problem at the federal level (BTI 2018). The police have also frequently been involved with drug organizations and accused of other law violations (BTI 2018). Previous attempts to improve the situation, including the dissolution of the Federal Police and reforms including the centralization of police forces, have not shown results (BTI 2018). Clientelism is widespread in Mexico and local and state governments have used the police to serve their clientelistic agendas (BTI 2018).

In September 2014, dozens of Mexican police officers were accused of kidnapping 43 students in the town of Iguala and handing them over to a local drug gang to later be killed under the order of a high-level politician (Independent, Nov. 2014). The case is indicative of the high-level of corruption and impunity within Mexico's law enforcement authorities. Independent investigations into the role the government played in killings were ongoing as of the time of review (The Intercept, Sept. 2017).

Public services Very high risk

The public services sector carries a high corruption risk for companies operating in Mexico: More than two-thirds of businesses claim that corruption is part of the business culture and that it affects their daily operations (EY 2018). Companies indicate that bribes and irregular payments are frequently paid in the process of obtaining public services (GCR 2015-2016). Almost half of all surveyed companies report that they experience delays upon refusal to pay facilitation payments (Control Risks 2015). On a more positive note, an overwhelming majority of companies in Mexico believe that resisting demands of bribery by corrupt officials has a positive effect, as officials eventually become less likely to issue demands in the future (Control Risks 2015). Roughly two-thirds of Mexicans believe most or all local government officials are corrupt (GCB 2017). The regulatory system is generally transparent and consistent with international norms, but corruption hampers the equal enforcement of some regulations (ICS 2017). Corruption has reached endemic proportions in Mexico; several state governors have been ousted from office and face enormous corruption charges: Many of them have fled the country (BTI 2018).

The government established Tramitanet (in Spanish) to allow for the electronic processing of transactions within the bureaucracy and to thereby reduce the risk of bribery (ICS 2017). Starting a business in Mexico is less time-consuming and less costly than the regional average, as is dealing with construction permits (DB 2018).

Land administration High risk

Mexico's land administration lacks transparency and carries a moderately high risk of corruption. Companies report that property rights are not adequately protected due to weak law enforcement (GCR 2017-2018). However, property rights are generally well-defined for large companies (BTI 2018). Property rights for small businesses are not well-defined due to corrupt and inefficiency in the administrative and judicial system (BTI 2018). The lack of clearly defined property rights makes these businesses vulnerable to corrupt trade union agents, tax collectors, and police, and the situation induces insecurity and corruption (BTI 2018). Moreover, property rights are being threatened by the steep rise in violence and the deterioration of security in Mexico over the past ten years (BTI 2018). It is more time-consuming to register property in Mexico compared to averages in the Americas (DB 2018). Complaints about bureaucratic hurdles which encourage corrupt practices are frequently made by investors (BTI 2018).

Mexican President Enrique Peรฑa Nieto came under fire over a 2014 purchase of a USD 7 million luxury home from a government contractor (The Guardian, Jul. 2016). The President also used a house owned by contractor Grupo Higa without paying rent in 2012 (The Guardian, Jul. 2016). The government-sponsored investigation into the allegations ultimately found no evidence of wrongdoing, but the opposition has attacked the impartiality of the investigation (The Guardian, Jul. 2016).

Tax administration Moderate risk

Companies face a moderate risk of corruption when dealing with Mexico's tax administration. Companies indicate that bribes and irregular payments are commonly made when paying taxes (GCR 2015-2016). Nearly half of Mexicans perceive most or all tax officials as being corrupt (GCB 2017). Mexico has the weakest tax revenues in the 34-nation Organization for Economic Co-operation and Development (OECD), partially due to corruption (Reuters, Jan. 2014). Firms make fewer payments and spend significantly less time filing taxes compared to Mexico's regional peers (DB 2018).

Customs administration Very high risk

Mexico's customs administration carries a high corruption risk for businesses. Bribes and irregular payments during the customs process are perceived by businesses to be common (GETR 2016). Companies express insufficient satisfaction with the efficiency and time-predictability of the customs process (GETR 2016). In 2016, the government estimated that out of every 10,000 import and export procedures, 'corrupt activities' occurred in 1,157 cases (Regeneraciรณn, Aug. 2017). The customs agency referred corruption reports involving 34 of its employees to the public prosecutor between 2016 and the first half of 2017 (Regeneraciรณn, Aug. 2017).

To reduce opportunities for corruption, the Mexican government introduced the Secretariat of the Economy website that offers information and forms related to investment and trade; import and export permit applications can be downloaded on the website. Trading across borders is less costly and less time-consuming than the regional average (DB 2018).

Public procurement Very high risk

Mexico's public procurement sector carries a high corruption risk for companies operating in the sector. Businesses believe that public funds are often diverted to companies and individuals due to corruption and perceive favoritism to be widespread among procurement officials (GCR 2017-2018). Most surveyed companies report that they have lost business opportunities due to competitors resorting to corruption (IMCO 2015), while almost half of businesses have failed to win contracts because competitors have bribed procurement officials (Control Risks 2015). The government uses its resources inefficiently, particularly the state governments have wasted large sums on useless expenses and corruption (BTI 2018). Clientelistic practices remain common in Mexico; diverting public money for their own purposes (BTI 2018). There are concerns that strong economic interests close to the presidency have been granted important infrastructure contracts, which presents a conflict of interest for the president and other members of the government (BTI 2018). These problems are even more widespread at the local level (BTI 2018).

A review of contracts granted to the construction of Mexico City's new international airport by a government auditing agency found irregularities in contracting for the new airport worth MXN 765 million; the airport's owner has instituted 29 administrative procedures against companies and public servants for irregular behavior (Aristegui Noticias, May. 2018).

An online federal procurement website, Compranet, is intended to increase transparency in the government and to decrease the frequency of bribery. Companies are recommended to use a specialized public procurement due diligence tool to mitigate corruption risks associated with procurement in Mexico.

Natural resources Very high risk

Corruption represents a high risk for companies operating in Mexico's extractive sector. Concerns in this sector include the relations between foreign and Mexican oil companies being set up to engage in the local bidding process with local political and business elites (NRGI 2017). Concerns also exist over Pemex's, the state-owned oil company, handling of contracts with other providers, an issue highlighted by alleged corruption in the large infrastructure contracts the company signed with the disgraced Brazilian firm Odebrecht (NRGI 2017). In September 2017, Mexico's anti-corruption agency announced it had identified USD 6,7 million in irregularities in a contract between Pemex and Odebrecht (Reuters, Sept. 2017). In the mining sector, there is no competitive bidding since concessions are granted upon request to the interested party (NRGI 2017). In general, organized crime, corruption, and human rights violations pose severe challenges to the governance of Mexico's natural resources (NRGI 2017).

Pemex has in recent years frequently become embroiled in allegations of corruption. Pemex's former Chief Adrian Lajous Vargas has stated that corruption was rampant and "everywhere in all areas and at all levels of the hierarchy" (NGI, Apr. 2018). In addition, Vargas stated that organized crime has moved into the logistical activities of Pemex (NGI, Apr. 2018). In April 2018, Pemex fired 100 employees for complicity with organized crime in fuel theft schemes (Animal Politico, Apr. 2018). In one instance, a nepotism case that broke out in mid-2015 revealed that the niece of President Pena was hired by Pemex. The President's niece was reportedly far from qualified for the job, a fact that neither her top executive position nor her salary reflected (TeleSUR, July 2015).


Despite a strong legal framework, Mexico's anti-corruption legislation is not effectively enforced (BTI 2018). However, in July 2017 the General Administrative Responsibilities Law (in Spanish) was passed. The Law calls for the creation of a new National Anti-corruption System and the appointment of an Anti-corruption prosecutor (LR 2018). The Federal Penal Code (in Spanish) criminalizes corruption, active and passive bribery, extortion, abuse of office, money laundering, bribery of foreign public officials and facilitation payments. Criminal penalties for corruption depend on the size of the bribe and may thus range from three months to a maximum of 14 years (LR 2018). Corporations may also be held liable for corruption offenses (LR 2018). Other measures may include fines of up to double the benefit obtained and 10 years of exclusion from bidding on public contracts (LR 2018). The Federal Public Servants' Responsibilities Law (in Spanish) prohibits public officials from requesting or accepting goods or services, either free or at a price less than market value, from individuals or corporations whose professional interests conflict with the official duties of the public servant. The law requires public officials to declare any gift valued at ten times the minimum wage in Mexico (USD 48) within 15 business days or deliver it to the administrative authority.

The Anti-Money Laundering Law restricts operations for a variety of vulnerable activities and provides criminal sanctions and administrative fines for failure to comply. Public procurement is regulated by the Law on Acquisitions, Leases and Public Sector Services and the Law on Public Work and Related Services (in Spanish) that address conflicts of interest among federal procurement officials, competitive bidding, asset declaration and monitoring, reviews of procurement decisions, and blacklisting measures. Mexico has adopted the Transparency Standards on Government Procurement by the Asia-Pacific Economic Cooperation (APEC). Whistleblower protection is very weak, and no legal protection is established for those reporting corruption.

Compared to the rest of the region, compliance programs in Mexico are more developed than the average (MC 2016). Seven out of ten businesses have internal reporting mechanisms, three quarters perform third-party due diligence, and three quarters have anti-corruption contract terms (MC 2016).

Mexico has ratified the United Nations Convention against Corruption (UNCAC) and is a signatory to the OECD Anti-Bribery Convention.

Civil society

Mexico's law guarantees freedoms of speech and press, but these rights are not respected in practice. Reporters face threats and violent attacks which frequently go unpunished, leading to an environment of impunity (FotP 2017). Mexico is among the world's most dangerous places for journalists; by one estimate, over a hundred killings have been recorded since the years 2000 (FotP 2017). Many murders are not investigated, and officials frequently blame the journalists' personal lives for the slayings (FotP 2017). Cartels frequently cooperate with authorities to force journalists into self-censorship; journalists cannot survive in some regions without accepting these explicit criminal demands (FotP 2017). Access to the internet is not restricted, but citizens who attempt to report crime via online platforms face threats, reprisal, and murder by criminal groups (FitW 2018). The Freedom of Information Act (in Spanish) ensures public access to information at all government levels, but information may still be temporarily withheld for reasons of 'public interest' and accessing information is often a time-consuming and difficult process (FotP 2017). The media environment in Mexico is considered 'not free' (FotP 2017).

Rights of association and assembly in Mexico are formally established (HRR 2017). While non-governmental organizations have been able to significantly increase public awareness of corruption, civil society remains very weak (BTI 2018). The civil society organizations (CSOs) that do exist have publicized, together with journalists, many corruption scandals (BTI 2018). However, these organizations lack the political power to pressure the government, judiciary, and political parties to effectively investigate and redress the corruption exposed (BTI 2018). CSOs have also faced violence, including threats and murders (FitW 2018).



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