Guest Post: Anonymous Companies Are Undermining Mexico’s Public Health

Today’s guest post is by Miguel Ángel Gómez Jácome, the Communications Coordinator at the Mexican civil society organization Impunidad Cero (Zero Impunity).

The COVID-19 pandemic has already affected millions of people. (As of the time this piece was initially drafted, around 2 million people had been infected; the exponential spread of the virus means that by the time this piece is published, that number is likely to be much higher.) And while Mexico has not yet been as severely impacted as other countries, official statistics (which likely understate the true prevalence) already report thousands of infections and hundreds of deaths. To confront this problem, Mexico, like other countries, will need to marshal its resources effectively. Unfortunately, though, Mexico’s ability to manage the COVID-19 epidemic is threatened by Mexico’s epidemic of embezzlement in the health sector, much of it facilitated by anonymous shell companies. This widespread corruption drains away vital public resources needed to combat public health emergencies like the COVID-19 pandemic.

In March 2020, two civil society organizations (Justicia Justa (Just Justice) and Impunidad Cero (Zero Impunity)), documented the extent of the problem in a research report entitled Fake Invoices: The Health Sector Epidemic. The research found that between 2014 and 2019, 837 shell companies issued 22,933 fake invoices to 90 health institutions across the country (in 30 of Mexico’s 32 states, as well as the federal government), ultimately embezzling a total of over 4 billion pesos (roughly $176 million US dollars) from the health sector—an amount that could have paid for around 80,000 hospital beds or between 3,400 and 6,900 ventilators. (To put this in context, Mexico currently has 5,000 ventilators in the whole country, and the government is looking to acquire 5,000 more.) And the problem is only getting bigger: According to Mexico’s Tax Administration authority (the SAT), the number of anonymous shell companies in the country has increased from 111 in 2014 to over 9,000 in 2020.

To crack down on the abuse of shell companies to embezzle public funds from the health sector (as well as other sectors), the authors of the Fake Invoices report propose three responses: Continue reading

New Podcast, Featuring Leonor Ortiz Monasterio and Miguel Meza

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Leonor Ortiz Monasterio and Miguel Meza of the Mexican civil society organization Mexicanos Contra Corrupcion y la Impunidad (MCCI) (“Mexicans Against Impunity and Corruption). They describe how MCCI works to fight corruption in Mexico, and critically evaluate the anticorruption efforts of Mexican President Andrés Manuel López Obrador (known as AMLO), who ran in large part on an anticorruption platform, but whose approach to anticorruption during his first year in office has been met with significant controversy.

You can find this episode, along with links to previous podcast episodes, at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Guest Post: Expert Interviews on Corruption Control in Latin America

Today’s guest post is from Columbia University Professor Paul Lagunes, who this year is also a Visiting Fellow at Rice University’s Baker Institute for Public Policy:

Elections in Latin America are freer and fairer than they used to be, and, with rare exceptions, political power in the region is no longer monopolized by a single individual, junta, or party. From Chile to Mexico, legal reforms have promoted higher levels of government transparency and citizen participation. But in spite of these improvements, the region continues to grapple with systemic corruption. Not only are individuals asked to pay bribes by lower-level government officials, but scandals such as Lava Jato (“Car Wash”) in Brazil, La Estafa Maestra (“The Master Fraud”) in Mexico, and La Línea (“The Line”) in Guatemala have revealed grand corruption at the most senior levels, making the fight against corruption a top priority for the region.

Prompted by these concerns, I contributed to organizing a conference at Rice University’s Baker Institute for Public Policy on corruption control in Latin America, which has already been featured (with links to the conference videos) on this blog. Some of the conference panelists stayed long enough that we were able to interview them about their important work. Tony Payan, my colleague at the Baker Institute and an expert on U.S.-Mexico border issues, agreed to conduct the interviews.

The videos of these interviews are now publicly available, and are well worth viewing for those interested in hearing a diverse range of perspectives on the corruption challenges currently facing Latin America. In this post I will provide links to the interviews as well as a brief summary of their content. (There’s also an online website, where you can find all the interviews, here.) Continue reading

Video: CAPI Panel on “Anti-Corruption Efforts in Latin America”

Recent developments in the fight against corruption across Latin America seem to have prompted an increasing number of conferences, workshops, and similar events that focus on this issue. (I was able to participate in one such event at Rice University’s Baker Center a few months back.) Last month, Columbia University’s Center for the Advancement of Public Integrity (CAPI) held another, similar event that may be of interest to those who follow these developments (indeed, perhaps of even greater interest to those who haven’t been following them, but would like to get up to speed). The panel, entitled “Anti-Corruption Efforts in Latin America: Perspectives from Brazil, Argentina, Colombia, and Mexico,” was moderated by Daniel Alonso (Managing Director of Exiger), and featured four senior lawyers from the region: Eloy Rizzo Neto (Brazil), Gustavo Morales Oliver (Argentina), Diego Sierra (Mexico), and Daniel Rodriguez (Colombia). The video of the discussion can be found here. And here’s a quick overview of the discussion, with corresponding time markers for the video: Continue reading

Corruption in Mexico under AMLO: Lessons from an Interview With Dr. Jose Ivan Rodriguez-Sanchez

In July 2018, Andres Manuel López Obrador (AMLO) won the Mexican presidential election in a landslide. AMLO campaigned on the promise to transform Mexican society, and his pledge to curb corruption was among the most prominent planks of his platform. Yet although AMLO remains very popular with the Mexican public (his approval rating at his 100-day mark in March 2019 was above 80% in some polls), many Mexican anticorruption experts are less enthusiastic.

I’ve offered my own reasons for skepticism about AMLO’s approach to fighting corruption in prior posts (see here and here), but to try to better understand some of the reasons why Mexican anticorruption specialists are critical of the AMLO administration, I interviewed one of those specialists, Dr. Jose Ivan Rodriguez-Sanchez, a Mexican scholar currently based at the Mexico Center at Rice University’s Baker Institute for Public Policy. Dr. Rodriguez-Sanchez, whose recent publications include Measuring Mexico’s Corruption and Corruption in Mexico, shared his view of the biggest concerns regarding the AMLO administration’s approach to corruption. What follows is my translation from our conversation (which took place in Spanish), with some paraphrasing and condensation for clarity.

Dr. Rodriguez-Sanchez highlighted five criticisms of the AMLO administration’s anticorruption policies: Continue reading

Mexico’s National Guard: The Wrong Response to Police Corruption

In September 2018, Mexican federal and state authorities disarmed the entire police force of the city of Acapulco because of suspicion that the police had been corrupted by drug cartels. Federal authorities certainly had reason to take action: partly due to the corruption of the police, murders in Acapulco surged to 2,316 in 2017, and police officers themselves were implicated in some of those murders. Yet rather than institute a plan to reform the local police to address this problem, the Mexican government had the military assume local police functions.

It now appears that Mexico’s popular new President, Andres Manuel Lopez Obrador (AMLO), is poised to adopt a similar solution for all of Mexico, in the form of proposed legislation that would create to create a 60,000-strong National Guard. This proposal, which has already been approved by Mexico’s congress and by a majority of the state legislatures, is not accompanied by any proposal for comprehensive police reform; rather, AMLO wants to simply replace the police by utilizing the National Guard to fight the war on crime. His justification for this approach is that the police force is simply too corrupt to do its job.

This argument is not without some merit, nor is it unprecedented. In fact, many governments around the world have opted to militarize domestic security when organized crime infiltrates the police, because of the military’s greater discipline, more hierarchal structure, and (supposed) lower susceptibility to corruption. (See here for an example from the Philippines.) AMLO has advanced similar arguments in favor of the National Guard. He has also emphasized additional safeguards: the top commander of the National Guard will report to a civilian boss, civil courts rather than military tribunals will have jurisdiction over National Guard members alleged to have violated the law, moving detainees to military installations is prohibited, and National Guard members will receive human rights training.

But despite all this, and despite the evident need to address the police corruption that contributes so much to the outrageous violence in Mexico, a National Guard is not the solution, for several reasons: Continue reading

AMLO Cannot Put a “Final Period” in Mexico’s History of Corruption Without Addressing the Past

The trial and conviction of the notorious drug lord “El Chapo” has shed new light on the rampant corruption that exists at even the highest levels of the Mexican government. To take just a couple of the most startling examples: During the trial, a witness testified that Mexico’s former president Enrique Peña Nieto accepted a $100 million bribe from El Chapo, while another cartel member testified that he paid at least $3 million dollars to the Public Security Secretary of former president Felipe Calderon and at least $6 million dollars to President Calderon’s head of police. In other countries these accusations would have shaken citizens to their very core. But in Mexico, long perceived as one of the world’s most corrupt countries, citizens have sadly grown accustomed to allegations of this nature, and the revelations from the El Chapo trial were met with little more than a shrug.

That doesn’t mean that Mexicans don’t care about corruption. Quite the opposite. Indeed, frustration at this flagrant culture of corruption was one of the key factors that helped Mexico’s new president, Andrés Manuel López Obrador (AMLO), to capture his constituents’ faith and votes. AMLO has promised to eradicate corruption through a “Fourth Transformation” of Mexico (the previous three were Mexico’s independence from Spain, the liberal reforms of the 1850s, and the 1910-1917 revolution). Yet despite these sweeping promises, AMLO has decided not to investigate the allegations against his predecessors that have emerged in the El Chapo trial. In fact, AMLO’s stance has been not to prosecute any officials for corruption that took place in the past, before he took office. (AMLO has wavered on this position—though only slightly—after receiving backlash during his campaign; he has since stated he would prosecute past corruption offenses only if the administration has no choice due to “internal pressure” from citizens.) AMLO has justified his opposition to investigations and prosecutions of past corruption crimes by using the language suggesting the need for a fresh start. He speaks of a need to put a “final period” on Mexico’s history of corruption, and to “start over” by not focusing the past.

But how can one eradicate corruption by granting numerous “Get Out of Jail Free” cards? AMLO’s support of a de facto amnesty for corrupt ex-Mexican officials’ casts doubt on the seriousness of his pledge to eradicate corruption. Rather than simply saying that it’s time to turn over a new leaf, AMLO should demand accountability for grand corruption, and he should start by ordering a full independent investigation into the veracity of the corruption allegations that came to light during the El Chapo trial. Continue reading

Video: Baker Center Conference on Controlling Corruption in Latin America

A few weeks back I was lucky enough to attend a mini-conference hosted by Rice University’s Baker Institute for Public Policy entitled “A Worthy Mission: Controlling Corruption in Latin America.” The conference featured an opening keynote address by Yale Professor Susan Rose-Ackerman, with a brief response by BYU Professor Daniel Nielson, followed by two panels. The first of these panels (which I moderated) focused on anticorruption prosecutions in Latin America generally, and featured Thelma Aldana (who served as Attorney General of Guatemala from 2014-2018, and is rumored to be a likely presidential candidate), Paolo Roberto Galvao de Carvalho (a Brazilian Federal Prosecutor and member of the “Car Wash” anticorruption Task Force), and George Mason University Professor Louise Shelley. The second panel, moderated by Columbia Professor Paul Lagunes, focused more specifically on corruption control in Mexico, and featured Professor Jacqueline Peschard (former chair of Mexico’s National Anticorruption System), Claudio X. Gonzalez (the president of the civil society organization Mexicanos Contra la Corrupcion y la Impunidad (MCCI)), and Mariana Campos (the Program Director at another Mexican civil society organization, Mexico Evalua).

Video recordings of the conference are publicly available, so I’m going to follow my past practice of sharing the links, along with a very brief guide (with time stamps) in case anyone is particularly interested in one or more particular speakers or subjects but doesn’t have time to watch the whole thing. Here goes: Continue reading

How We Did It: the U.S. Congress’ Exposure of the Grand Scale of Global Corruption

 Over the past two decades the U.S. Senate Permanent Subcommittee on Investigations has laid bare how Gabonese President Omar Bongo, Chilean dictator Augusto Pinochet, Equatorial Guinean President Teodoro Obiang, and a gaggle of friends and relatives of the leaders of Mexico, Pakistan, Nigeria, Angola, Saudi Arabia, and other countries conspired with large, prestigious banks to hide the enormous sums they stole from their nation’s citizens.  Financial Exposure, the new book by subcommittee investigator and later staff director Elise Bean, recounts how Democrats and Republicans united not only to document egregious cases of grand corruption but to enact legislation making banks’ complicity in future cases a crime.

Americans depressed by the rancorous polarization now gripping Congress will find her book a welcome reminder that Democrats and Republicans can work together to advance the public interest.  Scandals involving money laundering by banks in other nations, most recently Denmark’s Danske Bank and Latvian bank ABLV, should prompt non-Americans to send their parliamentarians a copy of Ms Bean’s book.  Below Ms. Bean offers a few morsels from the book to whet readers’ appetites.    

There isn’t room here to recount all the subcommittee’s anti-corruption investigations, but a few examples will illustrate what they showed and what results they produced.

Citibank Private Bank.  Corruption was the subject of a key investigation by the subcommittee in 1999, which was led by then subcommittee chair Republican Senator Susan Collins of Maine. Rumors were flying then that the United States had become the preferred banker for corrupt foreign officials around the world. Working with Democratic Senator Carl Levin of Michigan (my boss), the subcommittee elected to zero in on so-called “private banks,” banking units that opened accounts only for wealthy individuals with at least $1 million in deposits.

The inquiry ended up detailing four accountholders at Citibank Private Bank: Raul Salinas, brother to the then president of Mexico; Omar Bongo, then president of Gabon; Asif Ali Zardari, then known for his marriage to Benazir Bhutto, former prime minister of Pakistan; and the sons of Sani Abacha, recently deceased president of Nigeria.  Senate hearings exposed how Citibank had not only accepted tens of millions of suspect dollars from the accountholders, but also created offshore shell companies to hide their identities, helped them secretly move millions of dollars around the globe, and continued servicing them even after learning of corruption allegations. Continue reading

Guest Post: After the Tsunami–Mexico’s Anticorruption Outlook Under Andres Manuel Lopez Obrador

Today’s guest post is from Bonnie J. Palifka, Associate Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM), and Luis A. Garcia, a partner at Villarreal-VGF specializing in corporate compliance and anticorruption matters:

The results of Mexico’s federal elections last July have been described as a “tsunami” for Andrés Manuel López Obrador (AMLO) and his National Regeneration Movement, known by its Spanish acronym “Morena.” AMLO won 53% of the popular vote and Morena swept the House and Senate, as well as a majority of the nine state governorships up for grabs and several local legislatures. This is all the more remarkable considering that Morena was founded as a civil society organization in 2011 (and registered as a political party in 2014), and was fighting for control of Mexico’s political left against AMLO’s former party, the PRD. Many are hopeful that AMLO will lead a transformation of Mexico into a modern, peaceful, fair, and prosperous society like Chile or Uruguay, while others fear that he will take the country down the route of Venezuela. That the same person can engender such different reactions is due in part to the vagueness and inconsistency of AMLO’s rhetoric throughout the campaign: sometimes he would take a highly confrontational and uncompromising attitude toward Mexico’s political and economic elite—what he termed the “mafia of power”—while at other times he would strike a more conciliatory tone. But one consistent theme in AMLO’s rhetoric—and in the analysis of the data on the reasons for Morena’s electoral triumph—was profound indignation at the blatant corruption and impunity of Mexico’s political and business elites.

Mexican voters’ frustration with corruption is understandable. Although in recent decades Mexico has undertaken a number of anticorruption measures—including, under former President Vicente Fox, a new freedom of information law, and, under current President Enrique Peña Nieto, a new National Anticorruption System (SNA), which, among other things, updates national and state laws to criminalize more acts, reduce immunities, and increase punishments—these measures have been insufficient, as reflected in Mexico’s increasingly poor showing on the Corruption Perceptions Index. AMLO identified corruption as Mexico’s most pressing problem and promised to bring about an honest and transparent regime that would be truly responsive to the country’s needs. And, in an encouraging sign, AMLO has brought in a diverse group of highly respected experts and activists, from all sides of the political spectrum, and has appeared flexible and open to dialogue. At the same time, though, he has displayed a puzzling blind spot for potential conflicts of interest, and his optimistic rhetoric has suffered from a lack of specificity, coherence, and concrete proposals. Continue reading