Mexico is an important trading partner with the United States. It attracts a lot of foreign investment by United States companies.
Corruption risks are substantial and getting worse. Mexico is ranked 100 out of 182 countries by the Transparency International’s Corruption Perceptions Index. It has been moving down the list in the last five years.
FCPA prosecutors have focused on Mexico operations. In the last ten years, they have prosecuted ten companies for bribery in Mexico (and other countries). Some of the significant individual prosecutions have focused on bribery in Mexico, including the Lindsey case which was reversed for prosecutorial misconduct.
United States law enforcement has long-standing relationships with Mexican law enforcement officials. Relying on this relationship, prosecutors are able to gather evidence in Mexico relatively quickly because of established cooperation procedures.
Corruption in Mexico exists in many areas of the government. Local police and government officials, as well as managers and executives at state-owned enterprises, all have a reputation for corrupt practices. When it comes to business activities and regulation, Mexico’s public hospitals, health and food safety inspectors have been identified in enforcement actions. In recent enforcement actions, Mexican officials in the customs, veterinary, public hospitals, and zoning areas have been identified as demanding and receiving bribes.
Basic public services are typically coupled with demands for payments. Local police often block roads and require payments for transport vehicles to pass through the blockade. Beyond the local level, corruption permeates other sectors of the economy, including customs regulation, motor vehicle and transportation, and basic business licenses and permits.
The oil and electricity industries are subject to even higher risks through bribery demands by state-owned enterprises – Petroleos Mexicanos and Comision Federal de Electricidad. Both of these state-owned enterprises have been identified as involved in FCPA prosecutions of companies for foreign bribery. The recent BizJet enforcement action involved bribery payments to the Mexican Federal Police and fleet officials associated with the Mexican President.
The pharmaceutical industry has been a focus of enforcement in Mexico. The health care system in Mexico is controlled by the government. As a result, public hospitals are considered “foreign officials” under the FCPA.
Mexico prohibits bribery – under local and federal laws. Mexico’s government and law enforcement officials have identified the level of corruption as a priority for reduction. The OECD has recommended that Mexico initiate a larger number of criminal bribery prosecutions.
Companies with operations in Mexico have to make sure that compliance controls are in place and robust. Due diligence reviews of third party agents is critical to any company operating in Mexico.
Mexico presents significant economic opportunities for United States and foreign companies. Businesses have to recognize the risks, respond to the risks, and operate carefully to avoid potential FCPA prosecutions.