Corruption affects three out of every four companies in Mexico, which has become a matter of concern, said the Center for Economic Studies of the Private Sector (CEESP). In its weekly analysis, the organization considered that this problem has to do with poor regulation or excessive paperwork because they are associated with inefficiencies in public institutions and cause delays in the attention of businesses and encourage corruption.
The main manifestations of this phenomenon are reflected in payments to speed up procedures and avoid fines or closure of establishments. Delays in service or excessive regulation encourage irregular payments or influence peddling to expedite procedures or formalities, which generates unnecessary costs and causes interest groups to appropriate activities that correspond to the State.
The CEESP considered it worrying that the perception of more corruption is registered in cities with strong economic activity, such as Mexico City, Mexicali, Juarez, Chihuahua, Torreon, Saltillo, and San Luis Potosi. The National Survey of Regulatory Quality and Governmental Impact on Companies, released last week by INEGI, showed a drop in the perception of acts of corruption among public servants, decreasing from 82.2% in 2016 to 71.5% in 2020.
Corruption, a crime that depends on institutions and laws
Corruption is a crime of opportunity and calculation. Its incidence may be influenced by culture, but fundamentally it depends on the institutions and laws under which public officials, businesses, and citizens operate. Corruption can occur between private, procuring agents who accept payments, but its most damaging effects are on the functioning of government and public confidence in the state.
Corruption is a systemic problem and the Civil Service still has a lot of work to do, despite the progress made. Mexico is at an encouraging point, with a significant improvement in the public's perception of the measures that the Government is applying against this scourge. This improvement is an encouraging sign because it means that the country is moving from a vicious circle to a virtuous one, where there are very important changes in attitude. However, there is a need for measures to dissuade corruption, institutional reforms to inhibit its practice, that is, to eliminate corrupt incentives.
This means eliminating corrupt incentives. In other words, we need to see what companies gain, where the spaces for bribery or kickbacks are generated.
One of the actions recommended is to improve the structure of social programs, redesigning them to reduce the discretionary power of public servants in their management, which could be through the direct delivery of benefits, which is already being done by the Mexican Government. Likewise, to simplify procedures in the governmental fields most vulnerable to corruption, such as procurement and public works, where costs increase by up to 50% for both the government and society.
In recent years, the intolerance of citizens towards corruption has increased, and this is expressed in different ways, but especially through the vote. An example of this was the citizenry's support for the measures adopted by the Mexican government to combat fuel theft, despite the immediate effects of temporary shortages.
The fight against corruption always raises reactions. Today, the fight against corruption unites all Mexicans and many foreign interests who work together for a more just world.
Companies perceive drop in acts of corruption
Businesses' perception of acts of corruption by public officials in Mexico has decreased in recent years, while trust in government and public institutions has improved. According to INEGI's National Survey of Regulatory Quality and Governmental Impact on Companies (ENCRIGE), in 2020 71.5 percent of economic units in the country considered that acts of corruption were frequent, down from 82.2 percent in 2016.
The data indicate that the number of firms that perceived very frequent and frequent acts of corruption were 2.9 million in 2020, down from 3.7 million in 2016. Overall, the cost of these acts of corruption accounted for a total of 887.2 million pesos during the past year. In other words, per economic unit, the average cost per act of corruption was 7,419 pesos.
This reduction in corruption has to do, on the one hand, with the increase in trust between companies and the different types of federal, state and municipal governments; and this was reflected in the frequency of acts of corruption. There are other factors that may have influenced in the reduction of corruption such as the pandemic and technological progress, the procedures that companies did through the Internet increased, decreasing the possibility of corrupting any procedure since a public official who may have committed a corrupt action was not involved.
There is a decrease in the perception of corruption, but the data is still very high. The biggest problem is the paperwork, which is perceived as an obstacle for companies and many times they have to resort to participate in these corruption systems to speed up the paperwork. Regarding the level of trust of companies in different institutions, the worst perception was towards the police, where 65.3 percent perceived some or a lot of distrust; this was followed by political parties, with 60.8 percent, and the Public Ministry, with 47.7 percent.
However, trust increased in general, in all institutions: in the police it increased from 32.1 to 34.2 percent, between 2016 and 2020; in political parties it rose from 19.5 to 34 percent, and in the Chamber of Deputies it rose from 20.4 to 46.3. In the federal government the increase was from 26.4 to 62.3 percent, and in the electoral institutes the figure rose from 41.2 to 64.5; I also highlight the rise in municipal governments, from 41.0 to 61.1 percent.
Regulatory costs increase
According to ENCRIGE, the average expenditure of economic units for administrative burdens increased between 2016 and 2020 by going from 58 thousand 19 to 95 thousand 760 pesos. At the national level, the cost of compliance with regulations totaled 238.9 billion pesos, equivalent to 1 percent of GDP.
In the case of micro-enterprises, the cost was 33,956 pesos on average, a figure that rose to 287,000 pesos for small companies, 1.33 million for medium-sized companies and 2.3 million for large companies. A total of 28.2 percent of the companies indicated that the regulatory framework represented an obstacle to achieving their business objectives.
However, according to the survey results, the percentage of economic units with an unfavorable opinion on the evolution of administrative burdens decreased, going from 50.9 percent in 2016 to 45.7 in 2020. The good news from this survey is that indeed the perception of businesses improved in terms of an opinion. But unfortunately they have become more expensive administrative burdens.
In this sense, if these formalities are not carried out, it becomes a burden in terms of competitiveness and economic matters, that is, it generates informality, risks of corruption and negative externalities. According to the INEGI survey, the biggest problem for the operation of companies is insecurity, with 58.1 percent of responses. It is followed by the lack of government support (37.1); the increase in input prices (32.9), the economy of the entity (32.5) and access to financing (15.5).