Friday, March 11, 2016

How to Fix Mexico

From The National Interest:
Corruption dominates Mexico’s headlines: helicopter rides for officials’ family members, housing deals from favored government contractors, the still unexplained disappearance of 43 students and a drug lord escaping a maximum-security prison, for the second time. In a recent survey, Mexicans listed corruption as the country’s top problem, ahead of security and the economy.

In absolute terms corruption eats away at Mexico’s growth. The think tank IMCO estimates the costs at $53 billion, or five percent of GDP. It increases the costs of doing business, with bribes for permits and government contracts tacking on up to ten percent according to Transparency International. And business owners face an uneven playing field—65 percent report that on at least one occasion a competitor offered a bribe or tapped personal relationships to win new business. By undercutting the market, corruption stifles excellence, deters investment and hinders growth.

Corruption also distorts public spending. Studies show corrupt public officials direct funds to projects more amenable to personal enrichment than those that offer the highest public returns. This means they overweight spending on (often shoddy) infrastructure and underfund education, health, and other human capital building services—the very skills needed for a twenty-first century economy and society.

Lastly, corruption delegitimizes the state and undercuts democracy. The belief by two-thirds of Mexican citizens that their taxes line the pockets of officials fuels the informal sector and limits the collection of government revenue necessary to provide public services: education, healthcare, and basic safety. And it threatens Mexico’s democratic gains. When citizens know about corruption and nothing is done—as is the case in Mexico, where impunity reigns—voter turnout falls. (Read more.)

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