The Bite of Corruption

Luis Alfonso Sanchez Contreras searched the capital’s trendy Condesa neighborhood for two years to find the right spot for a pasta restaurant. So the entrepreneur wasn’t about to let a spaghetti-like tangle of red tape come between him and his dream.

He registered his business with tax authorities. He got permits to remodel his restaurant’s interior. He asked permission to set up sidewalk tables. He won approval to install a tank of natural gas.

“I wanted to do everything by the book,” said Sanchez, a bespectacled 44-year-old former bank manager.

So when local officials solicited an under-the-table payment of $1,350 to speed approval of his business operating license, Sanchez said, he balked. More than five months later, authorities still haven’t granted him permission to open. Sanchez’s bills are mounting. But he refuses to pony up.

“It just perpetuates this rotten system,” said Sanchez, who has sunk $70,000 into the venture. “They are public servants. Their job is to serve the people, not to enrich themselves.”

Officials in the permit office of Sanchez’s borough of Cuauhtemoc declined several requests for an interview. Nor would they respond to his allegations that they had hit him up for a bribe.

Corruption remains a huge obstacle to Mexico’s advancement. It is a hidden tax that stifles job creation, retards economic growth, erodes respect for law and order, and poisons citizens’ trust in their institutions.

To be sure, corruption is a global phenomenon plaguing rich nations as well as poor ones. Witness the billions in waste and fraud that have accompanied federal payouts from Hurricane Katrina in the United States.

But in Mexico, it is an ongoing disaster. Mexican officials have estimated that as much as 9% of Mexico’s gross domestic product is siphoned off annually to corruption. In 2005 that would have amounted to $69 billion, or more than the nation spends on education and defense combined.

One of President Vicente Fox’s first acts upon taking office in late 2000 was to create a Cabinet-level position for an anti-corruption czar. A landmark transparency law was implemented under his watch to give average citizens more access to public records.

Yet election authorities in 2003 slapped nearly $50 million in fines on Fox’s Alliance for Change, the political coalition that helped get him elected, for campaign finance violations that included failing to disclose millions in donations and accepting money from prohibited sources. The scandal tarnished his image as the maverick who was going to clean up Mexican politics.

Whoever succeeds him as president this December has his work cut out for him. Corruption in Mexico remains endemic and takes myriad forms, including kickbacks on government contracts, funds looted from social programs and drug money that has compromised courts, cops and political candidates. One out of every 5 businesses in Mexico admits to making “extra-official” payments to win public contracts, speed government paperwork or skirt regulations, according to a 2005 report by the Center for Economic Studies of the Private Sector in Mexico City.

The average Mexican’s most frequent brush with the system is la mordida, or “the bite.” Those are the small bribes, “tips” and other extracurricular handouts that public servants and others squeeze out of the citizenry to perform routine functions.

Last year more than 1 in 10 transactions for basic public services involved an under-the-table payment, according to Transparencia Mexicana, the Mexican chapter of the global anti-corruption group Transparency International.

Trying to keep the city tow-truck driver from hauling your car away? Depending on how affluent the neighborhood, how fancy your wheels and how well you haggle, a quick 20 bucks can get you off the hook in Mexico City. Want your garbage collected? Some municipal sanitation workers won’t touch your table scraps without a weekly “tip.” Need a copy of that public document quickly? Many reason that it’s better to pay up than miss a deadline.

In all, Transparencia Mexicana estimates that Mexicans in 2005 paid out nearly $2 billion to public servants in more than 115 million acts of corruption to settle traffic tickets, obtain driver’s licenses, hasten building permits and the like. That’s equal to the entire 2006 budget of the National Autonomous University of Mexico, the country’s largest seat of higher learning.

That $2 billion “could have gone to private investment, opening new businesses and creating new jobs,” said Eduardo Bohorquez, director of Transparencia Mexicana. “It creates a barrier to development.”

The trend has worsened since 2003, when the nonprofit group calculated that only about 1 in 12 transactions involved such payoffs. In international rankings, businesspeople give communist Cuba better marks than Mexico when it comes to perceived corruption.

Experts point to a variety of factors fueling the system, including low government salaries, a weak justice system and a culture of impunity born of seven decades of one-party rule.

The bite of la mordida is particularly painful for the poor. The average payout is about $16, or more than four times the daily minimum wage. But far from being hapless victims, some Mexicans admit that they sometimes willingly work the system, helping to sustain the very practice that most deplore.

Mexico City resident Omar Vargas Lopez needed an official copy of his birth certificate to renew his passport for a quick business trip to Argentina. Told that it would take 10 days, the computer engineer asked the documents clerk in his borough of Coyoacan whether they could “reach an agreement.” Four hours later and his wallet $15 lighter, he had a certified copy of his birth record in hand.

“I know it’s bad to do these kinds of things, but in cases of emergency there is no alternative,” said Vargas, 27.

The good news, Bohorquez said, is that some regions of Mexico have made dramatic improvements, often with the help of technology.

Five years ago, the central state of Queretaro ranked near the bottom of Transparencia Mexicana’s ranking of the nation’s 31 states and the federal district in terms of petty corruption. But in 2005, Queretaro topped the agency’s list as Mexico’s cleanest state, with only 2 out of every 100 basic transactions involving a payout.

Among the changes: Queretaro adopted a transparent, automated system for tracking public works projects and paying suppliers. It also set up an online complaint service for citizens to blow the whistle on government workers who try to tap them for bribes.

The impoverished southern state of Chiapas has made similar strides, vaulting to the No. 2 position last year from the middle of the pack in 2001. It did it by installing public kiosks that allow citizens to renew their driver’s licenses, order birth certificates, pay taxes and complete other government paperwork online, eliminating the long lines and opportunistic public servants that come with them.

Corruption “isn’t embedded in our genes,” Bohorquez said. “Simple changes can have a big impact. People will respond.”

But Mexico City, which is an autonomous federal district similar to Washington, remains a quagmire of corruption. One of every 5 transactions for routine public services here involves a payoff, double the national average. The district ranked dead last or next to it in all three studies of petty corruption that Transparencia Mexicana has conducted since 2001.

The metropolis has a legacy of patronage and cronyism that dates back to colonial times. For much of the 20th century, Mexico City voters couldn’t even elect their own mayor, having to accept whoever was appointed by the nation’s president.

Corruption flourished in this democratic vacuum. Attempts to rein it in have bordered on the comical.

For example, Mexico City residents no longer have to pass a written exam or road test to get a driver’s license. The bribing of test officials was so rampant that authorities reasoned that scrapping the exam could eliminate a huge source of chicanery with little effect on the overall quality of the city’s maniacal drivers.

Still, the capital’s paperwork gantlet remains so daunting that a cottage industry of intermediaries has emerged to act as go-betweens. Would-be restaurant owner Sanchez hired German Guzman to handle some of his red tape. It was Guzman who said he had received the request for the bribe to speed the authorization of Sanchez’s operating license from a borough employee he knew only as “Jose.”

Guzman said he did most of his work in four of the city’s 16 boroughs, each of which has its own miniature city hall for issuing building permits, business licenses and the like. He said the mordida process worked pretty much the same in all of them: A low-level employee checks with higher-ups, then reports back with the cost of the under-the-table payment. Guzman said there was some room for negotiation. But he said public servants higher up the chain of command were careful never to get directly involved.

Guzman said that he respected Sanchez for standing by his principles and that he neither encouraged nor discouraged his clients from paying bribes. Still, he quoted a familiar adage in explaining why so many do.

“El que no transa, no avanza,” Guzman said, which means “He who doesn’t compromise doesn’t get ahead.”

Meanwhile, Sanchez’s restaurant is shuttered and silent. The cozy tables and chairs he bought are stacked unused in his storefront, along with boxes of imported glass wine carafes and whimsical pasta bowls.

He recently filed a complaint with the internal controller of his borough in charge of investigating malfeasance by public servants. It’s a process he has been told could take three years.