Public Works: The Highlight of Corruption in Mexico

Around 20 to 30% of the budget for public works contracts goes toward fraudulent transactions

Garbage trucks were ready to leave for the public dustbin in Mexico City when a group of well-dressed men intercepted them. They had orders to take the load down, dive into it, sniffing, tracking any suspected item and, what they found was valuable: 58,654 sheets of paper cut into strips.

The “hound men” took all of them in the fall of 2015 to paste and match each of those neatly-cut-up sheets that were nothing more than evidence of “payments and illegal charges”. With such evidence, delegate Cuauhtemoc Ricardo Monreal was able to initiate a lawsuit against his predecessor Alejandro Fernandez.

There are multiple crimes and the investigation is still ongoing, but, according to Monreal’s statements, former delegate Fernandez (2012- 2015) has claimed around 1.5 million dollars in monthly bribes – one-fifth of the profit would come from irregular permits awarded to public works.

Organizations against corruption in Mexico, such as Transparencia Mexicana, directed by Eduardo Bohorquez, agree that “most corruption (and the juiciest) is related to the execution of public works”, either through direct awards, projects of little public benefit or public construction permits, even those against the common good.

During Fernandez’s administration, 835 new private construction works were authorized, mainly in the Roma-Condesa tourist corridor, an area of ​​high seismic risk that, in recent years, has had a high demand among the wealthy class in Mexico City, the hipsters, intellectuals and foreigners.

Some of these new works include the construction of a 10-story building located at the corner of Baja California and Cholula streets, which will reside next to small two-story houses and four-story maximum buildings because the risks of structural collapse are too high in that zone.

“Midsize buildings of eight to 15 floors are a major problem, because these buildings are usually built in very small lots and sacrifice the structure for underground parking,” said Jose Avila, architect and evaluator of seismic risk at the National Autonomous University of Mexico (UNAM).

Monreal’s team estimates that his predecessor received about $300,000 monthly in irregular payments for construction permits that did not meet the requirements, and for projects that could have been awarded directly instead of tendered as required by law, but the punishment so far is just disqualification for three years.

Nine of his subordinates, out of 121 being charged by the Attorney General of CDMX, received similar punishments.

“The Attorney Generals in Mexico are still run by the executive branch and if the politician under investigation is a friend of the governor or president, it is very difficult to punish him,” says Javier Romero, political analyst at the Metropolitan Autonomous University.

The Cost of Corruption

The Mexican Institute for Competitiveness (IMCO) estimates that between 20% and 30% of the public works budget in the country is wasted on corruption. This means around 1.5 billion dollars.

The losses include, among other things, constant surcharges.

“Once the public official receives a bribe and adjudicates or gives preference to certain suppliers for public works, the budget decreases because the construction costs can be much higher than the average on the market or costs rise without limits”.

This happened in the construction of the bicentennial monument of Independence “Estela de Luz” that was delivered two years late and 169% over budget; few years ago, the Library José Vasconcelos was initially estimated at 90 million dollars and finally the cost rose to $180 million; the new headquarters of the Senate also was valued at half its price

What Are the Solutions?

The Secretariat of Public Administration, in its final report of 2014, reported that part of the problem in fraudulent bids is that states have no common rules for bids and direct awards for projects.

For example, while in the state of Aguascalientes the top awarding contract is valued at $9,000, in Chiapas the government can award works up to $28,000 to whoever they see fit.

But the problem is more complex.

“For a long time we thought that having transparent bids was enough but soon we realized that, in fact, all the public work contracts must be opened to the public.”

Xochitl Gálvez, of Miguel Hidalgo Delegation in Mexico City, proposes a solution that is still being tested for transparency: videotaping live all the official acts of his government with the Periscope application, but this has caused some controversy and some argue that even this measure “violates human rights.”

Meanwhile, an amendment to the Law of Public Works is stopped in the Senate due to severe criticism from civil society organizations who consider that, as it is currently drafted, “seeks to avoid bidding” to award them more easily to their “compadres” (buddies).

Organized Crime Gets Its Slice

Two tall men with portfolios in hand entered the offices of one of the municipalities of Morelos, on which details are reserved since the life of the treasurer who told the story to this newspaper is in danger.

“They demanded 10% out of the public work’s budget for their companies that are businesses to launder money from drug dealing,” he says in an interview. “And we gave it to them”.

Municipal presidents in Mexico complain to be caught between the extortion of the organized crime and the indifference of the government.

“We reported to the governor and to the Federal Police that the organized crime imposed us companies to launder money but they did not do anything, what else can we do but pay?, ”says the treasurer.

“They threatened the mayor, the trustee and me that if we quit they would kill us and if we ran away, they would kill any relative we leave behind in town”.