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LAREDO, Texas – The combination of violence and corruption in Mexico affects deeply its economy, according to an investigation presented by Viridiana Rios during the IBC-Speakers Series at Texas A&M International University this month.

Rios’ study traces a decade of economic activity at the subnational level and shows that increases in criminal presence and violent crime reduce economic diversification, increase sector concentration, and diminish economic complexity.

Viridiana Rios
Viridiana Rios

Rios has a Ph.D. in Government from Harvard University and is a research fellow at the Wilson Center in Washington, D.C. She is an expert in regional economics and the rule of law in Mexico.

Rios divided her study in two phases, from 2007 to 2010, and from 2012 to date. In the first period homicides in Mexico doubled but Rios’ investigation showed the violence was happening in concentrated areas, specifically those where drug trafficking occurs. In the second period a drug war started and states like Sinaloa, Sonora, Chihuahua, Tamaulipas, Michoacán and Guerrero became extremely violent.

“No other country in the World saw an increase in criminal violence in this amount of time as Mexico did… unless there was a war,” Rios said.

From 2007 to 2010, the year with the least number of homicides was 2007. Rios explained that comparing September 2016 to a year ago, shows an increasing in violence.

But, Rios’ hypothesis considers that the violence in Mexico is not always related to drug cartel activities. She explained that Mexico has had a cocaine trafficking issue since the 1980s.

“That’s why the violence cannot be all related to drug cartels because then we would see the same violence since the 80s until now,” Rios said.

She explained that while some states have many points of entry for drugs and more than one criminal organization operating, some of those states are not considered violent.

During many years, Mexico was very tolerant with drug trafficking… “if there was no violence and the drugs weren’t for sale in Mexico.”

Rios said that changed when Felipe Calderon, from the then opposition party PAN, took office as president of Mexico in December 2006, and declared a war against drug traffickers. Calderon was destroyed by public opinion, but she considered this criticism a little too hard.

“The war between cartels was already happening,” Rios said. “Drug cartels spread after Calderon. He didn’t trigger the war, he reacted to a war already happening.”

Calderon also classified the homicides in two, the non-trafficking homicides and trafficking homicides.

According to Rios one of the biggest problem was the lack of collaboration and trust between the three levels of police (federal, state, local), because they represented different ruling political parties.

“When you have control of the three levels, police intelligence share work,” Rios said. “This is why, when you have instability and you captured the head of a cartel, it will be difficult to find control.”

While doing her research, Rios encountered different problems. One was the lack of cooperation between different Mexican authorities. Another was the need to read newspapers on Google looking for stories naming where journalists were saying cartels were operating.

“Nobody knows where the cartels operate, unless it is the police or the Mexican government operatives,” Rios stated.

The study showed the presence of 13 criminal organizations in 28,000 Mexican municipalities. It also revealed that Los Zetas have been operating since 1993, that cartels spread in 2006, and did again in 2008 and 2010.

But, also, she found that the violence diminished in states like Nuevo Leon and Chihuahua, where authorities managed to coordinate a security strategy with the federation.

Corruption


Rios defines corruption in a very simple way. It means violating the law.

In a graphic during her presentation, Rios showed that, according to her findings:

●    44 percent of Mexican firms pay bribes
●    It is estimated that 200 million cases of corruption happen every year in Mexico
●    1.78B USD are paid in bribes in Mexico every year
●    4 percent of the average construction contract value is spent in bribes
●    14 percent of Mexicans’ income is spent in bribes.
●    30 percent of income of the lower income population is spent in bribes
●    78 percent of Mexicans believe that police are corrupt
●    24.9 percent think authorities don’t follow the law

“This means, that we could down poverty significantly if corruption could be dropped to zero,” Rios said. “Corruption creates two types of citizens, those who have to deal with corruption and those who can’t escape.”

Rios found out that the most common type of corruption exists when somebody gets a traffic ticket, but also occurs at a smaller percentage rate when someone tries to obtain a construction permit.

But Rios added that even when someone thinks Mexico is corrupt, they shouldn’t talk about all Mexico, because that’s not the case.

“Even if Mexico is six times more corrupt than the US, the United Stated is four times more corrupt than Canada,” Rios said. “But is still true that corruption has increased dramatically in some parts of Mexico.”

The research revealed that 63 percent of businessmen considered corruption to be a matter of “business as usual.”

Statistics showed that 57 percent of the population use facilitators to obtain information and privileged access; 45 percent see the bribe as an opportunity to get a government contract; and 34 percent argue that it’s impossible to have a successful business without a political connection.

Impunity is also another serious matter.

“In the past 16 years, Mexican press has reported 272 cases of corruption by Mexican governors, and none has gone to trial,” Rios said. “The ‘nothing will happen’ is indeed an excuse.”

Of those 272, only 21 saw a charge filed, but still none went to trial.

Costs of violence and corruption


Rios said corruption is the biggest problem in Mexico, followed by crime and theft, because it affects the possibility of doing business.

These problems sometimes affect the business in a big way, and sometimes less so. She explained that some industries are more resilient to the impact of corruption and some are more sensitive.

“What were the probabilities of an industry dying after a mass wave of crime?” she asked herself. “It will depend on the type of industry.”

More resilient to violence are sectors such as electricity corporations, insurance companies and mining. More sensitive to violence are sectors such as wholesale/retail trade, hotels (tourism), food and textiles.

“When we say there’s an economic cost for Mexico for being violent, we need to think that it doesn’t occur everywhere and where it is happening more,” she added. “What is real is that violence reduces the number of sectors that remain in business, the diversity of subnational economies, and its complexity.”

Other results Rios’ research found were that it takes a 22.5 percent of increase in homicide rates for a whole business sector to disappear.

The economic cost of corruption has also affected NAFTA because in the U.S. 600,000 jobs have been killed, while in Mexico this number is of 480,000.

“Corruption reduces the possibility of business to innovate,” she said.

Actionable Measures


As a final part of her research, which, Rios explained, was not fully developed, the researcher found even though corruption is the base of crime in Mexico, the civil society is communicating and working to end corruption.

One step taken was governments approving a Law against corruption, which was pushed by the citizens.

“The corrupt are not going to change themselves. Believing the corrupt are going to legislate their own rules is just won’t happen. Mexico knows that,” Rios said. “But it has been proved that the power of academics, of good research, communication and students in general are one of the most important factors for political change.”