Episode Description
This Democracy that Delivers podcast focuses on how individual entrepreneurs and policy professionals are using business integrity and compliance programs to deepen trade ties in North America. Michele Crymes, deputy director of CIPE’s Anti-Corruption & Governance Center (ACGC), sits with former U.S. Ambassador to Mexico, Tony Wayne, and Gabriela Blanco, an anti-corruption expert and specialist in corporate integrity, to discuss business integrity in Mexico’s private sector.  Our guests share their perspectives on progress being made and challenges to creating a robust culture of business integrity and compliance in Mexico.
In 2024, the institutions and mechanisms of trade in North America are facing the potential for significant change. This year’s elections in both the United States and Mexico could lead to changes in the prevailing United States-Mexico-Canada Agreement. Regardless of the respective electoral outcomes, business will keep flowing between the three countries, and thus business integrity will remain a focus.
Drawing upon his tenure as U.S. Ambassador to Mexico, Mr. Wayne discusses the impunity rate for crime in Mexico, how a lack of business integrity hurts entrepreneurs, and what is presently being done to create a stronger business environment. Ms. Blanco likewise integrates her years of corporate governance work to examine how CIPE programs work with international firms and Mexican entrepreneurs to try to deliver better outcomes for stakeholders.
Subscribe to the podcast on iTunes or your Android device.
Like this podcast? Please review us on iTunes.
Transcript
Michele Crymes:
Hello everyone, and welcome to the Democracy That Delivers podcast. My name is Michele Crymes. I am the deputy director with CIPE’s Anti-Corruption & Governance Center, and I’m really excited about the conversation that we’re going to have today that will be focused on the status of anti-corruption and addressing anti-corruption in the private sector in Mexico. Given the most recent election in Mexico and the fact that there’s an election coming up here in the US and that Mexico is our neighbor, it’s a really important and relevant conversation, and we hope that you’ll enjoy what we talk about today.
I am joined today by my colleague, Gabriela Blanco, who is based in Mexico City, and who works on this issue and is on the front lines and can give us a lot of information about what is happening in Mexico in real time. And we’re also joined by Ambassador Tony Wayne. We’re so glad to have him joining us. He brings a wealth of experience and knowledge in terms of what has gone on in Mexico in the past, his experience, and probably what we can expect to see in the future.
But rather than me telling you about who they are and what they do, I will turn it over to both Gabriela and to Ambassador Wayne to tell us a bit about themselves, and then we’ll start having a conversation. Ambassador Wayne, over to you please for introductions.
Tony Wayne:
Well, thank you very much for inviting me to be with you today. It is a great pleasure. This is a tremendously important topic. I’ve been working in various ways on efforts to combat corruption since the 1990s when I was helping to implement the OECD Anti-Bribery Accord, and continued to work on these subjects when I was assistant Secretary of State for Economic and Business Affairs, and then in my several ambassadorial jobs in Argentina, in Afghanistan, and in Mexico, which was my last ambassadorial job. And since then, I also worked a bit in the private sector. I worked for HSBC for three years in helping them improve their systems to combat money laundering and the flow of illicit funds, so that also relates a bit to the anti-corruption work. And I continue to work particularly on Mexico as co-chair of the board of the Mexico Institute at the Wilson Center, and enjoy otherwise being a distinguished diplomat in residence at American University.
Michele Crymes:
That’s why we’re so excited to have you with us, so just a wealth of experience that really helps give color to this conversation. Gabby, over to you for an introduction, please.
Gabriela Blanco:
Hello, everybody. I’m really, really glad to be part of this initiative, and as Michelle said, my name is Gabriela Blanco. I’m an anti-corruption expert. I have seven years of professional experience in the implementation of compliance systems, risk management, internal control, anti-bribery and corporate governance in the public and the private sector. Currently, I’m working as a senior specialist in corporate integrity and team leader of Prointegridad of USAID Mexico, which it’s part of CIPE as implementer, where we promote corporate integrity practices and transparency in the private sector.
Prior to Prointegridad, I held leadership roles such as president of corporate compliance at the Mexican Association of Integrity and Compliance. I was also corporate manager in the International Council of Integrity and Good Governance, and compliance manager at Croix. I also served as a consultant for the United Nations Development Program where I contributed to the creation of the program called Preparade, which we will probably be talking about that initiative that was really, really good. And I’m also a lead auditor in the ISO or quality management systems and also for the anti-bribery management system. I’m really, really glad to be part of this podcast.
Michele Crymes:
Great. Now that we know who is on the podcast, I want to give a little bit of context of course for what we’re talking about. We know that Mexico has the world’s 15th largest economy. I think it’s second only right after Brazil, and we know that there’s a lot of economic power and prowess that comes from Mexico, but we know that there continue to be some barriers to anti-corruption are the way that you can say it in the sense that corruption is starting to undermine some of the commercial linkages between foreign direct investment, which really hampers the ability of Mexico to continue to grow its economy, and then of course eroding trust in democratic institutions in Mexico.
So what we’ll talk about today is what that looks like, and so I think a great place in the role of SMEs in particular in this. I think a great place for us to start for listeners who maybe are a little less familiar would be to walk them through the landscape of anti-corruption initiatives in Mexico and talk a little bit about the role that the private sector has played to date, or maybe what was previously a limited role and what is now becoming a growing role. So Ambassador Wayne, perhaps over to you to talk to us a little bit about the landscape of anti-corruption initiatives, and then Gabby, maybe a little bit from you about SMEs and what their role has been in this landscape.
Tony Wayne:
Well, thank you very much. First, Mexico has very serious challenges in fighting and controlling corruption. You can look at a number of the international indexes and studies that have followed Mexico for a number of years. For example, the World Justice Project has them listed as 136th out of 147 countries that they study for the absence of corruption. And you could look at a number of other studies including Transparency International, a very good regional study by the Vance Center of Anti-Corruption Assessment in Latin America. They point out that though Mexico has a lot of good laws on the books, it does not implement them very well. This has been true for a long time.
The US, Mexico and Canada have had a trade agreement for NAFTA starting in the 1990s, and in 2020, it became USMCA, the US Mexico Canada Agreement. Under NAFTA, there has been a reduction in corruption by especially larger firms who have wanted to do business with the United States and across North America, in large part because the Department of Justice was very serious about implementing the Foreign Corrupt Practices Act, and US companies were very careful not to violate that act.And so they were urging their Mexican partners to follow good practices, at least in dealings with the United States. And I think we saw that widely respected for larger companies, and as I say, companies investing in the United States or trading with the United States.
The USMCA for the first time put an anti-corruption chapter into the three-way trade agreement between the North American countries, and this chapter has all three countries committing to a number of the widely accepted anti-corruption principles and practices. It has been in the USMCA since 2020. It has not gotten a lot of focus. I’m not aware, I’m sure it has been discussed but there’s not been a public discussion of it nor public complaints filed through the USMCA process related to this, and it is subject to dispute settlement under this trade agreement between the three countries.
Mexico has a good framework for fighting corruption. However, the framework that was established in the 2015/16 timeframe has not been well-funded, has not been supported by the current administration, which is leaving power soon, and so has not been very effective in fighting corruption. There are a number of corruption cases that have been brought. There have not been major convictions in those cases, and so one of the challenges you find in Mexico with corruption is a very high rate of impunity for all crimes including corruption crimes. This does not mean that the private sector has not been trying to improve its own practices, especially those companies that want to do business across North America and internationally, because they know there are a series of commitments and international obligations which they want to try to enforce, but they face a very, very difficult situation.
The average impunity rate for crimes in Mexico is about 96%. Extortion has been rising in recent years, so businesses face a lot of pressure from organized crime as well as the temptations of other businesses offering them certain benefits if they can get a contract. And so it remains a really challenging situation and there needs to be a lot of good work done with private sectors working together and improving this, but very important that they get the support from governments. And I would say particularly, it would be very important if Mexico can work on improving its judicial system, its prosecution system, and a sense of accountability, reducing impunity as it relates to corruption.
Michele Crymes:
So I think something that I really want to pull out of what you’ve just said is impunity that is happening because although the fact that there is a great framework around addressing corruption, this impunity exists because there’s just not a great way to really enforce it or there’s been lack of enforcement, however you might want to think that through. But you’ve also pointed to a great spot where the private sector is trying to make inroads. It wants to have maybe a better landscape for themselves, and I think that’s where Gabby comes in here and she can tell us what that looks like in the work that she’s engaged with daily.
So I know specifically we at CIPE really focus on the role of small and medium enterprises, mostly because we know that they can have great impact on just this issue, which is reducing the impunity, asking for accountability, asking for transparency and accountability. So over to you, Gabby. We’d love to hear what it is that you are seeing through your work right now.
Gabriela Blanco:
Thank you, Michelle. Yeah, well, I would like to outline what Ambassador Wayne said, that despite the promising framework that Mexico has, for example, the SNA, the system, anti-corruption system that we have, it has not been functioning as effectively as was intended when it was created. It has faced significant challenges, and primarily due to insufficient resources and inadequate funding. These constraints have hampered its ability to fully implement and enforce anti-corruption measures, and it has limited its impact. And I believe that even though we have bolstered the anti-corruption framework with initiatives and with laws and everything, it isn’t mandatory for the companies to implement.
We have a framework. The companies know they have a framework for how should an integrity system should work or what it should have, but they are just doing the things that the law says. For example, I need to have a code of conduct.I have that code of conduct, but it’s not fully implemented. So what we have been doing, it’s trying to make them understand importance because that’s what I believe it’s lacking in the framework. It’s not mandatory, and of course there are sanctions, but as ambassador Wayne is saying, there’s impunity. So they are like, “Why should I do this?” So we need to do the business case. It’s going to be better for you, for your reputation, risk mitigation. All the benefits, we need to outline those benefits for them. And they are understanding, and now, larger companies are the ones that are like the champions, are the ones that are implementing because as it was already said, they want to be part of new relationships, commercial relationships. They want to open new businesses, so this is the way that I believe it’s been working now in Mexico.
We need to focus with the business case, not with the sanctions, not with the framework, not with the public sector, because they are dealing with extortion, dealing with bribery. They are dealing with several risks, and they want to survive. 95% of the companies in Mexico are MSMEs, and they are dying. They are dying because they can’t work with the public sector, and they need to. Even though they don’t sell to them, they need the license, they need the permission, they need those kinds of things to operate. And if they have this limitation, this risk that keep going and keep going, they won’t be able to. So we are trying to do our part by implementing these mechanisms, and they are having now enough elements to fight this, but still, we need the public sector to be part of this because it’s a co-responsibility, and they understand that now, but we need to keep going and make this like an ecosystem, and this is what we are doing, and probably we will have the time to talk about what specifically we are doing and talk about the Preparade initiative.
But I think now they are understanding. Mexican MSMEs especially, they are being part of this change. And yeah, it’s a problem. We have impunity, we have several issues that we need to address, but we are on the way to do that. At least in the private sector, there’s interest. They want to do things, and an example, that it hasn’t been effectively implemented but there was an initiative called Distintivo de Integridad that was created by the public function ministry. And yeah, it has helped. It has done several stuff for the companies because it was created with the companies. They were part of the focus group and they said, “Oh, we need to do this,” and different chambers were part of this initiative. And like I said, it hasn’t been enough, of course not, but it was one step. We’re getting closer to be where we need to be, so I believe that’s the part of the private sector.
Michele Crymes:
This is really great. I think that what I am listening to you, and you’ve really given us some great examples of an initiative that has started where the private sector is going, but I’d like to hear from both of you maybe more examples or more thoughts that you might have about tools that the private sector has to be in the fray here and to push exactly what Gabby is saying, pushing for that accountability, that transparency. So over to you, Ambassador Wayne.
Tony Wayne:
Well, in the sector that’s already trading across the continent, between Mexico and the United States, the larger companies are working with a number of their suppliers to make sure that those suppliers are following the best practices in anti-corruption, and this is something that is important to keep working on because the bigger companies will be held responsible if it’s found that some of their suppliers are involved in corrupt activities. They have a strong interest in making sure their suppliers understand the rules and follow the rules.
The new government in Mexico, the President, Claudia Sheinbaum, who is coming to office at the beginning of October, has said that she would like to try to use the USMCA agreement to expand participation of medium and small enterprises, PMAs, in the North American value chain. So if she wants to do that, which is a very laudable objective, hopefully, that will create extra incentives for the government also to help those companies learn the right practices and follow the right practices, and be protected against the pressures that PMAs run into in Mexico in this current environment from organized crime.
And I think that that can be a big boost. If the federal government specifically sees better practices against corruption can actually lead to more jobs being created, stronger bases and roots for these medium and small size enterprises, and so I think there’s a lot of room to work with, as Gabriela was talking about, between private sector entities but also with both governments going forward. And I’m hopeful that there will be some more effective attention brought by the new government in Mexico to some of these challenges.
Gabriela Blanco:
Yeah, and I would like to talk about what we are doing specifically right now, what is ProIntegridad? Because it’s a really, really good initiative that it’s been happening since 2021, and we believe we are doing a really important impact. This is an initiative from the United States Agency for International Development. We are working through CIPE and a firm that’s called Dexis, and this program aims to enhance transparency and reduce corruption in Mexico. It provides technical assistance, training, resources to government institutions, civil society and businesses. So I believe it’s really innovative because we are working with the three components. We are working with public sector, private sector, and civil society, and the good thing about this is that we are creating new things. There are plenty, plenty, like Ambassador Wayne said, plenty of framework and plenty of documents and diagnoses and manuals that businesses can use. They can use them, they can implement, but they just put their names and that’s it, and it’s a makeup compliance.
What we are doing differently, we are helped helping them understanding the importance, of course by training programs and different courses, but also by helping them implement. When you help them implement, they change their mindset. Usually, they start because one client asks them for it because they want to sell to the government, because they want access to credit or something that they ask them to have these compliance systems. But then when they start implementing, and we have a coaching program for that, they change their mindset and they are like, “Oh, this is really important and it has helped me to stop the rotation with my personnel. People are more encouraged to work with us and they are really happy to be part of this company that has its values.”
And I know it sounds like the ideal and that, oh, it should be like this, but it’s happening. I’ve seen it happening. They understand that, yeah, I’m a business. I need to sell, I want to sell, but it is also happening. They are selling more. They are understanding what’s going on. For example, there was this case with one company that they were signing the FCPA form that one company, that one client asked them for. And they were like, “Yeah, we signed this, but we don’t even know what this is.” So they understood what they were signing, but by this implementation, by this coaching. So I believe these kinds of initiatives are really important for those companies and they can be mentors, and that’s what we are going for, to create. Now, we’re working with probably 200 companies across Mexico and we are going for that. We are working with those two hundreds and we expect to create a network, a network, an association or something that they can relate and they can be part of, and then they can be mentors. They can be part of this.
So I believe this is one initiative that it’s been changing the parting and it’s been changing the way we are working in Mexico. Another one that it was really good, and I think it was the first step for this program, was the Preparade from UMPD, the one that I mentioned before. It’s the United Nations Development Program launched this initiative, and it helped because it was a program, it was train the trainers program. So there was the first step, the first program related to train people that could train another, and it was like a full effect, that they keep training the others and they keep understanding why it is important and how to do it. That’s the most important thing, because we have the what but we don’t have the how. How can I do this? I understand that it’s important to do a risk assessment, but how do I do this, and how do I do it within my company, inside my company? And how does it help? And how can I mitigate those risks?
So I believe that’s two initiatives that are worth mentioning. There are plenty more that we can talk about later, but I believe these two are the more innovative and the ones that have been setting the pace for the private sector.
Michele Crymes:
I think those were great examples that you gave us because it lays out the reality of what we see all the time in our work. How do we get the private sector to understand their potential role in ensuring that governments are accountable with transparency, which helps to overall support a vibrant, transparent economy. I think something that I’d like to maybe shift our focus a little bit is we focused on a bit of SMEs, MNCs, how they interact together. I’d like us to focus a little bit future forward, think about what could be happening with the new administration coming in in Mexico, and with the USMCA coming up for renegotiation, is that something that might have an impact on some of the initiatives that Gabby has talked about, the arc of history as you’ve laid out for us, Ambassador Wayne? I’d be really curious to hear both of your thoughts about what happens or what could potentially happen with renegotiation, or if there’s some other sort of thing coming up in the future. We’d be curious to hear what you think.
Tony Wayne:
Well, thank you very much. I agree. First, I agree fully that smaller and medium enterprises often need help in figuring out how to deal with new requirements, and so it’s great that there’s this program helping them out. In fact, we probably need to do more of that. So I’m going to mention something called the High Level Economic Dialogue that the United States and Mexico have that runs in parallel to USMCA, and it’s designed to help deal with some of these problems that aren’t just purely trade problems. They’re related to trade but they’re capacity building. And so there is an SME dialogue in USMCA, there is SME working groups in the High Level Economic Dialogue, both of which are aimed at encouraging more small and medium enterprises to be involved in this cross-border and cross-continental trade, and a big part of that is capacity building.
So I think as we go forward, we can see that this is an area where there can be additional training, and there are other parts of this. There’s how do you train your workers, the workforce development? How do you have new technology and better use the internet? All of that comes together, but this anti-corruption work is a really important part of that.
As the USMCA comes up for review in 2026, there will be a number of items that will be raised and discussed at that time, including some of the trade investment disputes that exist, and then also including where should we focus more effort going forward? I think the anti-corruption segment of it is in part of the where should we focus more effort going forward? There are a number of parts of USMCA, including some of the regulatory cooperation that is supposed to be taking place, some of the work on various sectors where the officials haven’t yet done as much as they could, and I think that’s true in the anti-corruption area. So I would hope that this would be one of these future priority areas that we deal with going forward.
I think some of the bigger issues that will come up in USMCA renegotiation however have to do with China, with some of the disputes that are currently underway over the auto sector, over energy, over other things, but this really does need to be an important part of that. And so I think there’s a lot that we can be doing. I think that having a new government in Mexico can be helpful, and of course, we’ll see what the outcome of the elections in the United States are also and who the new interlocutors will be on that side.
But there’s no question that this North America relationship is vitally important for all three countries. The United States’ two largest trading partners are first, Mexico, and second, Canada. They’re our largest investment partners. They’re our largest co-production partners, so we need to focus here, and I think that includes, as you’ve rightly said, focusing on best practices and improving capacity in the ability to combat corruption. But I do think that the private sector has to get support and be a partner of governments in making this happen. It cannot just happen by the private sector alone, nor can it just happen by governments. They have to be working together and have a collaborative dialogue.
Gabriela Blanco:
Yeah, and I also believe that the outcomes of this renegotiation, one could be the strengthening of the anti-corruption provisions. I think it will focus on the mechanisms within the USMCA, and this could include more rigorous enforcement mechanisms I believe, like clear definitions of corrupt practices, enhanced cooperation between signatory countries to tackle cross-border corruption effectively.
I think it could also help incorporate provisions addressing new and evolving challenges such as, that they don’t include right now, it could be digital corruption, cyber fraud, and the role of technology, because we are now talking about artificial intelligence and how this might impact these companies and the signatory countries. I think also, they should increase focus on MSMEs and the inclusive role. There could be provisions aimed to support them in adhering to anti-corruption standards. Like we said, they need more coaching. They need more help from the country, per se, possibly with capacity building programs, technical assistance, financial incentives. They need incentives. They need to implement it through the business case, like I said, so I believe this renegotiation could focus on that. And also the integration of civil society and NGOs. I think it’s important to see them as help. They can help both sectors, private and public, because the three, they need to interact. So I believe those could be provisions that could be renegotiated and implemented in 2026.
Tony Wayne:
You’re exactly right. All those issues can be addressed and there does need to be a wide group of stakeholders. Just to clarify one thing, the agreement is not going to be renegotiated. It’s going to be reviewed. There can be adjustments made to the implementation process and to what’s done at the sub treaty level, but if it were to be renegotiated, it would have to go back to all three congresses again to approve that. So the Spanish term, revisione, in English is review, and so there is not a renegotiation that’s going to go on but there is going to be a review and a discussion of what can be done better, and a lot of the things that you mentioned are indeed things that are being done. There’s a cyber dialogue, for example, going on, both in the High Level Economic Dialogue and as part of the Canada US North American leaders summit working agenda.
And a number of other efforts can help reinforce this along with USMCA, and in fact, just like the program that you’re working on with USAID, is not part of USMCA but it is part of the broader collaboration between Mexico and the United States. And that is so important because we have such a broad economic relationship, and we’re trying to make all three economies more competitive. We’re just not trying to trade more, per se. We’re trying to create an environment in which trade can prosper, more jobs can be created, and that means undertaking activities, as you know very well, that go beyond just the specific trade provisions in an agreement.
Michele Crymes:
Well, I think that I couldn’t have summed things up any better, so thank you so much Ambassador Wayne for your fantastic summary of what we’ve been talking about today. And thank you also to both of you for your predictions about what we might see in the upcoming months in the relationship between Mexico and US and anti-corruption efforts within Mexico. This has been a really great conversation. I hope that our listeners have seen a few ideas and maybe have an idea of where we might be going, and hopefully, we’ll come back maybe a year or so again and maybe we’ll have another conversation and see how our predictions landed. Thank you both.
Tony Wayne:
Thank you very much.
Gabriela Blanco:
Thank you so much. It has been a really nice dialogue, and thank you for the space. Hope you enjoy it like I did, and hope to see you next year.
Published Date: August 07, 2024