“El Que No Transa …”

articles Business

Ilya Adler

One of NAFTA’s positive effects on Mexico has been the renewed attention given to an old problem: corruption. As Mexico attempts to attract more foreign investment, mounting pressure has been placed on “cleaning up” the old corrupt ways. So far, Mexico is perceived as the more corrupt partner in NAFTA. According to International Transparency, a German non-profit organization, Mexico is ranked 59 out of 90 countries, with 90 being the most corrupt. A different measure developed by Price Waterhouse Coopers, which includes, in addition to corruption, more tangible measures such as the legal system, economic policies, accounting procedures and regulatory regime, Mexico received a score of 48, where zero is a perfect score, and 150 the worst.

The point made by everyone involved in these discussions is that corruption is not only a serious ethical issue, but leads countries to incur significant costs. Estimates vary, but the economic cost of corruption, according to the Mexican government, is 9.5% of gross domestic product, or US$52 billion. Corruption, real or perceived, also affects the interest rate the government has to pay for loans obtained abroad.

While recent federal efforts to weed out corruption are worthy of praise, I believe we are making an important mistake by focusing only on government actions. First, corruption in a society tends to exist in both public and private arenas. Secondly, corruption is not just propagated by those who demand bribes, but also by those who are willing to pay them. In other words, corruption is not just a government headache but a social problem.

Over the last two years I have been involved with a significant number of owners and managers of small- to medium-sized businesses-usually in the context of professional business training. What has absolutely astonished me is the incredible amount of corruption that exists in business-to-business operations. Normally, in order to get a contract, these business suppliers have to pay somewhere around 10% of what they invoice. Who do they pay? Normally it is a combination of two people, one from the purchasing department, the other from the department directly interested in the product or service. One of my informants tells me that if you refuse to play the game, sooner or later they will discover one little mistake on your part, and they will use that as an excuse to terminate business relations with your firm. “If you want to survive as an honest business person, you have to accept the fact that you will do less business, with fewer people,” he explained.

I have friends who tell me that if a business wants to run its own operations with an internal corruptive system, it’s their “right.” After all, internal corruption harms the business operation, and business owners can do whatever they want with their own property, including being inefficient or corrupt. I believe this is a misguided view of the freedom to practice business. If the argument is used that government corruption costs the general public economic resources, the same argument can be made for private corruption. The price I pay when I buy a product or service increases because of internal corruption, and in this sense, all sectors of society pay for it.

The fight against corruption needs to be viewed in its totality if we are to have any chance at eliminating it. After all, is it realistic to expect to have a clean government when everything else is dirty? I don’t think so.

Let’s start the cleansing of society by cleaning our own house-or business – first.

Published or Updated on: January 1, 2001 by Ilya Adler © 2008
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