By Helen Whalen Cohen. It’s been a rough few weeks for Wal-Mart. As you may or may not have heard, the retail giant hit a bump, facing a DOJ bribery probe for allegedly violating the Foreign Corrupt Practices Act while attempting to expand in Mexico. The Foreign Corrupt Practices Act, or FCPA, criminalizes bribery of foreign governments by corporations in the United States. Wal-Mart stands accused of greasing the palms of Mexican government officials to the tune of $24 million, then turning around and attempting to stymie an internal investigation into the matter. Now the Mexican federal comptroller is reviewing the permits that Wal-Mart needs in order to build more stores.
The Mexican federal comptroller’s office said it had begun checking the federal paperwork and permits that Wal-Mart de Mexico, known as Walmex, obtained to open and operate its stores in Mexico.
The comptroller’s office added that it would ask U.S. authorities for information on the case, in order to carry out its investigation and that the federal government would take action if wrongdoing by public officials was detected.
Wal-Mart already faces a criminal probe by the U.S. Department of Justice over potential violations of the Foreign Corrupt Practices Act (FCPA), a U.S. law that forbids bribing foreign officials. A spokesman for Walmex said the company had not been informed of any investigation in Mexico.
Reducing corruption overseas is a worthy goal, but perhaps one that isn’t so easily achieved by passing a law. As Steve Chapman points out, the root of the problem doesn’t lie with individual corporations, but with the corrupt culture that is already embedded in Mexican government.
If you think this is a case of greedy Americans corrupting innocents abroad, think again. In its annual Corruption Perceptions Index, the watchdog group Transparency International ranks Mexico 100th from the top, out of 183 nations and territories. On a scale of zero (“highly corrupt”) to 10 (“very clean”), it gets a score of 3, which I would read as “pretty sleazy.” (The U.S. was 24th, at 7.1.)
If you want to reach the Mexican consumer, you may have little choice but to grease some palms. The Times interviewed a former high executive of Wal-Mart de Mexico who offered insight: “Bribes, he explained, accelerated growth. They got zoning maps changed…Permits that typically took months to process magically materialized in days. ‘What we were buying was time,’ he said.”
Sure, executives can refuse to pay bribes. But while they get old waiting for permits to clear, they will lose business. They may also get to watch less scrupulous competitors swoop in. Those rivals may not have to fear the possible legal consequences quite so much, if they hail from countries with more permissive standards.
I’m not a fan of intermingling government and business, or the corruption that inevitably results. But in Mexico, this is just how business gets done. Either Wal-Mart can pay off some bureaucrats to prevent their building permits from getting shelved, or some other business can swoop in and do the same. Either way, whoever sets up shop in Mexico will have done so in an underhanded way. Having a law in place telling Wal-Mart not to pay bribes in other countries won’t save those countries from corruption. Why not keep the focus on the cozy relationship between government and big business in the United States and let other countries handle their own seedy practices?