The Institutional Revolutionary Party (PRI)’s victory in Mexico’s presidential elections signifies a new challenge for curbing Mexican capital flight. Returning after a 12 year hiatus from office, PRI will govern both a quickly growing democracy and an underground economy that transcends the party’s old negotiation strategy. Modern drug traffickers in Mexico’s most corrupt regions have more intelligent and larger money laundering operations than those of previous decades, signaling a need for greater transparency in Mexico’s financial structure.
According to an analysis of post-election US-Mexico relations by Andrew Selee, director of the Woodrow Wilson Center’s Mexico Institute, the greatest change since the PRI’s last national administration is the Mexican society itself:
“Mexicans today have become used to a flourishing democracy with competitive elections, freedom of the press, and greater (if still imperfect) transparency in governance. Mexicans expect politicians to be accountable, police to do their jobs well and courts to be independent. They are often disappointed, to be sure, but their expectations have changed dramatically since the late 1990s when Mexico’s democratic process began.”
Indeed, fears Mexican policy under President-Elect Enrique Peña Nieto will become soft on drug traffickers creates dual concern for Mexican citizens; they are affected by the estimated $872 billion illicitly flowing from Mexico since 1970 through cartel laundering and by the ruling party’s potential “lazy eye” approach. For instance, members of the massive cartel Los Zetas were recently revealed to be the owners of a Texas-based horse training company, which laundered its proceeds directly to the violent, North-Mexican group. This type of activity highlights the need for legislation in the United States that eliminates anonymous shell companies. However, the PRI’s history with Los Zetas was corrupt and even enabling.
In his discussion of Mexican narco-corruption under the PRI’s 70 year administration, Brown professor of political science Peter Andreas addresses the symbiotic relationship between drug trafficking and state corruption:
“Payoffs are made at each level of enforcement–the higher the position, the higher the payoff . . . Drug corruption in Mexico thus reflects a paradox: the state’s drug enforcement effort is undermined by the corrupting influence of the drug trade, yet the drug trade cannot survive without the protection of compromised elements within the state.”
Despite the party’s corrupt history, Nieto has assured that he will disprove allegations against PRI, practicing a “new style of governing.” Nieto’s campaign included promises of reduced violence in the drug war; however, he could still prevent billions in illicit financial flows through legislative means. The U.S. should work with PRI to strengthen anti-money laundering enforcement, tackle trade mispricing, and prevent Mexican money from leaking en mass to offshore bank accounts. At the same time, it could prove its willingness to defeat corruption and the seemingly interminable underground economy.
Disclaimer: Unless specifically stated to be the views of the Task Force, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Task Force on Financial Integrity & Economic Development.