Corruption Risk in Mexican Federal Government Agencies Surges in 2022

In 2022, alarming revelations emerged from the Mexican Institute for Competitiveness (IMCO) as it reported that seven out of 10 federal government agencies and entities increased their risk of corruption by failing to comply with transparency and competition provisions in public procurement. IMCO's Corruption Risk Index (IRC) saw significant spikes in risk scores for various entities, reflecting a concerning trend in Mexico's public procurement landscape.

The Corruption Risk Index (IRC)

The Corruption Risk Index (IRC) is a crucial tool used by IMCO to assess the risk of corruption in public procurement. Ranging from zero (no risk) to 100 (high probability of corruption), the IRC evaluates several key factors, including transparency, competition, and the background of winning contractors.

Entities with the Highest Scores

IMCO highlighted the entities with the highest scores on the Corruption Risk Index, which are as follows:

1. Birmex (70)
2. Port of Salina Cruz (68)
3. Ministry of the Navy (64)
4. Diconsa (58)
5. ISSSTE (58)
6. Liconsa (52)

Of these, the Port of Salina Cruz experienced the most significant increase in risk, soaring from 25 to 68 points between 2021 and 2022. The surge in risk was attributed to questionable warehouse maintenance purchases and the acquisition of stone material for the West Breakwater, a significant project forming part of the Interoceanic Corridor of the Isthmus of Tehuantepec.

Factors Contributing to Corruption Risk

The IRC identifies specific factors that contribute to corruption risk in public procurement:

1. Lack of Transparency: Failure to disseminate procedures in accordance with legal deadlines.
2. Lack of Competition: Avoidance of public bidding, leading to non-competitive contracts.
3. Background of Companies: Evaluation of contractors' background, including links to newly created, or ghost companies flagged by the Tax Administration Service (SAT).

Scale of Procurement in 2022

In 2022, federal public institutions conducted a staggering 174,219 purchases, spending over 513 billion pesos. This amounted to approximately 9% of the programmable budget exercised that year.

Lack of Competition and Risky Suppliers

IMCO's findings revealed that in 2022:

1. 38% of the total amount spent on procurement was awarded directly, bypassing competitive bidding processes.
2. 25% of tenders had a limited number of participants (three or fewer).
3. Over 107 million pesos were spent on contracts with suppliers sanctioned by the Ministry of Public Administration.
4. 32% of these contracts were awarded through direct awards, while 64% were for surveillance services.

Challenges in the Health Sector

The health sector's procurement practices posed significant challenges. For instance, 74% of the amount spent on medicines was awarded directly, indicating a lack of competition. Particularly concerning were the National Institutes of Health, such as the National Institute of Medical Sciences and Nutrition Salvador Zubirán (INCMNSZ), the National Institute of Rehabilitation Luis Guillermo Ibarra Ibarra (INR), and the National Institute of Genomic Medicine (INMEGEN). All of which scored above 80 in the competition sub-index.

Diconsa and Liconsa's Troubling Procurement Practices

The procurement processes of Diconsa and Liconsa, both companies managed by Seguridad Alimentaria Mexicana (Segalmex) and under investigation for corruption, did not show any improvement. Notably, Diconsa spent a substantial 19.734 billion pesos on public procurement, with 90% awarded directly. Meanwhile, Liconsa scored 85 in the competition sub-index, as it tendered only 18% of the amount spent on public procurement.

Conclusion

IMCO's understandable Corruption Risk Index (IRC) analysis raises red flags concerning corruption risks in Mexican federal government agencies and entities during 2022. The lack of compliance with transparency and competition provisions in public procurement poses severe challenges for Mexico's governance and economy.

Addressing these issues is crucial to fostering a transparent and competitive procurement ecosystem, ensuring efficient use of public funds and promoting fair competition among businesses for government contracts. As Mexico moves forward, stakeholders must work together to implement robust reforms and oversight mechanisms to combat corruption and safeguard the country's economic future.