Lava Jato in Brazil today, Auto Lavado in Mexico tomorrow?

Corruption scandals flare up sensationally and vaporise into impunity in Mexico. In the latest travesty, the governor of Veracruz, Javier Duarte, has done a runner, leaving a USD1bn hole in the state’s finances while police appear clueless as to his whereabouts. The country is ripe for an anti-corruption mutiny.

So with efforts to apply aggressive anti-corruption reforms gaining traction, are we on the cusp of ‘Auto Lavado’: a tequila version of Lava Jato, the sweeping anti-corruption probe that has lanced Brazil’s festering political and corporate establishment?

A commission of non-partisan experts is poised to name a five-member board of notables who will run the new anti-corruption system, SNA. This body will oversee a clutch of key actors who could make ‘Auto Lavado’ a reality: specialist judges, prosecutors, and the new head of a beefed-up federal audit.

Central to the SNA is a transparency law which hikes the number of institutions required to detail how they use public resources. In addition, a citizen-inspired administrative responsibilities law catalogues sub-species of corruption, and requires public officials and close relatives to declare their assets, interests and tax data.

Businesses beware: this law introduces stiffer penalties for bribery but also entertains mitigating factors, such as the existence of compliance programmes and willingness to cooperate with prosecutors.

What makes it promising is the fact that the SNA’s board will be comprised of respected luminaries, not party hacks selected in a dark, smoke-fill room. No wonder, then, that Angel Gurría, the head of the OECD, has praised the package of laws governing the SNA as “game-changing”.

The record size of Duarte’s alleged embezzlement is a reminder of the scale and breadth of corruption in Mexico. Experts estimate that corruption adds 10% to the costs of doing business, and overall costs 5% of GDP. One recent survey found that 43% of companies had paid bribes to overcome bureaucratic obstacles.

In Brazil, it was overbearing red tape, its federal political structure, and corrupt political leaders lounging in bed with oligopolistic corporate interests that combined to make the country a fertile landscape for the Petrobras-centred bribery and kickback cancer to metastasize. Mexico is a virtually identical environment.

The Duarte scandal may not include giant corporate brand names like Petrobras and Odebrecht to spice it up, yet it could be the spark that wills the SNA into being and sets in motion an eventual ‘Auto Lavado’. There is no shortage of allegations that Pemex is plagued by industrial-scale corruption and contract-fixing.

Getting the SNA operational is the crucial next step. That won’t be easy. President Enrique Peña Nieto has been dawdling in fulfilling his part of the deal. Over three months behind schedule, he has yet to propose a chief anti-corruption prosecutor, arguably the single most powerful new figure in the SNA framework.

Worse still, Peña Nieto failed to ensure that any cash was earmarked for the SNA in the 2017 federal budget. Senators are tinkering with budget rules to assign USD7.5m to the SNA by next week’s deadline, although a top federal judge has warned that USD20m alone is needed to set up five new regional SNA-dedicated courts.

Some funding is certain to emerge, but the SNA’s existence alone will not automatically engender Mexico’s answer to Lava Jato. It will depend on the notables who are at the controls to make it work, and to ensure that the new judicial officials enforce the laws in an exemplary fashion.

Behind Lava Jato is a troupe of driven individuals: federal police detectives, dedicated prosecutors and crusading judges who have doggedly pursued once-untouchable power-brokers and captains of industry. In Mexico, timid political will has acted as a brake.

That said, party bosses in the governing PRI are reacting. They have noted the crushing demise of the Workers’ Party in Brazil as a result of Lava Jato. PRI aristocrats realise that the Duarte scandal has not only further dented Peña Nieto’s popularity, but that it threatens the party’s chances of winning re-election in 2018.

This is what prompted the PRI to take the unprecedented step of expelling Duarte, even if just about everyone inside the party suspected long ago that he was on the fiddle. Cynics may see this as just window-dressing, and manoeuvring by the PRI to ensure that corruption within its ranks is contained, not eliminated.

Indeed, there’s no reason to think it will be eradicated. Yet the incoming SNA certainly offers hope for change. It may still be a way off, but whispers are beginning to be heard that Mexico’s ‘Auto Lavado’—with big corporate names included—is in the pipeline.