Mexican Corruption and NAFTA US Businessmen Are Up in Arms over Bribery and Unfair Practices in Mexico, Which May Become a Serious Issue in the Free Trade Debate

By David Clark Scott, writer of The Christian Science Monitor | The Christian Science Monitor, April 8, 1993 | Go to article overview

Mexican Corruption and NAFTA US Businessmen Are Up in Arms over Bribery and Unfair Practices in Mexico, Which May Become a Serious Issue in the Free Trade Debate


David Clark Scott, writer of The Christian Science Monitor, The Christian Science Monitor


CHARLES HARRIS is in Mexico posting his version of Old West "Wanted" posters.

WANTED: A clean Mexican judge.

REWARD: $300,000 for anybody who can collect an unpaid loan in a Mexican court without paying a bribe or illegally influencing the judge.

Since 1982, Mr. Harris has been trying to recoup a $110,000 loan made to the director of a Spanish language school in Michoacan. Although the loan was made here in front of Mexican witnesses, Mexican courts have ruled they have no jurisdiction because Harris and the school director are United States citizens. The US courts say they have no jurisdiction over a Mexican business contract.

Now on his fourth lawyer, Harris says: "All my lawyers tell me that I'm not winning because I'm not paying the judge."

The Harris challenge - and other recent cases of alleged corruption - touch on a familiar complaint by foreigners doing business in Mexico: Even under reform-minded President Carlos Salinas de Gortari, bribes are a standard operating procedure and there is no legal recourse for those who buck the system.

Many acknowledge that President Salinas has reduced red tape and made it easier for foreign businesses to operate without resorting to illegal payoffs. But the problem remains well-entrenched, they say. And the issue of corruption is now starting to catch the attention of those opposing the North American Free Trade Agreement (NAFTA).

"High-level government complicity in corruption is a powerful argument against free trade. It will be one of the most important issues in next year's elections and it would be extremely naive not to be concerned about it," says Ricardo Pascoe, a close adviser to Cuauhtemoc Cardenas, presidential candidate for the left-leaning Party of the Democratic Revolution. NAFTA considerations

In the US, Sen. Ernest Fritz Hollings (D) of South Carolina has questioned whether NAFTA would open the door to more "free trade or fee trade."

Politicians and organizations questioning the wisdom of uniting widely disparate business cultures and legal systems under NAFTA are likely to focus not just on the Harris case but also on the potentially more explosive International Business Machines Corporation (IBM) scandal.

The story broke Feb. 3 in The Financial Times, where British businessman Kaveh Moussavi alleged that IBM's division in Bethesda, Md., lost a $21 million bid to update Mexico's air traffic control system because it failed to pay a $1 million bribe.

Mr. Moussavi was approached on Nov. 9, he says, by three men in the lobby of the Hotel Nikko in Mexico City. They refused to give their names, but as "credentials" they showed Moussavi government confidential documents and discussed how IBM could "win" the bid.

"I was IBM's agent. I was eating, sleeping, and dreaming this tender. But these guys knew it better than I did," says Moussavi in a telephone interview.

Moussavi returned to his room and called his boss in the US. They agreed US law forbids such payments. But the payment could be legal if the three men could prove they weren't Mexican officials or the money wouldn't go to government officials, he recounts in a detailed account published in Proceso, a Mexican news magazine.

Moussavi went back to the lobby, but the men refused to reveal their identities. Ten days later, the bidding was canceled. In December, a new round of bidding was held under new specifications and French and Italian firms won the contract. …

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