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Wal-Mart and Corruption in Mexico: So What?

Wal-Mart and Corruption in Mexico: So What?

               

Tim Worstall, Contributor

I realize that this will shock some but in my view the correct reaction to the stories of corruption involving Wal-Mart in Mexico is almost certainly “So what?” 

This isn’t because we wouldn’t prefer there to be no corruption in such places, nor that we wouldn’t be entirely disgusted if such corruption became commonplace in our own societies and economies.

It is rather simply a necessary admission that other countries are indeed other countries and they do things differently there.

The basic story:

 

Wal-Mart Stores Inc, the world’s largest retailer, squelched an internal investigation into allegations of bribery at its Mexican subsidiary instead of broadening the probe, the New York Times reported on Saturday.

The Times said that in September 2005, a senior Wal-Mart lawyer received an e-mail from Sergio Cicero Zapata, a former executive at the company’s largest foreign unit, Wal-Mart de Mexico, describing how the subsidiary had paid bribes to obtain permits to build stores in the country.

Wal-Mart sent investigators to Mexico City and found a paper trail of hundreds of suspect payments totaling more than $24 million, but the company’s leaders then shut down the investigation and notified neither U.S. nor Mexican law enforcement officials, the Times reported.

Yes, I’m aware of the Foreign Corrupt Practices Act and have had to deal with it in my time. I’ve also had to deal with the much more recently introduced Bribery Act in my native UK as well.  Just as I’ve dealt with bribery back when it was legal for an Englishman to be so involved.  Back when bribes paid were actually tax deductible for an English company. And that again is, to my mind, simply a hard headed admission that other places sometimes do things in ways that we would not tolerate at home.

I was working in Russia at the time when you paid your krysha (refers to mafia protection,) or someone ended up at least being threatened with being shot. So much so that the standard operating procedure for a foreign company coming into Russia was not to first ask “OK, so what are we going to do?”. No, the first question was, “So, who is going to be our krysha?” for it is that which would determine what you were able to do.

You needed to pick your protector with care.  So your line of business would determine to some extent who you needed to pay off. You could even choose a government Ministry as your protector: but a protector, who was going to be taking a cut of your business, you most certainly had to have.

Back at that time it was entirely legal for an English company, to deal with such things as if they were simply business expenses. Which, in that time and place, they were.

Now back to Wal-Mart and Mexico. Yes, certainly, it looks as if there’s something at least worth investigating under the FCPA. But I would argue that that is a problem with the FCPA. For there are simply parts of the world where it is impossible to be and not be in breach of that law.  Or at least, not be in potential breach and still be able to conduct business activities.

This really is just the way of the world. Some places do things differently from either the way we do or the way that we think things ought to be done. I tend to think that domestic laws which fail to recognize this fact are doomed to eventual failure. For those “different ways” are going to carry on even if we or our companies can no longer operate there because of our own domestic laws.

Yes, of course, we all have to obey the law and no doubt there’s going to be a torrid time as possible violations of the FCPA are investigated. My argument is simply that such laws as the FCPA and the Bribery Act… shouldn’t exist.


 

Published Monday, April 23, 2012 5:03 PM by David Biondolillo

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