Friday, November 21, 2014

Más que un conflicto de interés

Aquí les dejo la versión en inglés de mi artículo de esta semana en El Universal: "Más que un conflicto de interés". 

El artículo original en español lo pueden ver aquí

 More than a conflict of interest

Mexican officials often deny the existence of conflicts of interest, that situation in which private interests can affect the decisions of a public servant to the detriment of the public interest. They often consider that if they do not feel conflicted about it, then it is not a conflict of interest. This is incorrect. The conflict of interest is generally well defined and punishable under the law. In fact, this issue is mentioned in section XII of Article 8 of the Federal Law of Administrative Responsibilitiesof Public Servants, which states their obligations (emphasis added):

"Abstain in the exercise of their duties, to seek, accept or receive, directly or through an intermediary, money, real or personal property by sale at a price well below that of the ordinary market, gifts, services, money jobs, charges or fees (...) arising from any person or entity whose professional activities, commercial or industrial are directly linked, regulated or supervised by the public servant (...), that involves conflicting interests."

The most recent case of conflict of interest in Mexico involves President Peña Nieto in relation to the house of hiswife, Angélica Rivera. The house of Mrs. Rivera was built and is still owned by a government contractor, which reveals a relationship that could have some influence on the President, who has the capacity to decide on issues related to that company. The conflict of interest is obvious and it is something that should have been avoided in the first place. However, it is likely that the problem is even more serious than that. This is because since 2009, when the real estate deal started, the company that owns the house (Grupo HIGA) has received numerous contracts by governments led by Peña Nieto, both as Governor of the State of Mexico and as President. In this sense, the conflict of interest is not only potential but it becomes real, and it could even be linked directly with issues of corruption and/or bribery (see the Mexican Federal Penal Code, art. 222).

This leads us to ask ourselves not only about the motivations that might lead to such real estate transaction, but also about the conditions agreed. Why is it that a company suddenly decides to create a real estate firm only to buy the land that someone like the President’s wife wants  (conveniently located behind her other house), built a house designed according to her own taste and with the architect she choose, and at the end, and only then, sells the house to her without a down payment (yes, that is correct, without a down payment), with a three-year grace period for payments of capital, and all of that with a preferential interest rate (9% vs. 11%, which was the market average)?

The President and his wife want us to believe that getting rid of the house solves the problem. Not so. If anything, it makes it more obvious. According to the contract released, from 2012 to 2014 Ms. Rivera has only paid interests on the transaction, so that the current value of the debt is the same as that in the original agreement, i.e. $54 million pesos (around $4 million dollars). The house was recently independently valued at $86 million pesos. Suppose that Ms. Rivera sells the house at an intermediate price: 70 mp. With these resources, Mrs. Rivera could pay her outstanding debt and get an immediate profit of $16 million pesos or around $1.2 million dollars (this should not be mixed with the 14 million pesos that Mrs. Rivera has already disbursed, since most of that would be just what it was due for the usufruct of the house, that is, for the house’s rent). Thus, this gain would follow strictly from the advantageous conditions of the original arrangement, which seems to support the idea that the President and his family benefited from a relationship with a company that in turn has made huge profits via numerous public contracts. Quid pro quo?

Therefore, the creation of a special prosecutor to investigate the President and his relationship with a business group that has received numerous government contracts is required. Until this is clarified, and despite the video of Mrs. Rivera and the release of the patrimonial statement ofthe President, the shadow of doubt on possible corruption and exchange of favors between a private company and the President will be there.

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