Mexico, the Next Brazil?

Why It Could Be Ripe for a Scandal

Enrique Pena Nieto, then the outgoing Institutional Revolutionary Party governor in the State of Mexico, is silhouetted against the national flag before addressing the audience in Toluca, September 5, 2011. Bernardo Montoya / Reuters

“When the tide goes out, you can see who’s been skinny dipping,” Warren Buffet once famously said about financial investing. As many investors are now discovering, the receding economic tide has caught Brazil in a state of undress. Slowing global growth and low oil prices have exposed not only a faltering economy, but also deep-seated corruption, which has helped send the country into a recession and damaged its reputation as a rising global player. Mexico, Latin America’s second largest economy, is not in such dire financial straits (buoyed in part by the relatively strong economic performance of the United States to which it is closely linked), but there are still plenty of chinks in its political and economic foundation. It would not be surprising to see the country in a similar state of crisis in the coming years.

In Brazil, the investigation known as “Operation Car Wash” has revealed that, as early as the late 1990s, Petrobas, the majority state-owned oil giant, conspired with a cartel of companies to award rigged contracts in return for bribes. Petrobas has conceded that nearly $17 billion worth of profits are tainted. The scandal has implicated dozens of senior government officials, including the speakers of both houses of parliament and five cabinet ministers. It has tarnished President Dilma Rousseff’s credibility and threatened her ability to remain in power. Even though she has not been charged with any wrongdoing, she was on the board of Petrobas when the illegal exchange took place.

In Mexico, many of the same building blocks of a scandal are in place: compromised public institutions, leaders who face limited political accountability, and a significant enough overlap between business and politics to make official corruption a lucrative undertaking.

President Enrique Pena Nieto. Molly Riley / Reuters

In fact, Mexico may be riper for scandal than Brazil ever was. Mexico emerged from single-party rule at the turn of the last century, but had been governed by the Institutional Revolutionary Party (PRI) for the

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