Geopolitical Insight - The Business Impact
- analyticalinsight
- Feb 22, 2015
- 4 min read
Updated: Nov 26, 2022
Mexico - Increasing Corruption Risk
Key Points
Corruption levels in Mexico are likely to increase in the run-up to the state and municipal elections in June, as officials seek to raise funds for their electoral campaigns.
Business Risk – The risk from corruption will likely increase across all sectors in Mexico in the run up to the June 2015 election. Companies involved in construction will likely be more affected. Investor confidence is likely to further deteriorate as the corruption levels increase.
Business Continuity – Business operations may be stalled in the short-term as companies unwilling to pay kickbacks are unable to proceed with public bids or gain public permits.
Travel – Mexico remains a MODERATE with HIGH RISK AREAS country with respect to travel risk. The travel risk for executives of companies involved in public bids will increase in the short-term.
For more information on the travel risk to Mexico view out Travel Risk Snapshot.
Background
On 16th February, a recording was leaked onto social media that allegedly records the mayor of San Miguel de Allende, in Guanajato state, ordering two officials to request kickbacks from construction firms to finance their election campaigns.
While the authenticity of the recording is yet to be verified, incidents of this nature are frequently reported within Mexico, especially at a state and municipal level. As the June 2015 local and legislative elections approach, businesses in negotiations with public officials are likely to become more susceptible to requests for kickbacks. The additional funds raised from these requests will be used to finance election campaigns.
Mexico is assessed as HIGH risk with respect to corruption and bribery. In the 2014 Transparency International Corruptions Perception Index Mexico ranked 103 out of the 175 countries assessed.
While corruption levels in Mexico are endemic across all sectors, the risks are likely to be especially high in the forthcoming months, especially at the state and municipal levels.Corruption at the federal-level is less likely to be affected in the short-term, as the government has enacted policies to improve the transparency of the bidding process.
Business Impact
Businesses bidding for contracts or permits in Mexico, at a state or municipal level, will likely face increased corruption risk for the short-term. In the run-up to the June 2015 local and legislative elections, officials are likely to increase kickback requests for contracts and permits to raise revenue for their election campaigns.
Investor confidence is likely to further decrease as corruption continues to inflate the cost of public work. The Organisation for Economic Co-operation and Development has estimated that public contract costs have increased by 37% in Mexico due to corruption.
Businesses operating in Mexico may face continuity issues if contract renewals or permit requests are needed in the run-up to the June election. Companies unwilling to meet official's requests will likely face long waiting periods for contract negotiations and permits.
Travel for executives involved in contract negotiations during this time may present a higher risk as officials may engage in intimidation techniques to encourage compliance to kickback requests. Travel for executives involved in contract negotiations of this nature should re-consider the need to travel at this time.
For more information on the risks businesses face in Mexico, read our Country Risk Snapshot - Mexico.
Bangladesh - Violent Unrest Likely to Increase
Key Points
Political unrest in Bangladesh is likely to continue and potentially increase in the short-to-medium-term.
Supply Chain Risk – Businesses with supply chains through Bangladesh are likely to face increased logistic and operational disruptions including port closures, road blockades and operation disruptions due to violent unrest.
Business Risk – Businesses operating in Bangladesh, especially those operating in major cities such as Chittagong, Dhaka, and Dinajpurare, are likely to face significant business disruptions. The ongoing political instability will stagnate the political environment and prevent economic reforms, investor confidence is likely to decrease and the ongoing political violence will continue to decrease the business environment within Bangladesh.
Security – The ongoing political violence will decrease the security situation. The threat to personnel in Bangladesh will likely increase further as fighting between political parties turns violent.
Travel – The travel risk rating for Bangladesh is HIGH. Travellers should reconsider their need to travel due to the increase threat from violent unrest.
Background
Prime Minister Sheikh Hasina, has called for elections for Dhaka city's two new administrative units. These elections are likely to be held in March. The elections have been pending since November 2011 due to protests by the opposition and difficulties finalising constituency demarcations.
The opposition, the Bangladesh Nationalist Party (BNP) allege that the current ruling Awami League government have rigged the new political system to empower themselves, and will likely boycott any proposed election.
The BNP has been staging anti-government protests in response to the January 2014 parliamentary election and are calling for a re-election under a caretaker government.
Business Impact
The political unrest that has continued to plague Bangladesh is likely to intensify as the government calls for administrative elections in Dhaka. The anti-government response from the opposing BNP is likely to cause widespread and violent political unrest across many cities, especially Dhaka.
Businesses with supply chains through Bangladesh are likely to be impacted by delays to and possible closure of ports. Chittagong port is likely to face delays and attacks from blockaders. Vehicles attempting to transport goods through the main cities may fall victim to blockaders and protesters. Businesses with supply chains in Dhaka and other main cities should ensure they have adequate continuity plans.
Businesses operating directly in Bangladesh are likely to face a deteriorating security situation and operational disruptions. Violent protests are likely to paralyse cities, violent unrest may cause damage to assets and personnel may be unable to travel to facilities as protests lock-down many of the main roads through Dhaka.
For more information on the situation, contact one of our analysts
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