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How Walmart used payoffs to get its way in Mexico

Source : BUSINESS_STANDARD
Last Updated: Tue, Dec 18, 2012 21:40 hrs
Shoppers walk from a Wal-Mart store in Mexico City

Walmart longed to build in Elda Pineda's alfalfa field. It was an ideal location, just off this town's bustling main entrance and barely a mile from its ancient pyramids, which draw tourists from around the world. With its usual precision, Walmart calculated it would attract 250 customers an hour if only it could put a store in Pineda's field.

One major obstacle stood in Walmart's way.

After years of study, the town's elected leaders had just approved a new zoning map. The leaders wanted to limit growth near the pyramids, and they considered the town's main entrance too congested already. As a result, the 2003 zoning map prohibited commercial development on Pineda's field, seemingly dooming Walmart's hopes.

But 30 miles away in Mexico City, at the headquarters of Walmart de Mexico, executives were not about to be thwarted by an unfavourable zoning decision. Instead, records and interviews show, they decided to undo the damage with one well-placed $52,000 bribe.

The plan was simple. The zoning map would not become law until it was published in a government newspaper. So Walmart de Mexico arranged to bribe an official to change the map before it was sent to the newspaper, records and interviews show. Sure enough, when the map was published, the zoning for Pineda's field was redrawn to allow Walmart's store.

Walmart de Mexico broke ground months later, provoking fierce opposition. Protesters decried the very idea of a Walmart so close to a cultural treasure. They contended the town's traditional public markets would be decimated, its traffic mess made worse. Months of hunger strikes and sit-ins consumed Mexico's news media. Yet for all the scrutiny, the story of the altered map remained a secret. The store opened for Christmas 2004, affirming Walmart's emerging dominance in Mexico.

The secret held even after a former Walmart de Mexico lawyer contacted Walmart executives in Bentonville, Arkansas, and told them how Walmart de Mexico routinely resorted to bribery, citing the altered map as but one example. His detailed account - he had been in charge of getting building permits throughout Mexico - raised alarms at the highest levels of Walmart and prompted an internal investigation.

But as The New York Times revealed in April, Walmart's leaders shut down the investigation in 2006. They did so even though their investigators had found a wealth of evidence supporting the lawyer's allegations. The decision meant authorities were not notified. It also meant basic questions about the nature, extent and impact of Walmart de Mexico's conduct were never asked, much less answered.

The Times has now picked up where Walmart's internal investigation was cut off, travelling to dozens of towns and cities in Mexico, gathering tens of thousands of documents related to Walmart de Mexico permits, and interviewing scores of government officials and Walmart employees, including 15 hours of interviews with the former lawyer, Sergio Cicero Zapata.

The Times' examination reveals that Walmart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Walmart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance - public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

Through confidential Walmart documents, The Times identified 19 store sites across Mexico that were the target of Walmart de Mexico's bribes. The Times then matched information about specific bribes against permit records for each site. Clear patterns emerged. Over and over, for example, the dates of bribe payments coincided with dates when critical permits were issued.

Walmart declined to discuss its conduct in Teotihuacan while it is continuing its own investigation. It has already found potentially serious wrongdoing, including indications of bribery in China, Brazil and India.


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