Wal-Mart de Mexico- The Sham and The Corrupt

By Nabarun Ray, GNLU

EDITORS NOTE: Eduardo Castro-Wright was the former Vice Chairman and CEO of the Wal-mart’s Global E-Commerce and Global Sourcing businesses; he retired on July 1, 2012. Castro-Wright previously served as the CEO and President of Wal-Mart Stores USA, the United States division of the world’s third largest corporation by revenue according to the 2008 Fortune 500. He was one of the primary suspect and is man behind all the shady work done by Wal-Mart in Mexico.

INTRODUCTION

In Elda Pineda’s alfalfa field (located in Mexico)Wal-Mart wanted to build a retail store. It was the perfect location, just off the town’s bustling main entrance and barely a mile from the aged pyramids, which was a major tourist attraction. With its careful precision, Wal-Mart calculated it would attract about two hundred and fifty customers an hour, if only it could put a store in Mrs. Pineda’s field. There was but only one major problem faced by Wal-Mart. The elected leaders had just approved a new zoning map.

The leaders wanted to limit industrial growth near the pyramids, and they considered the town’s main entrance too crowded. As a result of which the 2003 zoning map prohibited commercial development on Mrs. Pineda’s field. Wal-Mart would not take no for an answer, so they decided to bribe the appropriate authorities for changing the zoning map and it cost them $52,000. And that is how it all started.

Eduardo Castro-Wright was born in Ecuador. His family operated a local retail chain. He received a mechanical engineering degree from Texas A & M University in 1975 and began his career at RJR Nabisco Inc.’s Latin American and Asian units. He later moved to Honeywell International Inc., where he later became the president of Honeywell Transportation and Power Systems Worldwide. Castro-Wright, led Wal-Mart de Mexico from August 2001 until February 2005. He encouraged the use of bribes so that the retailer could outgrow their competitors grow in Mexico quickly that rivals wouldn’t have time to respond. The company has about 2,088 stores in Mexico. [i]

SLOW UNVEILING OF CORRUPTION

In the month of September 2005, a senior Wal-Mart lawyer received an e-mail from a “former executive” at the company’s foreign subsidiary, Wal-Mart de Mexico. In the mail and the follow-up conversations, the former executive described how Wal-Mart de Mexico had effectively a campaign of bribery to win market dominance. He said, to build stores, the company had paid bribes to obtain permits for construction in the country. The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico. In his detailed account, he had been in charge of getting building permits throughout Mexico, which raised alarms at the highest bureaucracy levels of Wal-Mart and prompted an internal investigation.[ii]

Even when Wal-Mart was alerted about corrupt practices that were going on in Mexico and as the investigation within the company was going on, no effective or efficient were taken to stop the practices altogether. The investigation was let to be continued for a little time and was eventually shut down. But as The New York Times revealed in April, Wal-Mart’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 Wal-Mart de Mexico’s conduct were never asked, much less answered.

The Times reported in 2012 that Wal-Mart consistently bribed public officials in Mexico for things like building permits to speed its expansion in that country. Executives at company headquarters in Bentonville learned of those supposed misdeeds in 2005 but subsequently shut down an internal investigation instead of reporting potential violations of the law to the United States government.[iii]

THE PROBLEM FACED IN THE MANAGEMENT LEVEL

Wal-Mart de Mexico faced a various number of legal obstacles in its mission to build a supermarket in the protected archaeological zone, around the pyramids in Teotihuacán. It overcame those obstacles by authorizing bribes, records and interviews show.

Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery around the country. They found a paper trail of hundreds of suspect payments totaling more than twenty-four million million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. The manager wasn’t able to control his greed to make more money, using corruption as a tool, he bribed officials to get his work done in a matter of no time. The briberies are as follows:[iv]

ZONING BRIBE

The biggest hurdle was Teotihuacán’s zoning map. It was clearly a forbidden commercial development where Wal-Mart wanted to build. Wal-Mart de Mexico authorized a fifty-two thousand dollar bribe payment to have the map altered, records as well as interviews show.

TRAFFIC BRIBE

Wal-Mart wanted to build by the main entrance into Teotihuacán, in a spot already choked with traffic. Wal-Mart de Mexico authorized a twenty-five thousand nine hundred dollars bribe payment to get the approval of local traffic authorities, records and interviews show.

ARCHAEOLOGY BRIBE

Wal-Mart could not build by the pyramids without a permit from the agency that protects Mexico’s cultural landmarks. Wal-Mart de Mexico offered a “donation” of up to $45,000 and a “personal gift” of up to $ 36,000 in exchange for the permit, records and interviews show.

POLITICAL BRIBE

Facing certain opposition from local merchants and residents, Wal-Mart de Mexico executives agreed to pay $ 114,000 in bribes to guarantee the support of Teotihuacán’s mayor and his allies on the municipal council, records and interviews show. [v]

CASE CLOSED

The information about the bribes came out in the public eventually, and government authorities raised various questions. Wal-Mart had violated various foreign policies of its company as well as its country’s laws. The managers in question had retired quietly before any questions could be raised directly to them in relation to the company. Wal-Mart had the upper hand in showing that it had taken reasonable steps when it became aware about the corruption involved.

Corporate greed and corruption in Mexico has always been the norm, but as a world citizen the thing to be most worried about is in general the growth of business culture and the hunger to profit at any cost. Aren’t we all concerned about this widespread practice which in the long run will only generate economic recessions and massive job losses and would benefit just a few? The real tragedy in all this is the vast expansion of Wal-Mart in Mexico and its domination in the retail area. This is an enormous assault against the middle class in Mexico cutting out both wholesalers and small retailers. Wholesalers and small retailers (tiendas) are the major mainstay toward economic advancement for countless numbers of people. When the tiendas go, the wholesalers will collapse and the merchant class will collapse. [vi]

Formatted on 27th February 2019.

Footnotes

[i] http://www.nytimes.com/2012/12/18/business/walmart-bribes-teotihuacan.html.

[ii] http://archive.fortune.com/2006/01/23/magazines/fortune/stars_castrowright_fortune_060206/index.htm.

[iii] http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-mexico-a-bribe-inquiry-silenced.html.

[iv] http://www.nytimes.com/2014/06/05/business/after-walmart-bribery-scandals-a-pattern-of-quiet-departures.html?module=ArrowsNav&contentCollection=Business%20Day&action=keypress&region=FixedLeft&pgtype=article.

[v] http://www.nytimes.com/interactive/business/walmart-bribery-abroad-series.html.

[vi] http://www.nytimes.com/2014/06/05/business/after-walmart-bribery-scandals-a-pattern-of-quiet-departures.html?module=ArrowsNav&contentCollection=Business%20Day&action=keypress&region=FixedLeft&pgtype=article.

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