Extortion Common For Latin American Businesses

High crime rates are holding back economic development in Latin America. One element of the crime is extortion, which cuts into the bottom line for local businesses and ordinary citizens.

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SCOTT SIMON, HOST:

Latin America has some of the highest crime rates in the world. And that includes extortion, which doesn't just terrorize but also takes a huge economic toll on ordinary citizens. In many Latin American countries, it's costing billions of dollars and hindering development. As part of our series on violence in Latin America, NPR's Carrie Kahn takes us to Mexico, where some estimates say extortion costs more than $30 billion a year. [POST-BROADCAST CORRECTION: Extortion costs an estimated $3.2 billion in Mexico annually.]

CARRIE KAHN, BYLINE: Extortion is not new in Mexico. You've probably heard of the famous mordida, slang for a bribe, usually handed on the sly to a traffic cop or low-level official. Recently, though, extortion has taken a violent turn, hitting some of Mexico's largest corporations.

UNIDENTIFIED WOMAN #1: (Spanish spoken)

(SOUNDBITE OF SIRENS)

KAHN: Nightly newscasts were full of images of torched delivery trucks and warehouses owned by one of Mexico's largest snack food manufacturers, Sabritas, a subsidiary of PepsiCo. The Knights of Templar drug cartel took responsibility for the sabotage and warned other big companies, including Dannon Yogurt and Bimbo, against operating in the conflictive central Mexican state of Michoacan. All three companies declined interview requests. A recent survey by the American Chamber of Commerce in Mexico reported that more than a third of all businesses were threatened with extortion last year. Arcadio Mendez Hurtado of the National Transportation Chamber in Michoacan says truck drivers in the state have it particularly tough.

ARCADIO MENDEZ HURTADO: (Spanish spoken)

KAHN: He says if you are hauling something in the state, limes, avocados, wood - anything - you have to pay a fee, a fee to organized crime for safe passage. Mendez says personally, he makes it difficult for an extortionist to get a hold of him.

HURTADO: (Spanish spoken)

SIMON: If he doesn't recognize the number, he won't pick up. For many, though, the extortion is face-to-face.

(SOUNDBITE OF TRUCK)

KAHN: At a truck stop on the main Michoacan highway, this long haul driver, who was afraid to give his name, says he usually pays off an officer at least two times a week.

UNIDENTIFIED MAN #1: (Through translator) This one officer here on this road, he says to me, look, if I'm not here when you come through, you leave me the money under that rock. You hear me? You leave it under there, even if I'm not around.

KAHN: He says the bribes, which average about 10 to $15, come directly out of his pocket. His boss only reimburses him for official trip expenses.

UNIDENTIFIED MAN #1: (Spanish spoken)

KAHN: He says it's not like the cops give receipts. Just how much extortion is costing Mexico is difficult to track. The nonprofit Transparency International in Mexico did a survey on bribes paid for 35 municipal services. On average, Mexicans paid 165 pesos, about 15 dollars a bribe. Annually, extortion cuts into 14 percent of a family's income. Executive director Eduardo Bohorquez says extortion comes in all sizes. In the big metro centers like Mexico City, small bribes or tips are a way of life. You pay them for everything from securing a parking spot on a public street to getting the trashman to pick up your garbage, even though the service is included in your property taxes.

EDUARDO BOHORQUEZ: When you have this so-called petty corruption, it's not so petty anymore. It accounts for a lot of money.

KAHN: Bohorquez says it's about $32 billion a year, and that was only the amount he calculated for bribes paid for a few dozen services.[POST-BROADCAST CORRECTION: $3.2 billion, not $32 billion.] He says the actual number is far greater. Some studies put the estimate at 10 percent of Mexico's GDP.

BOHORQUEZ: It's extortion. It's corruption. It's impunity, and we are all accepting it because we think we are gaining something else from the system, because they are not doing the math.

KAHN: Street vendors in Mexico City know the math all too well.

UNIDENTIFIED MAN #2: (Spanish spoken)

KAHN: At a busy metro stop in Mexico City, dozens of vendors sell everything from umbrellas to CDs. All pay 30 pesos a week, about $2 and a half, to a so-called leader. Israel Cruz who sells instant coffee and sweet bread says he doesn't know the guy's name but he has to pay or he'll get kicked off the street.

ISRAEL CRUZ: (Spanish spoken)

KAHN: He says he would much rather use those 30 pesos to buy his daughter a new shirt, something she needs. Carrie Kahn, NPR News, Mexico City.

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Correction June 8, 2013

We give an incorrect figure for the estimated amount that extortion costs Mexico annually. It is $3.2 billion, not $32 billion.

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