Tuesday, June 8, 2010

No Rule of Law

Macario Schettino starts with Greg Sánchez, and moves on from there:
The detention of the gubernatorial candidate of the leftist coalition in Quintana Roo, Greg Sánchez, once again puts the topic of distrust of Mexican justice on the agenda. Despite the public signals, the investigation, even denunciations in print from journalists of that ideological tendency, the parties that sponsored Greg maintain that it was a political action.

And that argument is accepted by millions of Mexicans, because we have a history of selective application of justice. It could be that this isn't one of those cases, but there have been other cases, and recently. And it's not just that justice has been used for political issues, but rather for everything. In Mexico justice isn't blind, it isn't speedy, it isn't anything.


The impact doesn't remain there. The Mexican financial system doesn't work precisely because the system of justice blocks it. Awarding credit in Mexico is almost an act of suicide, because collecting on it turns into an epic saga. That's why the banks don't offer credit, because to compensate their risk they have do to it at very high rates, and that's not possible. In consequence, credit is either very certain (thanks to very recent legal changes), or very expensive (as with credit cards). And because that's not enough [income], Mexican banks end up financing themselves with commissions. The worst of both worlds.

As is evident, not having a rule of law produces very high costs. It's at the origin of the unleashed violence, of the social fracture, and of the economic slogging. Which is to say, Mexico can't advance without resolving this problem. Don't worry so much about political reform, or energy, or even security reforms. As long as the system of enforcement, application, and administration of justice is what we have today, they will be of little value.

But resolving this problem shouldn't be impossible. For example, today we have a Supreme Court very different from the one we knew in the times of the Revolutionary regime. It's perfectly possible to construct a different judicial system, if we want to. It won't be a rapid affair, but it will be enough to start with so that the social dynamic changes.
This touches on a lot of things I wholeheartedly agree with, especially the need to resist the fatalism regarding the dysfunction of Mexican institutions and the perverse effects of the legal barriers preventing banks from collecting on bad loans. The latter seems to me an enormous barrier to social mobility and the natural generation of a large, dynamic, and entrepreneurial middle class, and it's a relatively simple problem to fix (though a little tricky politically), yet no one ever talks about it here.

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