Mexico lost $872 bn to illegal capital flight: Study

January 31st, 2012 - 12:05 pm ICT by IANS  

Mexico City, Jan 31 (IANS/EFE) Mexico lost $872 billion to illicit financial outflows between 1970 and 2010, according to a report released Monday by a US-based research and advocacy group.

The study, which said the annual illicit outflows averaged 5.2 percent of Mexican gross domestic product during the period, was presented by Global Financial Integrity at dual press conferences in Washington and Mexico City.

“This is a devastatingly large amount of money for any developing country to lose,” GFI’s director, Raymond W. Baker, said, adding that the calculations were based on data the Mexican government supplied to the World Bank and International Monetary Fund.

Trade mispricing, described by GFI as “trade-based money laundering”, accounted for nearly 74 percent of illicit financial outflows during the four decades studied.

The practice typically involves the parties to a transaction agreeing to misrepresent the prices to create a tax-free windfall that can be stashed in foreign bank accounts.

Mispricing “skyrocketed” in Mexico after the implementation of the North American Free Trade Agreement, according to the study drafted by former IMF senior economist Dev Kar.

Noting the lack of concrete data on the financial operations of the country’s powerful drug cartels, Baker said Mexico’s illegal capital flight over the last four decades probably exceeded $1 trillion.

Only China ranked ahead of Mexico in terms of illicit outflows among the 160 countries GFI reviewed.

Mexico’s illicit financial outflows ballooned from $1 billion in 1970 to $91 billion in 2007, before slipping back to $68.5 billion in 2010.

One of GFI’s recommendations to Mexican officials is to establish a system for sharing tax information with the US, an arrangement that already exists between Washington and the third NAFTA member, Canada.


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