Mexico City: Worst Case Scenario

Xóchitl Gálvez is head of the city’s Miguel Hidalgo community delegation, which encompasses some of the city’s toniest neighborhoods, including upscale Polanco and Lomas de Chapultepec. When she took office in 2015, she launched an investigation into construction manifests granted to developers by her predecessors.

This fall, Gálvez showed that one company, the company Grupo Inmobiliario Deviratán, built at least three housing complexes with falsified documents, according to records obtained by 100Reporters and Journalists for Transparency.

In addition, payments for development rights never reached the delegation’s coffers, according to Gálvez. “There are delegates who are accustomed to personally giving work manifests to the developers, so that they owe them a favor.”

In Mexico City’s Anzures neighborhood, Deviratán erected a five-story building that was supposed to be three stories tall, on just 430 square meters of land, according to the registry. The developer was granted the right to build four apartments, but built 15 instead.

“In the world of construction,” complicity and corruption underpin exchanges between authorities and builders, Gálvez said. “As an authority, you can’t claim to be unaware of what is happening in your neighborhood.” The consequences have proved deadly, especially in Mexico.  Gálvez blames corruption for the collapse of many buildings after the September earthquake in Mexico that destroyed 38 buildings and claimed 369 lives.

Following the earthquake, city officials disclosed to the Mexican Senate that a staggering 270,000 buildings in the city are susceptible to collapse in earthquakes.  The lack of maintenance, the geological characteristics and the conditions of the subsoil in the city are not the only elements that pose risks for the structural integrity of these buildings.  Corrupt exchanges between authorities and real estate companies produce a growing chain of irregularities in construction and land use that further compromise building safety.

Deviratán’s owner, Vinod Kumar Mangwani Gidwani, did not respond to numerous requests for comment on the reported irregularities in his construction projects.  

Sudden Growth and lax Standards

Dramatic population growth in the 1970s, combined with aggressive public policies for housing between 2000 and 2012, spurred substantial development in the Mexican capital.

Government programs lured residents from shanty towns on the city’s fringes to planned communities. Dozens of cookie-cutter housing developments and apartment buildings quickly emerged. What was slow, well behind the pace of construction, was oversight of construction standards and basic services such as running water.

This disorderly and voracious urban growth led to some 4,500 illegally developed buildings in Mexico, according to Josefina MacGregor, president of the civic group Suma Urbana.

Frenetic growth also generated an “escalation” of bribes and illegal payments to public servants, according to Paulina Escobar, head of administration and development at engineering firm APL Ingenieros Consultores. “The dynamic indicates that it is more important to build, sell and fill the pockets of a few, than the physical integrity of people,” she said.

How It’s Supposed To Work

Builders are required to hire Directors Responsible for Works, known by their Spanish acronym DROs, to oversee projects. DROs are selected by fellow architects and engineers, and then certified by the government. But the builders pay DROs for their service, which activists say creates a conflict of interest.

A DRO is responsible for directing, monitoring and ensuring compliance with regulations during construction, with authorization and registration granted by the city’s Housing and Urban Development Ministry, known by its Spanish acronym, SEDUVI. The regulator is also the official body in charge of issuing land use certificates.

DROs are supposed to report errors in building plans or construction. DROs who fail to do so can be suspended, fined, lose their licenses or in the most egregious of cases, face jail time.  And, indeed, 61 DROs have been fined since 2012, another 30 were suspended and 17 were stripped of their licenses, SEDUVI chief Felipe de Jesús Gutiérrez Gutiérrez told reporters in September.

The Lone Ranger

While buildings may fall, corruption stands on a firm foundation, built by the many who profit from illicit construction. “Corruption does not end because citizens do not want it to end,” said Gálvez.  “It generates a lot of profit.” Of 150 properties the Gálvez’s Hidalgo delegation examined, 30 violated the terms of their construction permits.”

The apartments, measuring 125 square meters, were advertised in pre-sale for $385,600 each.

Gálvez said Deviratán built two more buildings in the neighborhood using false documents. Salvador Ximénez Esparza, a public notary based in the faraway community of Chalco, some 25 miles from the construction site, issued deeds for the buildings.

Architect Juan Luis Llano Gutiérrez certified to the city government that the project was done properly, according to documents obtained by 100Reporters and Journalists for Transparency.

Llano Gutiérrez told 100Reporters and Journalists for Transparency that he doesn’t have any relationship with the owners or with the construction of the building, located at Gutenberg 126, since he resigned as DRO  in September 2016. “I’m not in a position to comment on this, because there are apparently investigations and legal proceedings in progress in relation to this property.”

Mexican building regulations state that builders must deliver the work according to the project manifest authorized by the delegation.

The Miguel Hidalgo delegation has filed a criminal complaint against Ximénez Esparza for issuing deeds with false documents.  In June 2017, the government of the State of Mexico revoked his appointment as public notary.  

Earthquakes And Institutionalized Corruption

“The problem of corruption in Mexico is not of the people, it’s of the system,” said Darío Ramírez, spokesman for the Mexican non-profit Against Corruption and Impunity. “As long as the system does not change, we’ll have lone rangers [like Xóchitl Gálvez] trying to do things right. The problem is that the next delegation chief can do the opposite.”

The Miguel Hidalgo, Benito Juárez, Cuauhtémoc and Venustiano Carranza neighborhoods – or delegations – comprise the financial, educational and governmental heart of Mexico City. These same delegations are home to an explosion in real estate development that appears to have fostered a growing population of corrupt public servants, land owners and builders, according to Salvador Mejía, specialist in anti-corruption issues at anti-money laundering firm Asimetrics.

This unholy alliance was exposed by the damage caused by the September quake. After the quake, an outcry from Mexico City residents decried corruption, blaming shoddy buildng in vulnerable neighborhoods on bribery and back scratching.

Disregard for building codes is rampant.  A 2012 study for the Mexico City government found that just 15 of 150 buildings four stories or taller that were built since 2004 appeared to comply with construction regulations in the Benito Juárez, Cuauhtémoc and Venustiano Carranza neighborhoods.

The study concluded that “nobody worries about doing things right” and that the city government had “disengaged” from the problem.  The city was plagued by “very ambitious” architectural projects with poor structural engineering, the study found. The authors compared construction to traffic in Mexico City: laws are there, but disorder ensues for lack of enforcement.

“The developers act like teenagers instead of taking responsibility,” Eduardo Reinoso,  lead author of the study, told 100Reporters and Journalists for Transparency.

Through revisions of building plans and other records, the study found that basic structural information was ambiguous or often absent entirely. Roughly 70 percent of the structures had weak floors.

Reckoning after earthquake

The impact of the earthquake not only brought down schools, housing units, shops and offices but also highlighted the lack of supervision over construction as an outgrowth of corruption. The lax standards threaten safety, and access to decent housing.   Official inaction in the face of flagrant violations of regulations encourages impunity and leaves citizens no recourse in the courts.

Following the earthquake, the Mexican daily El Financiero asked two structural architects and a civil engineer to review the building plans and debris from one of the fallen buildings, in the the Benito Juárez neighborhood. The five-year-old building’s load-bearing slabs were weak, steel support beams were damaged or nonexistent, and the builder used skinnier rods than specified. The building was supported by corner columns, but no interior columns.

Two people died in the collapsed San José residential complex. The building’s owner, who was also the DRO on the project, was arrested in October and charged with homicide.

Nearby, a 40-year-old building that partially collapsed in the September 19 quake is likely headed for demolition. Blanca Eligio, owner of the apartments, said her building might have resisted the quake if authorities had suspended work earlier in the year, while heavy machines carried out an excavation next door.

“In Mexico City, there is no rule of law or justice,” said Eligio’s husband, Óscar Herrera. One person died in the building because of the earthquake.

In the Hipódromo Condesa neighborhood, one building damaged in the earthquake featured an unauthorized heliport as of 2016, prompting neighbors to speculate that the heliport had compromised the building. In November, city authorities dismantled the landing pad.

“Nobody sanctioned, nobody detained and no official removed,” said Mony de Swaan, owner of an apartment in a neighboring building.

The Attorney General’s office opened more than 180 investigations for damages following the September 19 quake, including some against builders.

In the last five years, residents of the megalopolis have presented more than 7,190 complaints for violations of construction norms before the Environmental and Territorial Ordinance Attorney’s Office (PAOT). The highest number of complaints came from Cuauhtémoc with 1,089, Benito Juárez with 952 and Coyoacán with 878. Between 2012 and October 20, 2017, the oversight office identified 138 buildings that exceed the levels or heights designated by the delegations and urban development experts.

Officials at PAOT declined requests for comment for this article, as did the Ministry of Urban Development and Housing (SEDUVI). PAOT did not offer any justification for not giving the interview. SEDUVI canceled scheduled interviews on three occasions.

Collusion and power

A wide-ranging 2015 study titled Mexico: The Anatomy of Corruption showed that corruption is the third-biggest concern among Mexicans, with regard for real estate developers deeply negative.

Property development has long been vulnerable to money laundering by organized crime groups and drug traffickers, according to Mejía, the anti-corruption specialist. “You cannot understand the power of criminal structures without the collusion of property developers and notaries.”

A common practice, according to Mejía, is for businessmen to offer local officials a “gift” of perhaps two million pesos in exchange for authorization to begin construction, plus subsequent payments throughout the life of the project or beyond.

Gustavo García, a lawyer who last year joined neighbors in suing a builder for a project in the New Polanco neighborhood, said builders pay $530 per apartment to intermediaries with contacts in local government to obtain permits and to avoid inspections or work stoppages.

If a major problem arises, such as the death of a worker on the job, an extra fee is paid so that the problem “does not escalate,“ said García. The class action suit, which alleges that the developer failed to meet legal and structural standards to prevent leaks of the hydraulic system in departments, frontage and basements, is still underway.

Corruption allows buildings to go up where they shouldn’t, and excludes the public from participating in the design of the city, explains the activist MacGregor. Rather, the public finds itself having to “defend the city from local government who should ensure individual guarantees and preserve the rule of law.”

Despite the danger, demand for new housing in Mexico City continues to rise. In the third quarter of 2017, more than 8,300 homes were sold, 55 percent of which were in the Mexican capital, a 10 percent increase over the same period a year before. The highest concentration of real estate projects is in the western and southern areas of the Mexican capital, with 61 percent of all active real estate developments, according to a report by the Tinsa México consultancy.

And money continues to flow into government coffers. According to information provided by Mexico City’s Finance Ministry in response to a public information request placed by 100Reporters and Transparency International, the government received almost $2.3 million, between 2012 and June 2017, just for issuing zoning permits.

Built to Fail was produced by Journalists for Transparency, a project of Transparency International, in collaboration with 100Reporters.