The result is that drug traffickers are getting rich, while Mexico pays a heavy price in lost human lives and in economic activity that might otherwise bring a modicum of prosperity to the country.

In 2008, Mexico ranked 31st out of 60 countries studied in the Milken Institute/Kurtzman Group Opacity Index. The cost to ordinary Mexicans from poorly functioning institutions has been huge. My colleague, Glenn Yago, and I calculate that if Mexico were to reduce corruption and bring its legal, economic, accounting and regulatory standards up to U.S. levels (the U.S. ranks 13th and Finland ranks first), Mexico’s nominal per capital GDP would increase by about $18,000 to roughly $28,000 a year. And it would also receive a lot more direct foreign investment that would create jobs.

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