The scandal has raised concerns about the reputation of the town of Tequila, a major tourist destination and producer of tequila, ahead of the FIFA World Cup, which will be held in part in the state's capital.
After Mexican investigators said they'd uncovered a brazen extortion scheme by a rogue mayor against the world's oldest tequila maker, the state government is seeking to repair the damage.
Pablo Lemus Navarro, governor of Jalisco state, is pledging 500 million pesos ($29 million) of investment in the municipality of Tequila to support businesses and tourism while improving infrastructure and social programs. In an interview with Bloomberg on Friday, he said that business owners "can be certain about their investments because the municipality of Tequila will have direct intervention from the Jalisco state government."
The town, also the spirit's namesake, was hit by a political bombshell when its leader was arrested earlier this month on federal organized crime charges after allegedly converting a state-owned museum into his personal luxury residence, kidnapping a fellow party member and trying to extort businesses, among other charges. That included an attempt to charge Becle, the owner of 1800 Tequila and José Cuervo, with some $4 million in taxes.
"No act of extortion by any authority will be permitted," said Lemus, of the opposition Citizens' Movement party who visited the town on Feb. 10 to reassure business leaders. "And we are giving investors the certainty to come to Tequila and to come to all of Jalisco."
Companies across Mexico have long decried the nation's weak grasp on rule of law and the resulting extortion as an ongoing cost of operation. However, the blame is more frequently pointed at criminal groups rather than local authorities.
The scandal is particularly worrisome for the state of Jalisco, which is responsible for much of Mexico's $4 billion in tequila exports each year and a big tourist destination as a result. The state's capital, about an hour by road from Tequila, will also be the site of four FIFA World Cup games in June, which has elevated scrutiny of the area.
"There was a risk that it could affect the reputation of the country, if there's a scandal like Cuervo's extortion, but also that tourists could be put at risk," said David Gomez Alvarez, former member of Jalisco's anti-corruption body and director of think tank Transversal.
Extortion Scheme
Lemus said the municipal administration of Tequila, led by mayor Diego Rivera Navarro, systematically extorted businesses by fabricating civil protection and local code violations to close them and demanding large personal payments to reopen.
He said the world's largest tequila producer, Becle, was threatened with a more than 500% property tax increase, from 11 million pesos per year to 70 million pesos, if the company did not comply with the mayor's demands.
Becle declined to comment for the story.
Rivera Navarro, who took office as a member of the ruling Morena party in October 2024, denied accusations in December of violence against staff. At the time, he said he was the victim of political persecution. No lawyer has commented publicly on the most recent charges against him.
"It wasn't a payment requested by the city council where a receipt was issued. It was a payment demanded by a public official to line his own pockets, and these were truly enormous sums," said Lemus, noting that one well-known hotel in the municipality was charged as much as 7 million pesos.
Lemus said that José Cuervo, as Becle's subsidiary is often called, and nine other companies filed complaints with the state government last year accusing the mayor of extortion. In December, Lemus intervened when the mayor attempted to shut Becle's 1800 Tequila factory.
"The scheme just kept growing and growing until finally, it even reached the world's largest tequila producer," said Lemus, adding that the mayor's office even tried to shut off the factory’s autoclaves, which cook the agave needed to make tequila. "If you shut down autoclaves they can explode and cause a tragedy. So, the Jalisco state government intervened to prevent the closure."
Lemus said that he received a call from the National Security Minister Omar Garcia Harfuch in the early morning of Feb. 5 requesting support from the state police in the mayor's arrest that day. The mayor was detained along with his municipality's public security minister and the official who oversees property taxes, Garcia Harfuch said on social media, calling it part of a national crackdown on extortion.
The mayor was also accused of other serious crimes, including converting the state-owned Tequila Museum into his personal residence and using public funds to hire a musical group that glorified a leader of the notorious crime group Cartel Jalisco Nueva Generacion.
Investigations into the mayor also include an allegation of kidnapping of a potential candidate from his own party, according to Mexican media outlet El Universal.
President Claudia Sheinbaum said accusations from businesses and residents reached her directly, and some observers reckon the alleged extortion racket fell apart because the mayor bit off more than he could chew. José Cuervo is owned by the influential Beckmann family and they have a large multinational operation, while the town of Tequila itself is an important tourist hub that attracts international visitors.
Anti-Corruption Promises
The Mexican Employers' Confederation says extortion has become one of the most persistent and damaging costs for companies. Last year, extortion increased in 20 of the country's 32 states and the number of victims rose almost 80% in 10 years, the group known as Coparmex said in January.
That's raising pressure on Mexico's government to deliver on its anti-corruption message that was part of the ruling party's national platform in the country's most recent elections. Mexico's government wants to show that its own party members aren't exempt from scrutiny. Last year, it arrested the former security minister from former president Andres Manuel Lopez Obrador's home state of Tabasco. Critics argue the government should investigate politicians further up the chain.
Authorities at the municipal level often use taxes to pressure businesses. Companies can try to solve the issues in court, but out-of-court deals, some of which include bribes to local officials, are an alternative solution.
The denial of local permits is another way officials force companies to pay up, said Domingo Ruiz Lopez, managing partner at Guadalajara-based tax advisory firm Ruiz Consultores.
"Big companies with compliance officers are not going to cede to such pressure, but the little ones that cannot afford consultants or legal advice are most vulnerable," Ruiz said. "The threat can be, 'I'll close you down.'"
The extortion headache comes as the country tries to manage pressure from US President Donald Trump, who has accused Sheinbaum of not doing enough to combat the country's cartels. His government has suggested it might conduct land strikesBloomberg Terminal, in addition to the deadly strikes it has carried out internationally at sea on alleged drug boats.
At least for now, however, in the town of Tequila the mood of business owners and residents is one of relief.
Steffin Oghene, vice president of international sales at El Tequileño, noted that the town’s police presence has grown in recent days following the arrest, which, along with the governor’s visit has helped “reduce concerns” among local businesses.
Daniela Baldenebro from the marketing team at Tequila Arette echoed the sentiment, but added that the town still has work to do ahead of the World Cup.
“We are looking to lure premium tourism and those tourists seek security,” she said. “We believe we have a huge opportunity with the World Cup this year, so we need better news around the town.”