"Who is “IT”?"
Should be "What", not "Who". And, replace "IT" with "nation". Does that help?
“It” is used as a third-person singular personal pronoun referring to the previous inanimate noun “nation.” Pronouns are used to avoid repetition of nouns and make the sentence more concise.
The original sentence is excellent. Your ideas would make it very confusing.
“Does that help?”
No.
Should read...
“Mexico is the living example of what befalls a people when they allow corruption to run rampant and fail to crack down on their politicians.”
At the end of the day people get the government they deserve, or at least, the government they willingly tolerate.
Sadly, when corruption becomes institutionalized and elections no longer work, uprising from the public is the only remedy, but not an easy thing.