Can you see the muscle tissue inside the lesion? It looks a lot like furunculosis, or "hole-in-the-side" disease, except that I'm used to seeing that on freshwater koi, catfish and salmonids. I've never seen it on a mandarin fish, but the genus of bacteria that causes it (Aeromonas) is found in marine aquariums.
Sorry, though - I have no idea how you can treat this effectively. It is a pretty tough disease to cure in freshwater fish. Injectable enrofloxicin would be my first choice if it was a larger fish...not really practical on a mandarin. The problem is that although the lesion is external, the bacteria invades systemically, so antibiotic baths will have no effect.
So, heres hoping that I'm wrong.....
JHemdal