For those of you who may prefer to read in Spanish, my Foreign Affairs article on Mexico has been translated and appears in the latest issue of Foreign Affairs Latinoamerica, which you can find here.

While its origin and spread are still quite mysterious, cases of A/H1N1 virus, or swine flu, first appeared in Mexico and the U.S. southwestern border region in late March. Initially diagnosed as a regular flu, laboratory testing confirmed in mid-April that a new hybrid of pig, bird, and human flu virus was spreading rapidly and lethally throughout Mexico, the United States, and now the world.

In addition to the human costs, the flu is expected to hit Mexico’s economy hard. Already reeling from the U.S. and global downturn, GDP is expected to fall at least 5 percent – nearing the declines suffered during the 1995 “Tequila crisis.” Hardest hit is the $11 billion a year tourism industry, which had been holding up despite worries of drug violence. Cruise ships are rerouting away from its ports, only flights out of Mexico are full, and hotel phones ring with cancellations.

The only possible upside to this human and economic catastrophe is the reaction of the Mexican government. While not perfect, it shows yet again that Mexico is far from being a failed state. In the face of a spreading influenza, the government effectively managed to identify, monitor, and combat a deadly flu outbreak. The Mexican disease surveillance system picked up on the virus in April, and immediately shared this information with other countries through international mechanisms and organizations. At the same time, the Mexican government took bold steps to curtail the spread of the virus—shutting down one of the world’s biggest cities by closing schools, museums, government offices and even restaurants; sending out the army to help distribute thousands of face masks, and managing both the safety and fears of some 24 million people. Despite the severity of the crisis, there have been no panics or riots. And while far from over, the numbers of deaths in Mexico are beginning to drop, suggesting (at least for now) that the government’s efforts are working.

Mexico’s reaction reflects the strength – not the weakness – of its government. Despite a few grumbles, citizens have supported the tough measures, even when they affect people’s very livelihoods. This is a testament to Mexico’s elected leaders, and the slowly developing trust in a government of the people actually working for the people. It is also the result of steps taken to strengthen the health care system over the last few decades. In particular, efforts under the previous democratically-elected government to increase health care coverage through the national Popular Insurance program, and to alleviate poverty through the conditional cash transfer program Opportunities, incorporated millions of citizens into the national health care system. This, in turn, has enabled a more coordinated nationwide reaction to the swine flu, and undoubtedley saved many lives.

Mexico’s reaction has, of course, not been perfect. Many are upset – some claim the government has not done enough fast enough, while others worry it has gone too far, unnecessarily damaging the economy. More people have died in Mexico so far than anywhere else in the world, though the reasons are still elusive. The still present challenges of uninsured citizens and undermanned hospitals are likely part of the explanation. So too are Mexicans’ tendencies toward of self-medication with over the counter antibiotics, limiting the doctor and hospital visits that facilitate identifying, tracking, and controlling new diseases.

As in the fight against drug traffickers, the government is working to develop and implement a comprehensive policy that reaches throughout its territory. Through the health ministry, the government has launched mobile health units to test individuals and administer antivirals throughout the nation. It is marshalling substantial internal resources, as well as coordinating closely with other governments and international organizations. While the severity and spread of this epidemic remains uncertain, the fundamental capacity of the Mexican state does not. This is the best news for Mexico, and for its neighbors.

The drug cartels’ operations are fueled by one thing: money. This money buys guns, buys people, and buys power. The vast majority of this money – estimated at some $15-20 billion dollars a year – comes from drug sales in the United States. These profits are then sent back to Mexico, and fuel the insecurity and violence.

Mexican immigrants also send back large amounts of money – about $25 billion in remittances every year – to aid their families and help support their communities. This occurs mostly through money transmitters such as Western Union or through informal mechanisms such as “viajeros”—individuals who travel between countries carrying remittances in cash. Many immigrants use these means – rather than formal bank accounts – because they are underregulated and therefore less threatening to those without documents. U.S.-issued personal identification cards are not usually required and few questions are asked.

These same characteristics make these systems attractive to DTOs. The U.S. government, through the Department of Homeland Security as well as through state and local efforts, is beefing up efforts to target these flows. DHS is focusing more resources on bulk cash smuggling, sending 360 more officers and agents to the border as part of a recently launched multi-agency $700 million dollar plan. In one week in March DHS seized $4.5 million in south-bound bulk cash on the border. On the state level, Arizona in particular has been very active. Attorney General Terry Goddard has brought seizure warrants against suspect money transfers, and between 2003 and 2007 has seized over $17 million through intercepted wire transfers. Nevertheless, these are paltry fractions of the money heading south. Drug profits mingle among and are camoflouged by the steady stream of remittances sent by Mexican migrants in the United States. Finding the DTOs funds among the billions sent every year by millions of people without proper documentation in the U.S. will remain a huge challenge.

Immigration reform would alleviate in part this security challenge. While legislators differed in recent years over various issues, every realistic immigration reform proposal presented includes a process for undocumented immigrants to step forward and undergo background checks in order to receive proper documentation. This process would, first of all, help authorities identify criminals among the undocumented immigrant population. It would also facilitate migrants’ access to formal banking, and in the process help separate legal and illegal money flows and transactions. Bringing the United States’ over 11 million undocumented immigrants out of the shadows would limit the DTOs main monetary hideout.

Immigration reform would also cut into DTOs profits in other ways. As the border tightened and the cartels’ territories changed, many DTOs diversified their businesses beyond drugs into kidnapping, extortion and other types of smuggling – including people. The tighter border means would-be immigrants are increasingly using coyotes, or smugglers, to help them cross, and in the process funding these criminal organizations. The rates charged by smugglers have climbed precipitously in recent years from about $500 to close to $3,000, and there are also reports that some force migrants to carry drugs with them as part of their payment. An immigration reform that recognizes the supply and demand forces in the bilateral labor market, and provides a legal means for Mexicans to enter the United States would cut back on this flow of illegal entries, again hurting the profits of the drug cartels.

Finally, a recent Departmant of Justice Report shows that Mexican DTOs have established networks in over 200 U.S. cities. This distribution chain – the anchor of their business – thrives in part because these nefarious elements can hide among a larger population forced to live underground. Fearing deportation, undocumented individuals are unlikely to contact the authorities about suspicious activity, to report crimes, or to step forward to cooperate with U.S. authorities. Immigrants’ marginal status in the United States gives many criminals refuge.

As Mexico becomes a foreign policy priority, the Obama administration should not lose sight of the broader bilateral relationship. A myopic focus on security will not only limit a much broader agenda, but it will hinder the very efforts to improve security. Issues of security, immigration, trade, the environment, and infrastructure are interrelated, and success in one area will remain dependent on success in the others.

 Photo courtesy of Flickr user Daquela Manera under a Creative Commons license.

Tuesday’s results show that Latinos were crucial in many states that switched from red to blue. In 2004 56% of Florida’s Latinos (639,225) voted for George Bush, propelling him to a 5% (380,978 vote) victory. This time around, 634,500 Latinos—57%—voted for Obama, propelling him to victory with a 2.5% (204,577 votes) margin. Despite the still solid Republican vote of Florida’s Cuban-Americans, the growing non-Cuban Latinos pushed Obama over the top. Latino votes for Obama also exceeded his margin of victory in Colorado and New Mexico. In Nevada and Virginia, Latino votes also played an important, if not decisive, role in moving Nevada and Virginia into the Obama camp. All told, without the Latino vote, Obama would have won 41 fewer electoral college votes. Not a deal breaker, but this demographic helped orchestrate his electoral college landslide last Tuesday.

Nearly one out of every two new Americans is Latino, meaning this demographic could increasingly dominate the future electorate. But to do so, they have to get out the vote. While 10 million voters is a record, it means that nearly 7 million eligible Latino voters didn’t make it to the polls. That places Latino turnout at 58% – below the country’s 62%, and particularly lower than white voters’ 67% . To strengthen their political heft, and shape the issues that matter to them such as education, the cost of living, jobs, health care, and immigration, turnout will have to increase. As Latinos expand to become 30% of our population (expected by 2042) the question will be whether this population resides in the heart, rather than the margins, of American democracy.

To kick things off, here is a link to a new Independent Task Force report from the Council on Foreign Relations, titled U.S.-Latin America Relations: A New Direction for a New Reality. The Council brought together 19 individuals of various interest and expertise under the chairmanship of Charlene Barshefsky and General James T. Hill. As director of the project, I can attest to the long hours of intense and at times spirited discussion among its members.
The group decided that U.S. policy should focus on four critical areas: poverty and inequality, public security, migration, and energy integration. The main recommendations are the following:

Poverty and Inequality:

• U.S. should expand targeted assistance for poverty alleviation and institution building by fully funding the Millennium Challenge Account and developing new initiatives to reach the poor regions of the larger middle income countries. These programs should reflect the priorities of Latin American governments and also involve restructuring and integrating the programs of various U.S. government bureaucracies and multilateral institutions.
• Alongside aid, the United States should approve pending free trade agreements with Colombia and Panama and extend trade preferences to Bolivia and Ecuador to encourage productive relations with these complex countries.

Public Security:

• The United States should assist Latin American countries in strengthening their law enforcement and judicial systems. Only through strong institutions can criminal networks and drug traffickers be controlled in the long term. The United States should also focus more on the demand side of the drug equation, working closely with other large drug consuming nations, specifically those in the European Union.

Migration:

• Push through a comprehensive reform in 2009. This must deal with border security, employer responsibility, some sort of regularization of the 12 million unauthorized workers here today, and a flexible guest worker program to deal with future labor demands.

Energy Security:

• The United States should provide FDI incentives to help build energy infrastructure i the region. It should also sponsor regional and subregional working groups to forward best practices.

Finally, the task force touches briefly on 4 bilateral relations. It recommends deepening U.S. relations with Brazil to promote global trade negotiations and manage energy demands; strengthening cooperation with Mexico to stop narcotics trafficking, increase U.S. investment in energy production, and reform immigration policies; using multilateral institutions to address foreign and domestic policies of Venezuela; and opening informal and formal channels of communication with Cuba, with the eventual goal of lifting the embargo.

While these monetary flows often do lift recipients out of poverty – providing adequate food, clothing, and shelter – they do little to stimulate local or national economic growth through productive investment. And as private money, unlike foreign aid or even FDI, it has been hard for governments to direct this capital into development-oriented projects. How can governments stimulate investment through public policies without hurting these flows?

So far, governments have focused on reducing the costs of transmitting remittances through formal channels such as banks with quite a lot of success. The costs of transferring money abroad have fallen precipitously, allowing migrants and their families to keep more of the funds earned. Also, migrants and their families are beginning to put funds in local and international banks, leading to more savings and investment capital. But these changes, while beneficial, do not in and of themselves increase investment in productive activities in their home communities. The amounts in individual accounts are small, and still used primarily for consumption by local families. In addition, banks often pool these savings from remittance receiving communities and invest them in larger amounts in more attractive loan markets, such as the capital cities in each country. This limits local economic development in the places most starved for investment capital.

Another set of public policies, prevalent in Mexico, involves matching funds for local community investment. Dubbed “3 for 1” programs, migrant groups pool together funds for infrastructure investments – for instance local roads or schools – and the federal, state, and local governments each match a peso. While helping local communities, the actual size of these programs is quite small, estimated at roughly US$70 million in investment last year. Many also question why migrants are funding 25% of public infrastructure for which the state should ultimately be responsible.

Mexico recently announced another pilot program aimed at directing remittances into rural economic development (Houston Chronicle 12/24/07). Unlike earlier policies, this program targets productive private investment. And, it focuses on agriculture, ensuring that these funds go back to the communities of origin of many migrants. While obviously in the initial phases, this incentive structure is promising. It may actually get at the elusive goal of economic development in the hardest hit areas of the national economy – the areas most likely to send large numbers of migrants abroad. If tied to capacity building and technical assistance programs – either provided by the Mexican government, non-profit organizations, or international aid such as USAID – this type of program could become and important step in promoting economic development, and ultimately providing citizens the choice of staying home.

Interview November 6, 2007

He was returning to Mexico “ to a small town in Morelos “ after almost two years in the New York area. The main reason was to see his family: his wife, children, parents, and other relatives. While he never had working papers, during his two years he held jobs in restaurants, hotels, and most recently in a supermarket. He came to the United States with four friends, easily crossing the border, ending up in Los Vegas, flying to Boston, and then making his way down to New York.

He was both happy and sad about his return: happy to see his family after such a long absence, but also sad to leave the opportunities of the United States. He told me he plans on driving a taxi (his family has an extra car) and perhaps studying to get a certificate to join the municipal police or a private security company. But, if it doesn’t work out, he will migrate again to the United States. His employer at the supermarket told him to hurry back, saying there would always be a position for him. If he does return, it will only be for a limited amount of time again, so he can earn more money to help out his family.

His story is similar to that of so many migrants. He doesn’t want to stay in the United States: his home and family are in small town Mexico. But he also is searching for better economic opportunities to provide for his family. He is engaging, like so many others, in “circular migration,” moving back and forth between Mexico and the United States. Yet with the current U.S. migration system, this behavior is becoming increasingly difficult. With no legal means to come, and the rising costs of illegal crossings, many migrants are returning less often and are even deciding to settle in the United States permanently. But this situation leaves no one happy. For the United States millions of individuals continue working and living in the shadows, and for the Mexicans, they remain far from their home.