A truck of the Mexican company Olympics bearing Mexican and U.S. flags approaches the border crossing into the U.S., in Laredo (Courtesy Reuters).
It is worth reading the Woodrow Wilson Center Mexico Institute’s new study by Christopher Wilson, entitled “Working Together: Economic Ties between the United States and Mexico.” The report is packed with examples and statistical evidence of the deepening integration between the United States and Mexico since 1993 (the signing of NAFTA), and concisely explains why this relationship is so important and beneficial for the United States.
In terms of trade, for nearly half of U.S. states, Mexico is the number one or number two export destination. For border states such as Texas, New Mexico, and Arizona, up to a third of all exports head to our southern neighbor. But it isn’t just a border issue – export industries in states as far flung as New Hampshire, South Dakota, Nebraska, and Missouri all depend on Mexican industries and consumers. And these are some of the most dynamic trading relations we have. Twenty U.S. states increased exports to Mexico by more than 10 percent each year over the last fifteen years. Investment also flourished. Mexican FDI in the United States, though starting at a low base, increased tenfold over the past two decades.
The report shows that trade with Mexico is particularly beneficial to the United States because these goods incorporate many parts and products produced in the United States. In fact, even though fully counted as imports in official trade data, an estimated 40 percent of the value of Mexican products is actually “made in the USA.” Only Canada comes close to this ratio (25 percent). In stark contrast, only 4 percent of the value of Chinese imports is made on U.S. soil. This means that products coming from Mexico support homegrown industry and labor. In fact, 6 million American jobs – or 1 out of every 24 – depend on Mexican trade. The study breaks down employment by state – showing for instance that some 200,000 Georgians, 120,000 Indianans, and 100,000 Coloradans owe their jobs to Mexico. Other studies show that export oriented jobs pay more than others, further benefiting U.S. workers. And what is good for Mexico is good for the United States — Mexico’s strong 2011 economic growth should create 150,000 new U.S. jobs.
The report interestingly points out how the United States is now competing with China and others to supply parts and materials used in Mexican production. Here, worryingly, the United States is falling behind – losing market share to its Asian rivals. Part of the problem is the border. Overwhelmed infrastructure, and long and unpredictable wait times at crossings limit competitiveness, costing taxpayers billions in lost revenue and jobs.
There are some signs that these issues are at least appreciated. In 2010 three new border crossings opened, easing congestion along the dense 2,000 mile border, and under its “21st Century Border” project, the Obama administration is working to make commercial and other crossings more efficient and secure. But a conceptual shift is still needed. U.S. politicians, business owners, workers, and the general public need to understand that the path to improving U.S. global competitiveness –defending American industry in the process – runs through, rather than around Mexico (and Canada). Regional integration is vital for U.S. economic recovery and growth going forward.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Source: UNCTAD World Investment Report 2011
In the wake of the 2008 economic crisis, economists, investors, and even politicians have pinned their hopes on the major emerging markets as the new engines of global growth. International Monetary Fund Managing Director Christine Lagarde’s recent visit to Latin America (she has also made the rounds in China, Russia, and Japan) demonstrates this increasingly prominent macroeconomic role. Perhaps a first, the multilateral head came to ask for funds, not lay down rules. But for emerging economies to truly drive global growth, the real engine will be the private sector. While less measured than central bank reserves or monetary flows, anecdotal evidence suggests that this too is happening – with foreign direct investment now flowing from emerging to more mature economies. And it isn’t just China searching for bargains.
A recent example of this worldwide trend includes Mexican-based Grupo Bimbo’s purchase of Sara Lee’s U.S. and European operations for close to $1 billion. The acquisition caps a two decade-long global expansion, buying up brands such as Entenmanns and Thomas’ and establishing plants in places as far flung as Beaverton, Oregon and Fort Worth, Texas. Begun by Spanish immigrants, Grupo Bimbo began with a family cake shop on the outskirts of Mexico City. In the post World War II economic boom the Servitje family expanded into breads, cookies, and candies, delivering their wares first in Mexico City, then throughout Mexico, and now throughout the world. Today Bimbo owns plants in 19 countries, and is the largest baker in the United States.
Other recent acquisitions – such as Lenovo’s purchase of German electronics supplier Medion and Tata Group’s buyout of Jaguar and Land Rover – show a similar shift. To be sure, U.S. and European capital still pour into emerging economies – even in the midst of the global recession. FDI from developed to emerging economies nearly doubled from 2007 to 2010. It is not just diplomats but also Wall Street and the City of London that are adapting to a multipolar world. Developing countries are investing abroad more than ever, eating into advanced economies share of overall FDI outflows (down from 84 percent in 2007 to 71 percent in 2010). Most of the investment outflows (almost two thirds) go to their emerging market peers. This, perhaps more than other factors, will lead to the touted “rise of the rest.”
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
A pharmacy employee looks for medication as she works to fill a prescription while working at a pharmacy in New York December 23, 2009 (Lucas Jackson/Courtesy Reuters).
The U.S. Substance Abuse and Mental Health Services Administration recently released the findings of its 2010 National Survey on Drug Use and Health (NSDUH). The report draws on data collected from face-to-face interviews of 67,500 people aged twelve years or older across the United States (the U.S. government has been conducting this type of research since 1971). Of the many findings in the report, some of the most interesting include:
Over 22 million Americans used drugs in the month before the survey; about 9 percent of the population over twelve years old and a slight uptick from 2008 numbers. City-dwellers (9.4 percent) were more likely to use drugs than those residing in more pastoral settings (3.7 percent), and Westerners (11 percent) got high more often than Southerners (7.8 percent). Men were almost twice as likely to use drugs than women, and they liked to smoke pot. And perhaps not unsurprisingly, young people—aged eighteen to twenty-five—were more likely to use drugs (21.5 percent) than other age groups.
The most popular drug was marijuana—consumed by over 17 million Americans—and its usage is trending upward. An estimated three million more Americans were toking up in 2010 as compared to 2007. Cocaine, ecstasy and meth use stayed flat or fell over a similar time period.
The trends for the non-medical use of prescription drugs are perhaps the most interesting and challenging for current drug policies. An estimated seven million Americans got high on prescription medications in the month prior to the survey; over five million using pain killers. The popularity of prescription drugs is evident in the increasing number of people trying them for the first time each year (some two million), and the doubling of emergency room visits for pain killer abusers from 2004 to 2008. Prescription pain killer abusers seeking publicly funded rehab also tripled from 2002 to 2009.
While the conventional wisdom holds that America’s drugs come from Mexico and Latin America, the study shows this is not wholly true. Prescription drugs were almost exclusively created, bought, sold, and consumed north of the border. Over half of those using and abusing prescription drugs received them from a friend or relative. Fewer than 5 percent got them from a stranger or the internet. Just a fraction of these sales then can be linked back to international cartels. When policymakers debate thorny questions of drug use and international drug enforcement, it’s wise to remember that cartels, though formidable, are hardly the only suppliers in a vast American drug market.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Soldiers stand guard in their military vehicle outside a clandestine drug processing laboratory discovered in Zapotlanejo (Courtesy Reuters).
There are many theories out there about why we have seen a huge uptick in violence in Mexico – now running close to 25,000 homicides a year. An interesting academic paper by Melissa Dell, PhD candidate at the Massachusetts Institute of Technology (MIT), tests one particular theory – elaborated by Eduardo Guerrero among others — that the policies spearheaded by Calderón and the PAN more generally have actually caused the increase in violence. To do so she uses statistical models to examine how PAN victories in close mayoral elections affect violence locally, and whether they have “spillover effects”, causing traffickers to divert their routes to neighboring municipalities.
She finds that when a new PAN mayor comes in after a close election, homicides become 9 percent more likely, and drug traffickers are much more prone to have confrontations with the police. The movement of drugs also shifts to nearby towns — causing an increase in violence there — confirming the so-called cucaracha, or cockroach, effect. Dell argues that government’s policy is behind these statistically significant differences, and specifically that the PAN’s decisions — from top to bottom — to take on drug traffickers more aggressively than other parties is behind the surge.
This rigorous analysis is extremely helpful, and is the type of work that academics should be sharing with policymakers on both sides of the border. Yet we should also be mindful of the limitations. For one, Dell only considers locally produced drugs – marijuana, heroin, meth – leaving out the biggest cash cow, cocaine. Her analysis also exclusively focuses on drugs and not organized criminal groups’ other businesses such as extortion, kidnapping and human trafficking (she does nod to these, but finds no adequate dataset to use). As the business model has changed, so too have the targets, bringing these criminal groups much closer to the general population –as customers and as prey.
This leads to the third limitation – the assumption that “more than 85 percent of the [drug] violence consists of people involved in the drug trade killing each other,” a figure repeated a number of times without any footnotes. Though this has also been the mantra of the federal government over the last five years, so far neither the Mexican government nor outside sources have provided any proof that this is true. Of the nearly 50,000 drug trade-related deaths since 2006, the Attorney General’s office has investigated less than 1,000 (and solved less than 350). Given the shifting commercial interests of the criminals (bringing them closer to innocent civilians), it seems doubtful that the deaths are still almost all between the gangsters themselves, or that the percentage of bad guys killing bad guys hasn’t changed. Indeed, as a recent Human Rights Watch report points out, there are many cases of misclassification, where the authorities presume that murder victims are linked to drug traffickers until proven otherwise (which they rarely are, since the Attorney General’s office investigates less than 2 percent of the killings). The rise in extrajudicial killings by the military, also laid out in detail by Human Rights Watch, further questions these claims.
Finally Dell makes the assumption – repeated in the press and elsewhere – that drug-related violence picked up with Calderón and his “war against narcotraffickers.” But the data show that the uptick started earlier, under president Fox, increasing some 40 percent from 2004 to 2005, and another 25 percent from 2005-2006. This doesn’t necessarily disqualify a PAN-ista effect (given both Fox and Calderón hail from the same party), but it needs to be explored more, as the security policies of the two differed in some respects.
The paper provides some policy suggestions, particularly regarding how to best use scarce law enforcement resources (for starters, don’t set up roadblocks). But the other more ominous implication is that if drug traffickers are rational economic actors, and PAN victories are so costly for them (in terms of relocating their routes or bringing in competitors), it makes sense for them to invest up front – and buy more local elections. As we head into 2012, all should be worried about this conclusion.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Mexican President Calderon tours Dorval Challenger Plant with Bombardier Inc. president Beaudoin in Montreal (Christinne Muschi/Courtesy Reuters).
Over the past two decades China emerged as a manufacturing powerhouse, dominating production in industries ranging from textiles to solar panels, semiconductors to wind turbines. Among the countries hardest hit by China’s rise – and ascension to the WTO in 2001 — was Mexico. In its wake, Mexico’s maquila industry shed thousands of jobs. On factory floors and the halls of government alike everyone talked about the possibility – and in many cases actuality – of plants leaving for the Far East.
But the decade long status quo seems to be shifting again, this time back in Mexico’s favor. More and more plants are opening in Mexico – a mix of new businesses as well as some returnees. One reason is the rising cost of labor in China. Where once China’s wages undercut countries such as Mexico several times over, today the differential is much lower. With China’s strong economic growth and rising per capita incomes, wages too have risen — increasing 22 percent in 2011 alone. When combined with an ever more competitive Mexican peso, many analysts estimate the labor differential between China and Mexico at just 15 percent today.
This much smaller difference no longer offsets Mexico’s geographic advantage. Particularly in a scenario of high oil prices, the long plane or boat ride away from American shores – still the world’s largest economy and consumer — is a drawback. Mexico’s maquila industry too transformed in the last decade, making the most of its strengths. Where once most of the factories lining the border were purely labor arbitrage — sewing blue jeans and crafting Converse sneakers — today an increasing number run highly sophisticated, customized manufacturing operations. Aerospace companies, including Goodrich and Bombardier, have opened operations in Mexico in the last few years, as have many other high tech manufacturers that depend on fast, efficient, technically advanced responses and that create high value added products.
This shift bodes well for Mexican growth, if it continues and expands. To do this, Mexico will need to tackle a few stubborn issues. The most obvious is security. While foreign investment continues, nearly all executives think twice before opening new facilities near the border. One can’t measure the counter-factual, but a safer Mexico undoubtedly would bring more investment, more jobs, and higher economic growth.
A second challenge is the still antiquated and at times overwhelmed border crossings. Many of the current crossings need major renovations or upgrades to help shoulder their part of the now $1 billion dollars of goods and thousands of trucks that cross each day. Waits are not only at times quite long, but also often unpredictable, throwing the delicate just-in-time delivery dance of modern manufacturing into turmoil. The new U.S.-Mexico trucking agreement should alleviate some of these costs, but only if it becomes a full-fledged, permanent – as opposed to pilot – program. With the current mandate still limited, most trucking companies are holding off on the technological investments needed to enter the U.S. market, uncertain about the future payback.
Resolving these issues should give Mexico an edge over China. But in addition, it would strengthen North America vis-à-vis its competitors in the global marketplace, benefiting the United States in the process.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Mexican Gov. Enrique Pena Nieto answers reporters' questions at the National Press Club in Washington (Molly Reilly/Courtesy Reuters).
It seems the campaign book so popular in the United States has headed south of the border. After a recent tour through Washington, DC, and New York, former governor and likely PRI presidential candidate Enrique Peña Nieto just released Mexico, the Great Hope. An efficient state for democracy with results.
Arguing that the successive PAN administrations have left the country worse for the wear, Peña Nieto lays out his vision for a government based on guaranteeing citizens’ basic rights (such as security), getting the economy growing at its full potential, and reaffirming Mexico’s leadership as an emerging power on the world stage. He calls for a number of economic reforms, including opening Petróleos Mexicanos (PEMEX) to private investment (still maintaining state ownership), as well as widening the tax base and simplifying the tax code. On security, he favors a more comprehensive strategy geared first and foremost to reducing the violence.
Most of his positions are quite sensible. Mexico needs to (and is already starting to) focus on lowering the escalating levels of violence, as opposed to concentrating on taking down drug kingpins. Economically, opening up PEMEX would increase foreign investment and improve Mexico’s overall competitiveness, boosting jobs and growth in the process. Reforming the tax code would also go a long way to enhancing and diversifying government revenues and hopefully make it easier to start up businesses. But these two reforms are also politically difficult — having been on the legislative table for years now, and repeatedly stymied by Peña Nieto’s own party. If he wins, perhaps the former governor will be Mexico’s equivalent of a “Nixon in China” – able to change the dynamics precisely because of his party’s ties to PEMEX’s union – but that remains to be seen.
Much will also depend on the United States. For Mexico to reach its economic potential, the United States will have to grow as well, as the economies today are indelibly intertwined. A U.S. immigration reform – if it happens — also could change things for Mexico. For all its big vision, the book makes clear that there is much that needs to happen during the next presidential term in Mexico to fulfill this “great hope.”
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
U.S Air Force worker, helps unload tons of relief aid at Armenia's airport, Colombia (Str Old/Courtesy Reuters).
Last week WOLA released the report “A Cautionary Tale: Plan Colombia’s Lessons for U.S. Policy Toward Mexico and Beyond.” The study is a useful reminder of the real differences between Colombia and Mexico. Unlike Colombia, where security forces fought to assert control over territory left to criminal groups, Mexico has had a strong state presence throughout the country for decades. Whereas violence in Colombia was concentrated in rural areas, in Mexico the highest rates of crime are in population centers and along drug trafficking routes.Their analysis also puts the Colombian experience into historical perspective. The real fight against drug cartels, as opposed to guerrillas and paramilitaries, happened in the 1990s – before Plan Colombia was even on the table. Successes here depended on police work by specialized vetted units, as well as a strong public prosecutor’s office – not sending the military into the streets or hills.
There are a number of good recommendations about how the United States and Mexico can apply these lessons to their joint policy on the drug war going forward. A few stand out.
For Mexico (and other countries dealing with organized crime):
• Don’t rely on the military, as it lacks the investigative capacity and the right training to provide public safety to civilians.
• Measure what matters. Rather than process (e.g. how many arrests or drug kingpins captures) the government should focus on tangible results, such as how many cases are successfully prosecuted, or how much violence and other crimes decline.
For the United States:
• Take on challenges at home – guns, money, and demand. Since the United States is asking other countries to implement politically difficult policies, policymakers at home should try it themselves – particularly because all these issues feed into the escalating violence Mexico (and other countries) face.
• Make human rights a top priority, not an afterthought. Do more than just require police and military forces to take classes in human rights, and withhold bilateral security cooperation if standards are not met.
• Let USAID take the lead in managing security assistance, not the Department of Defense or even State’s Bureau of International Narcotics and Law Enforcement Affairs, as these are likely to overlook the crucial socioeconomic side of the security problem.
For all involved: protect local populations first. In addition to safeguarding, these governments need to invest in people – protecting them through law enforcement, courts, and social policies, and creating economic alternatives to a life of crime for those that today remain on the margins.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Photographs of missing people are on display at a square in Queretaro (Courtesy Reuters).
Last Wednesday, Human Rights Watch (HRW) released its report “Neither Rights Nor Security: Killings, Torture and Disappearances in Mexico’s ‘War on Drugs’.” The report is incredibly thorough – based on two years of research in the states of Baja California, Chihuahua, Guerrero, Nuevo León and Tabasco, and incorporating information from over 200 interviews. It charges Mexican security forces with routinely violating citizens’ most basic rights during President Felipe Calderón’s six years in office, and further argues that these horrific tactics are not incidental, but endemic to the government’s drug war strategy.
Some of the most worrisome statistics and findings include:
· Formal human rights abuse complaints increased seven-fold, from 691 during the 2003-2006 period, to 4,803 from 2007-2010
· Of some 3,700 military investigations into human rights abuses in the past four years, just 15 – less than one half of one percent — resulted in convictions
· Formal complaints of “degrading treatment” – read torture — at the hands of security forces more than tripled since 2006
Based on witness testimonies and material evidence in specific cases HRW investigated they find:
· Law enforcement – including the Army, Navy, Federal Police as well as local and federal judicial investigative police — participated in over 170 specific cases of torture – including beating, asphyxiating, water boarding, electrically shocking and sexually torturing detainees
· Others facilitate this torture – medical examiners fail to document signs of physical abuse on detainees, and judges admit confessions and other evidence acquired through torture, even when the victim protests
· Law enforcement played a part in 39 “forced disappearances” and 24 extrajudicial killings of civilians
After a meeting with HRW representatives Calderón agreed to investigate the findings, though he did say that the “main threat to the human rights of Mexicans is from criminals”.
Why have human rights violations expanded so drastically? One explanation lies in the use of the military. Armed forces are trained to kill the enemy on the battlefield, not police neighborhoods to ensure basic public safety. With some 50,000 soldiers now on the front-lines of the drug war, this disconnect can lead to abuses of the rule of law.
Another reason is the profound weakness of Mexico’s judicial system. Most crimes – likely 80 plus percent — are never even reported. Of the few complaints filed, the Attorney General’s Office (PGR) investigates only one in every five; even fewer go to trial. In the end, only one to two of every hundred crimes end in a conviction. Once prosecutors do move forward with a case however, the chances of acquittal are slim, as roughly 9 in 10 of all suspects brought to court end up in jail. This has less to do with the stellar cases built around airtight evidence, and more to do with the underlying system, which is stacked against defendants – resulting in few safeguards and a de facto presumption of guilt.
Finally, Mexico doesn’t even have the laws needed in some cases to prosecute bad behavior. For instance, only eight of Mexico’s thirty-two states have laws against forced disappearances and only sixteen have formally criminalized torture. What it does have is opportunities to limit citizen rights – such as the arraigo procedure, which lets prosecutors lock up individuals for up to 80 days if they’re allegedly involved in organized crime, and vaguely defined “flagrancia” rules that dictate when police officers can make arrests without a warrant.
The spike in human rights complaints is worrisome on many levels. First and foremost, it reflects the government’s utter failure to protect thousands of citizens from itself. But more strategically, the abuses described in the report run counter to the state’s long-term aims. In order to “win” the war on organized crime, Mexico’s government must have society’s support. Egregious human rights violations will just push away the one force the narcos can’t match. To end drug related violence, Mexico must construct a truly democratic rule of law, in which the means to and the ends are one and the same. To do so, the government must track and punish human rights abuses and abusers as fervently as it does those on its Most Wanted lists.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Mexico's Former Interior Minister Blake Mora applauds during a discussion with victims of the violence in Mexico City (Courtesy Reuters).
Mexico’s interior minister, Jose Francisco Blake Mora and seven others, including Deputy Interior Minister Felipe Zamora and spokesman Jose Alfredo Garcia, died tragically today in a helicopter crash. They were flying from Mexico City toward Cuernavaca for a meeting with prosecutors in Xochitepec, Morelos. His death comes just a week after the three year anniversary of the tragic death of one of his predecessors, Juan Camilo Mourino, who also died in a plane crash in November 2008. There is no evidence yet (in either case) that foul play was involved — though conspiracy rumors are sure to fly.
The interior minister is no longer the preeminent government post (once second only to the Presidency in terms of power), but it is still a vital Cabinet position, and one crucial for executive-legislative relations, for coordinating the work of various ministries and secretariats, and importantly for the government’s security strategy. While a blow to the government and its security team, Mora’s death won’t likely change the Calderón government’s broader drug war policy during this last year of his administration. Sadly, it will mean that the administration will now be searching for a fifth individual to fill Blake’s shoes.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
U.S. Border Patrol agent Celso Ramos (R) looks at surveillance camera video from cameras looking at the U.S. - Mexico border May 2, 2006. (Rick Wilking/Courtesy Reuters).
The U.S. Government Accountability Office (GAO) released a detailed report last week that criticizes attempts to patrol the Arizona-Mexico border using high-cost technologies.
The report comes ten months after the cancellation of SBInet, Boeing’s “virtual” fence project that started in November 2005 and eventually cost the United States over one billion dollars. While the project in theory required less manpower and provided 24/7 patrols of the border using surveillance towers and software platforms, in practice the results were dismal. Criticism of SBInet ranged from outright technological failures, to poor oversight, to few measurable success metrics.
Although the Department of Homeland Security ended SBInet’s expansion, the GAO report makes clear that the broader emphasis on such technologies has hardly waned. The flawed SBInet system will actually continue to operate along 53 miles of Arizona’s 387-mile border with Mexico, and Customs and Border Patrol (CBP) estimates spending $36 million dollars to continue that project through 2012. The successor to SBInet, the Arizona Border Surveillance Technology Plan, will be a mixture of different surveillance technologies and platforms, with funding requests totaling $427 million over the next two years. The GAO report indicates that the new systems also lack quantifiable metrics or thorough cost-benefit analyses; some of the same problems that plagued SBInet.
To many, “virtual” fence technologies seem like an answer to immigration issues along the U.S.-Mexico border. But, like other attempts to wall-off Mexico from U.S. border states, they simply haven’t worked.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
