Venezuela's opposition Democratic Unity coalition potential presidential candidates attend a second debate in Caracas (Jorge Silva/Courtesy Reuters).
Though fewer in number than in 2011, the two Presidential elections on the docket for 2012 will make up for it in terms of their importance in the region.
The first will happen in July in Mexico. Leaders of the Institutional Revolutionary Party (PRI) are already talking about not only winning Los Pinos, the Mexican White House, but taking the “carro completo” – gaining a majority in the House and Senate. Recent trends favor the PRI – they won four out of six governorships in the 2011 midterm elections, now control almost half of the 500 seats in Congress, and have united behind Enrique Peña Nieto, the young, handsome former Governor of the State of Mexico. The National Action Party’s (PAN) close association with rising violence – as Calderón made the war on drug traffickers his signature issue – will likely hurt the incumbent party’s chances, whomever wins their presidential nomination in February. And the Party of the Democratic Revolution’s (PRD) choice of Andrés Manuel López Obrador (AMLO) –who lost to Calderón in 2006 by a razor thin margin (he claims the election was rigged) – suggests this party too is stuck in the last sexenio, which should also benefit an energized PRI.
Though many see the race as locked up, there are still six long months to go. The PAN has yet to choose its hopeful, and current front-runner Josefina Vázquez Mota could shake up the race as the first female presidential candidate from one of the main political parties (and due to her distance from President Calderón). AMLO too has been working to revamp his image away from the combativeness of the last five years, talking to the media about “love and peace,” and saying recently, “I want to be the Mexican Lula,” the market friendly former president of Brazil. His poll numbers have risen, and even some business leaders have switched over to AMLO’s camp. Peña Nieto has stumbled a few times in unscripted moments, for instance when he couldn’t name his favorite books (even as he hawked his own campaign book) at the Guadalajara International Book Fair. Some wonder if he can hold his own in a debate.
If the PRI does triumph, domestic and international observers alike will be watching to see if Peña Nieto is in fact the epitome of the much heralded and marketed “new PRI” – a modern, democratic, grassroots party — or if he is just a young face for the “old PRI,” one more used to back room deals, corruption, and opaque governance.
Venezuela too heads into Presidential elections in October, with Hugo Chávez now running for his third six-year term. Many things seem the same – already the opposition is denouncing the regime’s electoral machinations (such as moving up the election date from December to October 2012) and repression of anti-Chávez media.
Some things, though, are different, making the elections interesting for observers and for Venezuela’s future. First, the opposition has finally come together [learning its lesson in 2005 when it boycotted legislative elections and was left out in the cold, allowing Chávez and his United Socialist Party of Venezuela (PSUV) to govern unchallenged]. It will hold a February primary, where voters will choose between six candidates, including front-runners Henrique Capriles Radonski, Governor of Miranda state, and Pablo Pérez, Governor of Zulia state. This early on, the opposition holds a much stronger position in opinion polls as well. Recently released data place Capriles Radonski just two percentage points below Chávez in the general election.
The biggest difference though is Chávez – and his health. Though he claims to have beaten cancer, others, including his former doctor, believe he may not live more than two years. Worries of succession continue to plague PSUV, as all recognize none can replace the charismatic (if erratic) leader. This 2012 election lead up will be one to watch – for Chávez’s health and his ability to campaign, for ever increasing electoral shenanigans and repressive measures (particularly if the ruling party feels their candidate is flagging, either in his health or the polls), and for the broader actions and reactions of Venezuela’s society, and its international neighbors.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Britain's Prime Minister Cameron stands with other leaders during the family photo session of the G20 Summit in Seoul (Courtesy Reuters).
2012 will be a year to watch Latin America’s rising role on the multilateral stage. The hints of Latin America’s growing stature were already there in 2011. In November, International Monetary Fund (IMF) head Christine Lagarde toured the region, meeting with Brazil, Mexico and Peru to ask for help (and extra funds) to stabilize Europe and the eurozone. But 2012 will be the real stage, as both Mexico and Brazil – the region’s largest economies – take the reins.
The first stage will showcase Mexico’s role at the helm of the G20. Its year of leadership will culminate in the annual summit to be held in Los Cabos in June 2012. Given the eurozone crisis, fights over currency valuations, and volatile financial markets, the path will be choppy at best. Mexico ambitiously wants the issues of the structure of international financial regimes, food security and financial inclusion all on the table, with the goal of transforming, at least somewhat, the role and mandate of this vital multilateral institution for the future.
The second major event will be the 2012 Earth Summit to be held in Rio De Janeiro (just one day after the Group of Twenty meet). It commemorates the first groundbreaking 1992 Earth Summit (also in Rio), where the United Nations Framework Convention on Climate Change (UNFCCC) was adopted, and which still forms the basis of the global climate change regime today. But the Brazilians hope for more — to push forward with international negotiations, perhaps even setting the agenda for the next twenty years. There are real doubts as to what can actually be achieved (particularly given what little happened in Durban, South Africa, which hosted the last UNFCCC negotiation late last November). But, whatever the odds stacked against it, Brazil will be at the fore, burnishing both its environmental credentials as well as its aspirations for global leadership.
Neither climate change nor world financial stability are easy sells today. But both depend on multilateral actions. And whether progress is made in 2012 will very much depend on the leadership of Latin America.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Central American immigrants await a train departure to the north of Mexico, on top of a freight train in Arriaga, Chiapas (Jorge Lopez/Courtesy Reuters).
Looking ahead to the new year ahead of us, these next two weeks I want to look at important developments affecting Latin America that are worth keeping a close eye on in 2012. The first is the changing nature of immigration.
The flow of immigrants from Latin America to the United States, a constant and often accelerating trend of the last three decades, slowed in 2011. The most prominent was the change from Mexico. New arrivals fell off a cliff, with apprehensions at the border hitting their lowest levels in seventeen years. The drop is so great that Doug Massey, head of the Mexican Migration Project (a long term survey of Mexican emigration at Princeton University), claims that for the first time in sixty years, Mexican migration to the United States has hit a net zero.
Though Mexico is the single largest source of migrants to the United States, providing roughly a third of all newcomers, they weren’t the only change. Anecdotal evidence at least suggests that many Brazilian migrants – which once numbered around one million – started heading home as well. Unemployment fell to all time lows, and numerous articles pointed out the labor scarcities both for high and low skilled workers.
There are many reasons behind these trends, some general, some country specific. Many point to the Obama administration’s rather tough immigration policy as one reason for the decline. A record-breaking 400,000 immigrants were deported last year, and immigration prosecutions increased almost eighty percent along the U.S-Mexico border in the last four years. For Mexico, others speculate that the rise of organized crime and violence along the border may deter some from contemplating the journey (though studies, such as that done by Jezmin Fuentes et al., suggest this may be less of a deterrent than many claim).
An important factor is the weak U.S. economy. With unemployment rates hovering at just over eight percent, there are fewer jobs for natives and migrants alike. This has occurred at a time when many of their home countries are growing steadily – at a decent 4 percent regional average clip, and much more in particular countries and economic strongholds. Better job opportunities in the region broadly — but particularly in Brazil — encouraged many to return home, and kept others from leaving at all.
Looking ahead, a U.S. economic recovery would recreate the pull north for Latin Americans seeking to improve their lot. If the Chinese economy stumbles this too could slow returns, or push more migrants north (especially from Brazil, which counts China as its largest trading partner). Meanwhile, flows from Central America are likely to continue as long as economic opportunities there remain scarce. The real question is Mexico. There, demographics have already shifted, with fewer Mexicans coming of age and entering the work force each year. As a result, the Mexican immigration boom of the 1990s and early 2000s is unlikely to be repeated ever again.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
A stuffed bear hangs from a cross of a child's grave at the children section of the San Rafael cemetery in Ciudad Juarez (Courtesy Reuters).
Latin America has the ignominious distinction of being one of most violent regions in world. Though not known for its wars or even (at least violent) border disputes, homicide rates average nearly 20 per 100,000 people. Central and South America are among the most murderous regions worldwide, behind only Southern Africa. Six of the ten most violent nations in the world are in Latin America, with Honduras and El Salvador claiming the number one and two spots. The biggest headline-grabber this last year has been Mexico, which counted some 12,000 deaths in 2011 and over 40,000 drug related homicides since the start of President Calderón’s term (non-official estimates put these numbers even higher). Though Mexico is not the most violent in per capita terms, this escalation has deeply impacted the country.
But the region’s security outlook is not all gloom and doom. Ciudad Juárez, still Mexico’s most violent city, saw its homicides drop by almost half since 2010, to just under 1,700 this year. Given the well-documented inertial effect of violence (i.e. violence tends to breed more violence, ratcheting up the effect over time), this is a doubly encouraging trend. Further south, the Brazilian government rolled out its “Favela Pacification Program” beyond the original pilot (launched in 2008), sending Police Pacification Units (UPPs) to 19 favelas in Rio de Janeiro. Since last year, the city’s homicide rate dropped 13 percent and armed confrontations with police were down by a quarter. Meanwhile, Guatemala enjoyed a relatively peaceful year, with a slight (2.5 percent) decline in murders, bringing its homicide rate under 40 for the first time since 2004.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Customers look at laptops at a Wal-Mart store in Mexico City (Henry Romero/Courtesy Reuters).
Another 2011 trend is the rise of the middle class. While in the United States article after article – as well as the country-wide “Occupy Wall Street” protests — denounced the decline of the middle class, in Latin America the middle continued its gains. Despite the tougher international climate, economic growth averaged over 4 percent, and unemployment rates fell to 6.8 percent (from 7.3 percent in 2010). Perhaps more important, GINI coefficients – which measure inequality — lowered slightly to just over 50 (from roughly 53 in 2000). This means that the growth that happened actually spread to the bottom and middle of the pyramid.
There is an ongoing debate about how to measure the global middle class. Some of these issues I addressed in this past post. But whatever the starting point, the 2011 regional trend was positive. In Brazil, the middle topped 100 million, in Mexico it reached 67 million, and in Argentina more than 21 million.
This doesn’t mean Latin American nations don’t continue to struggle with poverty. According to the latest World Bank data, just under 30 percent of the population — 160 million people — lives on less than $4 a day (in PPP terms), and 14 percent — some 80 million — live in abject poverty (on less than $2.50 a day). The growing middle though does show the path forward, and reinforces the goal for those concerned with the less fortunate, helping them too rise the economic ranks into a more comfortable middle.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
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.
