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.
Presidents Chavez of Venezuela, Fernandez of Argentina and Rousseff of Brazil chat while posing for a family photo during the CELAC summit in Caracas (Carlos Garcia Rawlins/Courtesy Reuters).
As 2011 comes to an end, I want to reflect on just a few trends affecting the region over the course of the past year. While these developments certainly have long histories, they have all become more noticeable – and noteworthy – in 2011. To keep it interesting, I will be posting one trend a day for the rest of this week, so check back — and let me know what you’d add to the list in the comments or via my twitter account (@latintelligence).
This hasn’t been a good year health-wise for Latin American leaders. Cristina Kirchner’s recent diagnosis of thyroid cancer is just the latest. The most mysterious, and politically game-changing health challenge is that of Hugo Chávez. Officially, Cuban doctors removed a reportedly “aggressive” pelvic tumor in June, and since then he has undergone chemotherapy and steroid treatment. Though he claims to have conquered the disease, others (including his former doctor) say he may not live more than two years.
Last year, Paraguayan President Fernando Lugo was diagnosed with non-Hodgkin’s lymphoma, and spent four months in chemotherapy and in and out of hospitals. According to the most recent tests, his cancer is in remission. In Brazil, President Dilma Rousseff continues some treatment for lymphatic cancer (discovered during her 2010 presidential campaign) and former President and still political heavyweight Luiz Inácio Lula da Silva has just begun his final round of chemo for throat cancer (diagnosed in October). Pictures of the famously bearded leader now show him hairless, though still beaming. There were also rumors circulating that Evo Morales had a cancerous tumor in his nose, though this was never proven.
This type of illness has idiosyncratic, but nevertheless real effects on politics. It can weaken a politician due to their physical absence from the public limelight as well as political backroom negotiations. Lula’s Worker’s Party (PT) will sorely miss his active leadership, especially in the run up to local elections in 2012. Kirchner is expected to make a quick recovery after surgery, though she will turn power over to her Vice President Amado Boudou (a close political confidant) for three weeks in January. It remains to be seen whether these absences will make a significant mark on either country’s internal politics.
Javier Corrales, a political scientist at Amherst, has written about a different role for illness, and its potential to strengthen rather than diminish the political patient. Calling it “participatory cancer” he chronicles Chávez’s attempts to turn his illness from a disadvantage to an electoral strength. By brandishing cancer and his fight as an electoral gimmick, the Venezuelan leader distracts voters from more serious problems (such as a floundering economy and rising crime).
While continuing to watch the political fallout, let’s hope the new year brings health to all.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Former Guatemalan dictator Efrain Rios Montt leaves the public prosecutor's office in Guatemala City (Jorge Lopez/Courtesy Reuters).
This is a guest post by Natalie Kitroeff, a research associate here at the Council on Foreign Relations who works with me in the Latin America program.
Last Thursday, former de facto President of Guatemala during military rule, General (ret) Efraín Ríos Montt walked into the Attorney General’s office to ask whether they planned on trying him on ten-year-old war crime charges anytime soon. He stands accused of committing genocide and crimes against humanity against indigenous civilians in the early 1980s – the most violent years of the country’s civil war. Flanked by his lawyer and a gaggle of reporters, he calmly told public prosecutors, “I’m here, I’m healthy, and I’m not afraid… if there’s a criminal investigation against me, it should go forth according to due process and I should stand trial.” While this may seem like an ill-advised move, it’s actually quite cunning given the weak hand he now holds.
When the new legislature takes office next month, Ríos Montt will officially lose his congressional seat, and with it his immunity from prosecution (granted to all members of congress unless they’re removed by court order). What’s more, the party he led for over two decades – the Guatemalan Republican Front (FRG) – is weaker than ever – winning just 2 percent of the vote in local elections last September. This is not good news for Ríos Montt, who has had his differences in the past with incoming president Otto Perez Molina. Longstanding tension between the two came to a head in 2000 when Perez Molina left army ranks to form his own Patriot Party (PP) after the ruling FRG government denied him a top spot in the military.
The newly strengthened Attorney General’s office may be an even bigger problem for the aging ex-General. With Claudia Paz y Paz at the helm this year, the Public Ministry has shown that it is willing and able to aggressively pursue his case, convicting four soldiers and charging five more for their roles in two massacres that occurred on Ríos Montt’s watch. But if he leaves the country he risks facing an even fiercer opponent in Spain’s National Court, which issued an international arrest warrant for Ríos Montt on genocide charges in 2006.
An obvious reason why Ríos Montt turned himself in voluntarily is that he wants to avoid the embarrassment of a very public arrest. He also may be angling to get in the good graces of public prosecutors, who have already detained his third in command, former Chief of Staff Hector Mario López Fuentes for acts of genocide. He has made clear that he intends to shed all responsibility onto his subordinates, using the excuse that he was the political, not the military leader during the civil war and was not aware of any human rights abuses. Regardless of his motives, the fact that Ríos Montt has to engage with the charges at all shows that something may finally be right with Guatemala’s fledgling justice sector.
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.
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.
