Venezuelan President Chavez looks on as his Brazilian counterpart Lula da Silva speaks during their meeting at Miraflores Palace in Caracas in July, 2010 (Jorge Silva/Courtesy Reuters).
Jorge Dominguez’s recent testimony before the Senate Subcommittee on Western Hemisphere gives an overview of Latin America’s progress toward democratic consolidation in recent history, and the role the international community has played in this slow, but steady, march.
Time and America’s Quarterly have two good pieces on Mexico’s state level elections last weekend. While both rightly focus on the PRI’s strength coming out of the election, it didn’t win everywhere. The party lost nine municipalities it previously held in the state of Hidalgo, due in large part to successful alliances between the PAN and PRD. Meanwhile, the PRD mayor of Mexico City urges that these ties must become stronger to give his party and its allies a fighting chance in the 2012 presidential elections.
A recent New York Times article looks at the current state of illegal immigration from Mexico to the U.S., highlighting how changing dynamics within both countries dissuade Mexicans from crossing the border illegally. This discussion addresses issues I raised in the past, namely changing demographics and new economic realities, including the rise of the middle class in Mexico and the region more broadly.
Lastly, for readers worried about Brazil’s overheating, this Economist graph won’t calm your fears.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
A girl stands in front of a mural as she waits for Spain's King Juan Carlos and Queen Sofia for the inauguration of a public library in a suburb of Medellin (Jose Gomez/Courtesy Reuters).
I wrote this op-ed for Bloomberg Views on the lessons for Mexico from Colombia’s wealth tax.
In 2002, strife-torn Colombia took a bold step that paved the way for vastly improved public safety. Now Mexico is struggling to subdue drug wars that have killed almost 40,000 people during President Felipe Calderon’s tenure. It’s time to try the Colombian remedy.
Part of Colombia’s success can be traced to Plan Colombia, the multibillion-dollar U.S. assistance package. That plan concentrated on beefing up military capacity, professionalizing the police and reforming Colombia’s judicial system. The desperately needed money and strategy helped pull Colombia back from the brink of chaos.
Just as important — and much less heralded — is a transformation within Colombia. The country’s privileged rallied together, not just to demand better security but also to shoulder responsibility. In 2002, newly inaugurated President Alvaro Uribe and Colombia’s elites negotiated a wealth tax. In the decade since, the tax has raised nearly a billion dollars annually for security. It also changed the nature of the fight, throwing the establishment’s weight behind the government in the battle for public safety. More than foreign security aid, this is what Mexico needs today: an investment by Mexico’s elites in the safety and well-being of all its citizens.
Click here for the full story.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Mexico City traffic police inspect driving documents (Daniel Aguilar / Courtesy Reuters).
Nearing Mexico City’s airport on my way to Oaxaca with my husband and brother-in-law a few years back, we had an all too familiar experience. Amid the crawling traffic were eight or ten police officers, systematically pulling over every third or fourth car. Unlucky in the lottery, we duly stopped, half in the road, half up a curb. Our offense was not using our blinker to signal a lane change, even though we hadn’t, of course, changed lanes. After the requisite license showing, some hemming and hawing about having to go to the station to sort things out, and a few long silences, we asked what our ticket would cost, and if we could pay it here. Now more animated, the officer pulled out his black notebook and quoted a price based on a multiple of the minimum wage. After finally working the amount down to roughly $40, we put the pesos into his small notebook and were on our way. Just a hundred yards on, at the next light waiting to make our turn, another policeman approached our car, knocking on the driver’s window. My husband, exasperated at this point, rolled it down a couple of inches and yelled “Ya pagamos!” (We already paid). To which the officer, ever polite, replied “Gracias – buen viaje!” and headed off to talk to the next driver in line.
A recent study by Transparency International shows that it wasn’t just our Texas plates that led to this ritual. In the capital, as well as the states of Mexico, Tamaulipas and Querétaro those stopped by the traffic police pay bribes over 80 percent of the time. While these represent the worst, the national average is just under 70 percent (in only four states is it less than half of the time).
(Courtesy The Economist / Transparency International)
Surveying 15,000 homes across Mexico, the report measures 35 different types of bribery and corruption, from those facing street vendors (23 percent of those surveyed paid a bribe), to people recovering stolen vehicles (25 percent), buying building permits (13 percent), requesting trash collection (22 percent). Perhaps more shocking, 15 percent of the respondents have paid to bring a case to court, while 9 percent speeded up hospital treatments with a financial incentive.
Overall, the data are sobering. Mexicans pay some $2.5 billion a year in bribes – no small change. These costs hit the poor the hardest – a regressive tax if ever there was one. While some federal programs – including the postal service and utilities – have been cleaned up; across the board the numbers aren’t improving. Compared to 2007, if anything things are getting worse, with the amounts charged rising ahead of inflation – today, the average fine is $14, up from $12 in 2007.
This reality makes life for many Mexicans more difficult. A big cut of their hard earned pesos goes to graft. But it also importantly makes the fight against insecurity and violence all the harder. If law enforcement officials often (if not almost always) prey on citizens in these smaller ways, how can the population trust them enough to work together on the bigger threats to their communities and country?
US Secretary of State Clinton and Mexican Foreign Minister Espinosa (Saul Loeb / Courtesy Reuters).
Last Friday, Hillary Clinton hosted the Merida Initiative High-Level Consultative Group in Washington. The meeting was the Group’s third, building on previous meetings in November 2008 and March 2010 in Mexico City to deepen the security partnership between the two countries. The meeting brought together cabinet secretaries from both governments, including Defense Secretary Robert Gates, Attorney General Eric Holder, DHS chief Janet Napolitano, Chairman of the Joint Chiefs Mike Mullen, drug czar Gil Kerlikowske, and Ambassador Pascual, as well as Mexico’s Foreign Secretary Patricia Espinosa, Secretary of Governance José Francisco Blake Mora, Secretary of National Defense General Guillermo Galván Galván, top police chief Genaro García Luna, Attorney General Marisela Morales Ibañez, National Security Spokesman Alejandro Poire Romero, and Ambassador Arturo Sarukhan.
Much as the Calderon visit to Washington in March, little new was announced beyond renewed commitments to the current four-pillar strategy and a recognition of shared responsibility. Instead, the main “news” is that security relations continue on the same path. Which begs the question – where are we now after 4 years of US-Mexico security cooperation?
An excellent new paper by Andrew Selee and Eric L. Olson at the Woodrow Wilson Center’s Mexico Institute lays out a concise evaluation and accurate scorecard. On the first pillar, targeting organized crime groups, they argue that while progress has been made in intelligence sharing and the arrest of key leaders in both Mexico and the U.S., a clear strategy to dismantle the cartels’ financial and arms smuggling networks – arguably the most important task ahead to erode future capacity – has yet to emerge. On the second pillar, to strengthen Mexico’s rule of law institutions, they find that police reforms and efforts to clean up Mexico’s courts have been slow and face numerous setbacks, and have failed to filter down from the federal to the state and local levels. On the third pillar, they see positive first steps in the lengthy task of modernizing the U.S.-Mexico border, including new ports of entry and technology to expedite transit and improve security. They find that the least progress has been made on the fourth pillar, as U.S. resources for strengthening communities through job creation and youth engagement has lagged behind other programs. Finally, they name the implicit fifth pillar that should be a key component of measuring success: demand reduction in the U.S.
While no news may be good news out of these high level meetings, Selee and Olson’s analysis suggests the need for much bolder measures and stronger support on both sides of the border, given how much is needed to turn the security tide.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Soldiers escort four detainees for presentation to the media at a military zone on the outskirts of Monterrey (Tomas Bravo/Courtesy Reuters).
At the Mexican port of Lázaro Cárdenas, containers arrive from China laden with toys and electronics. Some never make it into the hands of customers: they are dumped as worthless merchandise. Their value, instead, lies in a simple bill of sale that allows the buyers – drug trafficking organizations and organized crime syndicates – to launder billions of funds through seemingly legitimate trade.
Drug-related money laundering conjures up images of plastic-wrapped bundles of $20 or $100 bills stashed in car tires and dashboards, or hauled across the U.S.-Mexico border in semi-trailers. It includes tales of storied banks moving billions in sophisticated operations and entangles Western Union and other money transfer companies in the flow of profits south. Some worry that prepaid cards or even “virtual worlds” will be the new avenues for illegally moving billions and billions of dollars.
But trade-based money laundering is likely where the real money is. Less understood and perhaps more pernicious, this includes the stereotypical restaurant that never seems to serve any customers, except for a few toughs at the back table, but “rakes in” profits. But it is much more than that. It can involve jewelry stores, textile factories, travel agencies, or car dealerships. Any type of trade across borders is a potential opportunity for nefarious transactions, buried among the billions of legal ones.
Price mismatches—reporting different values for the same goods – offers a means of concealing the money’s origins. A Mexican front company can send a shipment of computers to the United States, and, by over-invoicing it, can cover both the legitimate cost of the merchandise and the extra laundered funds. In this way, the extra funds are washed clean and enter a U.S. bank account as a formal, legal transaction, skirting the warning flags provided by current financial transparency laws and regulations. The same can happen in the reverse, when drug trafficking organizations want to repatriate their earnings from U.S. street sales. Often they do it through third or even fourth countries, further obscuring the true origins of billions of dollars. Egregious discoveries include Pakistan-made dishtowels imported to the United States for over $150 a piece, and missile and rocket launchers sold for just $50 each, destined for Israel.
Another path is through seemingly normal import/export business transactions. Drug dealers on the U.S. side buy goods (in dollars), ship them to Mexico, where they are sold. The proceeds (now in pesos) are given to their partners. This almost inevitably requires complicit businesses, who can receive a cut worth 3 – 8 percent of the funds passing through the books.
Trade-based money laundering is only likely to increase between the United States and Mexico. New Mexican laws limiting the use of U.S. dollars will push the drug cartels to shift transaction to more “illiquid” assets like goods and real estate. Coming into effect just last fall, already law enforcement agents are seeing the exodus of physical dollars from Mexico. Money changing houses on the U.S. side of the border are beginning to report their inability to keep pesos in stock – another sign that taking dollars straight to Mexico is on the decline.
Trade-based flows are especially worrisome, as they represent quite ingenious and ever changing ways to get money to the bad guys, which then feeds corruption and violence. But even more, trade-based money laundering undermines legitimate business and commerce. With criminal organizations happy to dump imported goods at a discount to get their now “clean” cash, legitimate businesses can’t hope to compete with the “discounts” of twenty, thirty, forty percent often provided. As Mexico (or any other country) struggles to compete in an increasingly globalized world, the last thing it needs is an additional barrier to entrepreneurship, crowding out legal economic activity.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
A shaman performs a ritual in front of a photograph of President Barack Obama in Lima (Mariana Bazo/Courtesy Reuters).
Between March 19 and 23, President Obama will take his first foreign trip this year – and his first ever to South America. He will kick it off in Brasilia and Rio de Janeiro, then head to Santiago, and finish up in San Salvador. The trip’s goal, as announced in his State of the Union address, is to “forge new alliances across the Americas.” Alongside the obvious meetings between presidents, in the works are business roundtables, a visit to one of Rio’s favelas, an Egyptian style speech to “all Latin Americans” in Santiago, and educational activities for his daughters, who, along with the First Lady, will accompany him.
Why these three nations?
Brazil is the obvious choice. It has grown into an economic and diplomatic powerhouse, weighing in on world issues from financial reform to climate change. Under Lula, it flexed its muscle at times to the discomfort of the United States – on nuclear proliferation and Middle East politics, U.S. bases in the region, and the Honduran standoff. With newly installed President Dilma Rousseff’s openness to deepening U.S.-Brazil ties, there are high hopes on both sides that the trip will open a new chapter in the relations between the two largest economies of the Americas.
On the table will be trade and investment, particularly on clean energy and Brazil’s infrastructure needs in the lead up to the World Cup and the Olympics games. Also up for discussion will be China and its currency, as companies in both countries struggle to compete with Chinese imports and investments.
The other two nations are less obvious stops. Important as nations with which the United States maintains strong friendly ties, they are also examples of pragmatic and progressive governments from across the ideological spectrum. Chile’s Sebastián Piñera is leading one of the region’s most prosperous and stable nations from the center-right– the first elected conservative leader since the end of the Pinochet dictatorship. Obama’s visit will put the finishing touches on a nuclear pact, and the two leaders will work on clean energy and intellectual property issues (in particular the steps to get Chile off the U.S. priority watch list for failing to protect IP rights). Both leaders are keen to discuss innovation and entrepreneurship – part of their domestic political platforms.
El Salvador’s Mauricio Funes rules from the other side of the spectrum. A reformed revolutionary, he is the United States’ strongest partner today in Central America. The presidents will focus on security– Funes presented a $900 million plan to Hillary Clinton last fall, which would quadruple U.S. commitments under the Merida Initiative to Central America – as well as issues of economic cooperation and poverty reduction. The future of the 2.5 million Salvadorans (roughly one of every four) living in the United States will also be on the table, as Funes hopes to replace the Temporary Protected Status under which most live with a path to permanent residency.
What is also interesting is who is not on the list. The President, First Lady, and family will not be stopping in Buenos Aires, Argentina; a decision said to upset President Cristina Fernández de Kirchner. Behind the scenes, many feel that the old aphorism once attributed to Brazil is perhaps now more applicable to Argentina, that it is “not a serious country.” Also not on the itinerary is Colombia, in part because Obama has no good news to bring his counterpart on the long-delayed free trade agreement.
Though timed to coincide with the 50th anniversary of the Alliance for Progress, nothing so grandiose will be in the works. Nevertheless, as the heads of state meet and talk about an array of issues, Obama has the opportunity to make a significant change. In addition to the usual bilateral and regional topics, it is important that Obama bring Latin America into his thinking about global challenges. This shift, though subtle, would be the start of a real transformation in U.S.-Latin America relations.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
I published the following CFR expert brief on the U.S.-Mexico summit this week.
The surprise announcement of President Felipe Calderón’s trip to Washington is a chance to right a teetering relationship. On March 2-3, the Mexican president will meet with U.S. President Barack Obama, Speaker of the House John Boehner, and members of the U.S. business community. This trip could prove an important turning point in U.S.-Mexico relations. It will, assuredly, be a defining test of Calderón’s statesmanship.
U.S.-Mexico relations have hit a rough patch. The February 15 attack on two U.S. Immigration and Customs Enforcement (ICE) agents raised the stakes for the U.S. government in Mexico’s drug war. Agents Jaime Zapata and Victor Avila were driving to Mexico City from Monterrey when drug cartel gunmen intercepted, then fired upon their armored SUV. Zapata died and Avila was wounded. Though the details remain unclear–whether it was a carjacking gone wrong, a case of mistaken identity, or a calculated hit–the idea that drug traffickers would target U.S. officials sent chills through the U.S. embassy and beyond. And the attack lays bare the security challenges Mexico faces in securing even the country’s main thoroughfares.
As U.S. officials worked through the ramifications of Zapata’s death, longer-standing simmering grievances within Mexico’s government boiled over. Behind the scenes, many experts and officials recognized the serious damage done to U.S.-Mexico relations by by WikiLeaks’ revelations late last year. Secret cables signed by current Ambassador Carlos Pascual on December 17, 2009, and Deputy Chief of Mission John Feeley on January 29, 2010, in particular presented unfiltered assessments of the strengths and weaknesses of the Mexican government’s security efforts, pointing to a hidebound Mexican army, infighting between Mexico’s various security institutions, and worries about corruption and human rights abuses. While in line with the views of numerous independent analysts–as well as many security officials in their more candid moments–the leaks have embarrassed the Calderón government, and provided fodder for rival politicians as the Mexican electoral arena heats up for 2011 gubernatorial races and the 2012 presidential contest.
In a wide-ranging and sensational interview in El Universal, one of Mexico’s leading newspapers, on February 22, Calderón vented his anger. He accused the U.S. diplomats of “laying it on thick,” distorting and exaggerating their analyses for ulterior motives. He went further, saying the lack of coordination and rivalry was not on the Mexican but the U.S. side, between ICE, Drug Enforcement Agency, and Central Intelligence Agency. The vitriol was so strong that U.S. Homeland Security head Janet Napolitano formally responded the next day, asserting that not only did U.S. agencies work well together, they did so closely with their Mexican counterparts.
Historically, it is remarkable that the two countries have gotten along this well for so long. For decades, the bilateral relationship has had fits and starts–beginning with expansive promises from new presidents, ending with bitter divisions. Domestic politics were often behind the fracture, as Mexico’s ruling Institutional Revolutionary Party (PRI) painted the United States as the great imperialist to justify its excesses and heavy political hand, and U.S. administrations changed course at the first hint of domestic opposition. Just as often personal differences, and real and perceived affronts, sank once promising bilateral ties.
Calderón’s upcoming visit has the potential to break this counterproductive historical cycle, principally by getting the two countries’ conversation back on track. That will require strong leadership from Calderón himself. Can he rise above personal grievances and his not unjustified frustrations with the United States to become the rare Mexican president who succeeds during his term in moving the bilateral relationship forward?
This trip will test U.S. policy and commitment to Mexico. The now often repeated rhetoric of co-responsibility and Secretary of State Hillary Clinton’s heartfelt words of “being a fan” of Calderón are fine, but the United States has to go beyond these niceties. Calderón is right to ask for more–U.S. demand for drugs remains unchanged, illegal guns and illegal gains flow south unabated. Estimates range widely, but tens of thousands of guns and tens of billions of dollars flow south each year. Though the Obama administration recently tried to boost the Bureau of Alcohol, Tobacco, Firearms and Explosives’s ability to track gun sales (specifically multiple assault rifles–AK-47s, AR-15s, and the like), it was struck down by the new Republican-dominated Congress. Boehner will have to square his vocal support for Mexico and the Merida Initiative with his reflexive heeding of the National Rifle Association’s demands.
There is a real possibility that U.S.-Mexico relations could fall into a downward spiral. That would be dire for both nations. Much more than security cooperation hangs in the balance. Mexico is the second largest U.S. export market, the largest source of U.S.-bound migrants, the ancestral home of over thirty million Mexican Americans, and an important partner in multilateral negotiations ranging from world financial markets to climate change. With economies, societies, and communities indelibly intertwined, whether it likes it or not, the United States’ future is tied to Mexico’s.
I published a background piece that charts Mexico’s progress on economic and democratic reforms. It can be accessed here.
This brief forms part of CFR’s new Civil Society, Markets, and Democracy Initiative. The initiative aims to offer fresh thinking on what the United States and others–including foreign governments, corporations, NGOs, international organizations, and the leaders and citizens of developing countries themselves–can do to foster open, prosperous, and stable societies. The initiative focuses on four areas: economic and political openness and reform; combating extremism through civil society; women and foreign policy; and entrepreneurship and economic development.
This article appeared in the spring issue of the Americas Quarterly. It can be accessed in full here.
Open any Mexican newspaper today and the drug carnage is front and center. In the last three years, narco-related murders surpassed 18,000, nearly 8,000 of these occurred in 2009 alone. The macabre nature of the violence ratcheted up too, featuring heads rolling across an Acapulco disco floor, a “stewmaker” admitting to dissolving some 300 bodies in acid and a dead man’s face stitched onto a soccer ball. The drug cartels openly taunt the authorities and each other, hanging narcomantas, or banners, over major thoroughfares boasting about their latest kills and threatening future violence if not left alone. Both the number of the attacks and their brazenness—particularly in states such as Sinaloa, Chihuahua and Michoacán—are unprecedented.
Yet crime-related violence in Mexico is not new. Mexico has always been a supplier of illegal markets in the United States, from alcohol in the prohibition era, heroin during World War II, marijuana throughout the 1960s, and in recent decades, a variety of drugs including cocaine, heroin, marijuana, and methamphetamines. As illicit businesses without access to formal contracts and courts, disputes and “mergers and acquisitions” have traditionally been settled with blood on the streets.
What has changed in recent decades is the scale of Mexico’s narcotics operations. U.S. demand has grown and diversified, and Mexico has increasingly become the primary supplier. While in 1990, 50 percent of U.S.-bound cocaine came through Mexico, today the figure is 90 percent.
It’s also important to note that the power base of the hemisphere’s drug trade has shifted from Colombia to Mexico. After four decades and billions of dollars, the U.S. “war on drugs” has pushed the epicenter of these illegal criminal networks closer to the U.S. border. The sheer amount of money that has accompanied this fundamental shift to transportation and smuggling just south of the U.S. border has upped the stakes. More resources have transformed the cartels into increasingly sophisticated organizations—with more professional enforcement arms.
Mexico’s democratization throughout the 1990s, which upset the long-standing collusion between some members of the ruling Partido Revolucionario Institucional (PRI) and particular favored drug traffickers, has been another contributing factor. The PRI’s eroding political monopoly brought in new actors, undermined old deals, and opened up the illicit sector to those previously kept out in the cold. The combination of more lucrative opportunities, heightened competition and changes to the political game created dramatic uncertainty in the market, escalating the bloodshed. Legacies of the PRI’s 70-year rule—in particular the political manipulation of law enforcement and judicial branches, which limited professionalization and enabled widespread corruption—further aggravated the situation, leaving the new government with only weak tools to counter increasingly aggressive crime networks…
I published this brief on CFR’s First Take. 
On their high octane visit to Mexico City yesterday, Secretary of State Hillary Clinton and senior administration officials formally announced changes in U.S.-Mexico security cooperation that had been in the works for months. The U.S. delegation–including chairman of the Joint Chiefs of Staff Admiral Mike Mullen, Defense Secretary Robert Gates, Homeland Security Secretary Janet Napolitano, Director of National Intelligence Dennis Blair, and top officials from the DEA, Justice Department, border security, and other agencies–met with their Mexican counterparts to officially unveil a “new stage” in bilateral cooperation.
Merida 2.0
The new program will build on the Merida Initiative, a Bush administration policy passed in 2008 that allocated $1.4 billion over three years to fight organized crime and violence across Mexico and Central America. The joint strategy will expand beyond the previous military focus on dismantling drug trafficking organizations and reforming law enforcement institutions to incorporate initiatives to improve border surveillance and to address social and economic factors that underpin the violence. These new strategic priorities will increase vigilance of vehicles going south (not just north), while also moving much of the vigilance away from the actual border through programs to certify cargo at plants. It also means that U.S.-Mexico cooperation will now include local-level operations, providing technical and financial support to local police community-based initiatives alike.
The starkest shift is in how funding will be spent: While over half of the allocated Merida funds has gone to military equipment and training, most of the requested $330 million for the program’s 2011 budget will be targeted to Mexico’s judicial reforms and programs on good governance.
Expect Bumps in the Road
Military to military cooperation will continue to be an important part of the relationship. This makes many uneasy in Mexico, and it is always an easy target for politicians looking to rile up nationalist sentiment. From the U.S. side, worries will continue regarding rising allegations of human rights abuses by the military and others, and the chicken and egg problem of dealing with the weak existing institutions (that permit, for instance, human rights abuses) while simultaneously trying to transform and strengthen them.
Another potential sticking point is the U.S. recalcitrance to address the demand that drives the illegal drug market. As Secretary Clinton made clear in her curt negative response to a question of decriminalization or legalization of drugs at the press conference following the announcement, this subject remains a political non-starter in Washington. More room exists to address the flows of money and guns south, though here, too, powerful U.S. lobbies limit the extent of U.S. actions.
Despite these potential pitfalls, this new strategy to combat drug trafficking and limit today’s extreme violence is welcome. A military solution to a police and judicial problem was never going to change things over the long term.
Yet while attaining these ultimate goals is now more feasible with the broader focus, the chosen path is also much more ambitious. Attempting to address the complex nature of the drug trade and organized crime in Mexico is not easy. Many of the problems undermining current bilateral efforts–incompetence and corruption in Mexico’s police and court system, the lack of legal economic opportunities for Mexico’s youth, limited and uneven access to education, and underfunding in public health and other community programs–are difficult to change.
The results of this more comprehensive approach will only appear in the longer term. It is the next generation of young people that will benefit from better schools, better jobs, and from prevention programs for at-risk youth. Realistically, it will also take a generation to transform Mexico’s police and courts, creating systems where impunity is the exception not the rule.
The question remaining is whether, as the murders pile up daily along the border and elsewhere in Mexico, politicians in both countries will have the patience to see this strategy through. If they do, there is a chance ten years from now that things will be better in Mexico. If they don’t, both countries will be fighting the same drug war in a decade.
