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.

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 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.

Shoppers carry an electronic item outside a store in Caracas (Jorge Silva/Courtesy Reuters).

As journalists, policymakers, and activists of various stripes and interests focus on the rise of the global middle class, scholars struggle with how exactly to define this category of people worldwide. The method matters, as differences can make one exceedingly optimistic or pessimistic as to today’s reality, tomorrow’s promise, and of what people, governments, companies, and markets should and should not be doing to encourage this growth.

One way of measuring the middle class is in relative terms, by looking at who is within the middle range of incomes in any given country. Scholars such as Lester Thurow, Nancy Birdsall and William Easterly have done this in various formats. But it is often unclear exactly what their results mean for emerging economies, where the middle of the country is not necessarily one and the same as the middle class. It is also hard to use this approach comparatively, as the “central” income range differs widely from country to country.

Another approach is to use absolute thresholds, which has the advantage of getting at attributes that are more universally acknowledged as middle class. The question here becomes how to define this “fixed band.” The most expansive calculation – used by Martin Ravallion at the World Bank — classifies a middle class person as anyone who makes between $2 and $13 a day in PPP terms. Intended to measure the expansion of the middle in emerging markets,  this definition includes those who have just made it across the World Bank $2 poverty line. By this measure, China and India have made incredible strides over the past fifteen years, developing a true middle class. But to those in advanced Western economies many of these people would almost certainly be considered abjectly poor, questioning the comparative value, and universality of this scale.

On the more restrictive end, a study by Branko Milanovic and Shlomo Yitzaki sets the the upper and lower bounds of the global middle at the average incomes of Brazil ($4,000 in 2000 PPP terms) and Italy ($17,000) as, and counts anyone earning between $12 and $50 a day as middle class. These may not be the right threshold incomes either, however, particularly because this bottom line leaves out the millions in India and China who earn less than $12 a day and yet still, as households, lead quite comfortable middle class lifestyles. This definition puts Mexico’s middle at less than half the population, in contrast to those that count Mexico as now majority middle class.

Finally, a Brookings report by Cárdenas, Kharas and Henao takes a slightly different approach to the issue. Based on an earlier study by Kharas, they use the poverty line in Portugal and Italy – the lowest among advanced European countries – as the lower limit and twice the average income in Luxembourg, the richest European nation, as the upper limit of the global middle. As the authors note, their calculation “excludes those who are considered poor in the poorest advanced countries and those who are considered rich in the richest advanced country.”

Source: Cárdenas et al., "Latin America's Global Middle Class," Brookings (2011).

By this definition, the Latin American countries with the largest middle classes are Mexico (60%), Uruguay (56%), and Argentina (53%), while Bolivia (13%), Honduras  (16%) and Paraguay (19%) fall on the lower end of the spectrum. As a whole, the region cannot be called middle class, but it is moving in the right direction, and may qualify in the near future. The model predicts that by 2030 over half of Latin American countries will have a majority middle class. It contrasts with China and India in this regard, where, despite great progress, a true middle class as a substantial percentage of the overall population is still decades away.

Recognizing the enormous expansion of the middle class in Latin America and worldwide does not deny the destitute poverty in which hundreds of millions, even billions, still live. But ignoring the progress of recent years also has its perils for the poor. Better measuring and understanding the rise of the global middle is vital precisely because it suggests paths for those still less fortunate to follow.

Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.

Young people rest on a sidewalk as a man cleans in Mexico City (Henry Romero/Courtesy Reuters).

An OECD report released this September shows that seven million young Mexicans between the ages of fifteen and twenty-nine are neither in school nor in the labor force. Among OECD countries, Mexico has the third largest “inactive” youth population, behind only Turkey and Israel. Mexico has been increasingly concerned about the security implications of  the vast number of  these “idle” youths — dubbed “Ni-Nis” (Neither-Nors). NiNis are thought to be especially vulnerable to recruitment by organized criminal groups, acting as lookouts, dealers, smugglers, or even hit-men.

Overall, the number of NiNis has decreased by more than 10 percent since 1990, questioning at first glance the ties to rising violence. But a more detailed breakdown of this rootless youth suggests these worries aren’t totally misplaced. Most of the decline reflects the changing prospects for young women – who are much more likely to work or study today than they were twenty years ago. For urban men – the population most likely to be recruited by gangs and organized crime groups – not as much has changed, as their share of the total NiNi population has only decreased by one percent over the past two decades.

A recent study conducted by investigators from CIDE and the Colegio de México shows too that NiNis are concentrated in Central and Northern states — including some of Mexico’s most violent ones. The largest proportion of inactive youths are in Chihuahua, Durango, San Luis Potosí, Guerrero and Zacatecas (and in cities such as Ciudad Juarez).  In municipalities in these five states the numbers have remained stubbornly high over the last twenty years. Also, while NiNis aren’t concentrated in the poorest states, they do come predominantly from poorer families. Seven in ten NiNis come from households earning below the national average. Their parents are also less educated than the average Mexican, suggesting a vicious cycle as they too spend less time in school than their occupied counterparts.

Some factors are working in Mexico’s favor. Demographics should lessen the challenge  a bit – as going forward each year fewer youths will hit the streets. A rebounding economy can help too – as unemployment levels fairly strongly affect the number of (particularly male) NiNis. But Mexico’s government and society still will have to find ways to engage these young people, to help them see beyond the next few years and offer them real alternatives to a life of crime.

Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.

Peña Nieto, outgoing Institutional Revolutionary Party governor in the State of Mexico, is silhouetted against the national flag before delivering his sixth and final state report in Toluca (Courtesy Reuters).

I had the pleasure of speaking at and moderating a panel last Thursday at the Council of the Americas/Americas Society with Claudio X. González, Chairman of the Board of Kimberly-Clark de Mexico and on the board  of a number of top Mexican corporations, as well as Alberto Ardura, Managing Director and Head of Capital Markets for Latin America at Deutsche Bank. Some of the most interesting issues raised were the relationship between security and the economy, and the future of the energy sector.

Overall, the political and economic outlook was quite positive, despite the formidable challenges the next administration will face. Mr. González highlighted that Mexico presents something of a paradox – despite increasing insecurity, the economy is picking up. He credited this in large part to orthodox economic policies that have kept deficits and inflation low, leading to GDP growth in the realm of 4-5 percent (outpacing current market estimates). Mr. Ardura echoed this view, saying that the fifteen plus years of fiscally responsible policies have made Mexico’s economy the healthiest in the hemisphere, with some of the best macroeconomic fundamentals in the world (certainly among emerging markets).

Still, both panelists remained concerned about Mexico’s future competitiveness and growth. Despite its macroeconomic prowess, it has fallen behind Brazil, Peru, Colombia, and even less orthodox Argentina. The main holdups are security, the closed energy sector, education, and the concentration within so many sectors of the Mexican economy.  They felt that if the government could tackle a few of these major issues, it could pick up the speed of annual growth to five or six percent — transforming Mexico in the process.

The speakers were quite optimistic about the PRI, both on its ability to get things done if it wins the presidency (particularly if it wins a majority in Congress, ending legislative gridlock), and on substance — especially the possibility of opening the energy sector.

But some in the audience doubted the positive momentum, particularly the veracity of the new, more modern PRI that looks set to capture Los Pinos next July. Many (at the podium and in the audience) remained skeptical about whether the “dinosaurs” of the party would stand down, allowing these more comprehensive reforms to strengthen Mexico’s public institutions and jump-start its economy.

Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.

Bundles of confiscated drug money worth two million euros ($2.7 million) are displayed at a police headquarters in Madrid January 18, 2011. (Andrea Comas/Courtesy Reuters).

On Tuesday, the UN Office on Drugs and Crime (UNODC) released a new report on global money laundering, “Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crime.” The upshot? It is really hard to estimate. But, the report does provide some tangibles. Surveying numerous studies, it calculates that illicit global proceeds amount to over $2 trillion dollars every year (roughly 3.6 percent of global GDP), with some $1.6 trillion of this laundered. Within these staggering figures, roughly $870 billion of these revenues relate to drug trafficking and organized crime, and close to $580 billion of those illicit funds are laundered through financial institutions. The study drills down and looks specifically at the global cocaine market, estimated at some $85 billion. Most of this, again, is laundered.

The report provides some hints as to how this happens. Of the $85 billion cocaine market, most (estimated at $61 billion) stays in the retail markets – the United States and Europe primarily. Producers – mostly Andean farmers – receive in total $1 billion, or just over 1 percent of the gross profits. This leaves, by their estimates, roughly $23 billion for those processing and moving the drugs from the fields to the domestic wholesalers. Shipping cocaine from producing regions to transit locations generates at least $8 billion in profits.

When it comes to laundering this money, at least half occurs locally, and most of the rest in nearby countries. In South America, the report estimates that some $13 billion dollars of laundered cocaine  money likely flows into and through local banks and local businesses, and roughly $7 billion is probably cleaned nearby, often in the Caribbean. The report also touches on the profound (and mostly negative) impacts of these flows on local economies, including corruption, real estate price distortions, large income disparities, and weaker growth (since criminals aren’t usually looking for long term productive investments in local economies).

The report ends on a fairly pessimistic tone. Drawing on a separate, heavily cited 2009 report from the U.S. Department of Justice’s National Drug Intelligence Center, the UNODC estimates that Mexican and Colombia’s drug-related money laundering may amount to between $18 and $39 billion each year. The authors argue that, unlike taking down kingpins (who are easily replaced), seizing illicit funds has much more severe and long lasting impacts on illicit trade. But, then the report  goes on to show that our global ability to find and stop these financial flows is abysmal – estimated at far less than 1 percent – not much different than the fees brokers charge to clients to buy and sell stocks, and less than hedge funds take to manage your (legal) money. With the cost of doing business – at least in terms of money laundering – remaining low, the UN office points out the vital need for international law enforcement to truly step up and follow the money.

Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.

An obvious question is how does this affect crime and violence? The answer is less obvious. Overall, the data shows no straightforward correlation. Patrick Corcoran lays out many other factors that affect public safety, including each officer’s moral compass,  the chances of getting caught the severity of the punishment. Daniel Sabet’s study on corruption within the Tijuana police makes this point, laying out the complicated calculus  behind an officer’s decision to fall in (or not) with the bad guys.

Still, the graph below of police salary vs. homicide rate by state suggests that police pay does matter. While we see a lot of variation at the low and the middle end of the scale, high salaries and low violence are strongly correlated. The top nine payers– including states that are in drug traffickers’ line of fire (e.g. Baja California) –  have relatively few murders per capita. While not the only and last word, this should encourage lagging state governments to rethink their spending priorities.

Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.