A Laundry List of Problems

At last, someone has truly outlined issues in Mexican security and equity, and presented them in a sort of open letter to President Obama.

The article outlines various issues that threaten the welfare of the state of Mexico, including:
- Corrupt court officials that prohibit drug kingpins from being jailed
- No media safety net, as many journalists are taken hostage and/or killed

The article continues on to divide the blame between the United States and President Calderon; the former because of the un-renewed ban on assault weapons and high demand for mexican drugs, and the latter because of his inability to reach out to his "left" allies for help in the time of the country's greatest need.

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And Now for Something Completely Different

Taking inspiration from the United States mortgage bubble, Mexico applied for a 40 billion dollar credit line from the International Monetary Fund. This act will occur at .27 percent interest and will double Mexico's foreign investments. The money is a record setting amount from the IMF, which offers no stipulations or conditions on lent money. This move enhances its comparative credibility with other organizations like the World Bank, and shatters the previous record for a flexible credit line of 27 billion to Brazil. The economic response to the initiative was good; the Peso appreciated 2.7 percent in two days and the country in general appears to be stabilizing economically to a certain extent. The impact on public policy making from international organizations is enormous, as it usually imposes some economic restructuring that may trade off with such basic amenities such as public health, and enhances globalizing pressures.

http://www.forbes.com/2009/04/02/mexico-imf-credit-business-oxford.html

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Mexico Raises US Tariffs - Who is in the Wrong?

Recently, Mexico raised tariffs against 90 US products, some taxes increasing to 20%.  The reason given was US failure to honor a NAFTA commitment 14 years ago, granting  looser restrictions on Mexican delivery trucks America.  A NAFTA committee ruling puts us at fault, and admittedly the entire process of escapist ignorance was started in the Clinton administration, and continued to this day.  Currently, many goods are transfered to American trucks shortly after crossing the border, allegedly because Mexican trucks are too unsafe to be on American roads.  An international random inspection program determined more American trucks to be in violation of standard regulations (21.6% - 20.7%).  US response to the tariff is expected to be minimal, because it only covers about 1.5% of our exports to Mexico.  Also no one cares.  About Mexico.

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Justified or not, this tariff is an example of a distancing between our countries in a time when cooperation is necessary.  Without working together, neither country can tackle the drug problem - Mexico lacks resources, US lacks access.  And America needs to be held accountable for the treaties it makes.  Used more popularly in our history as a protective measure for domestic industries, tariffs can be, and now are, used as a means to influence foreign powers.  And in an increasingly globalized economy, we at least need to keep geographically close countries on good terms.

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Turns Out, People Don't Want to Die

The recently blogged about decision of the United States travel agencies to declare the majority of Mexico a "Go at your own risk" location, Mexico's tourist industry is bracing for the worst. As simple as this seems, the economic challenges that Mexico faces right now can only be exacerbated by foreign (negative) speculation, especially for key markets like tourism.

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GM Corn Experiments Tentatively Begun

Genetically modified corn, formerly a no-no by Mexican law, is now allowed with special permission on a kind of trial basis.  Mexico (and the surrounding region) is, historically, the birthplace of corn, and it had totally banned all genetically modified variations until now, largely out of fear that GM would limit genetic diversity, thus making their entire crop more susceptible to famine, or any major disaster.  Technically the usage has not been officially legalized, and the government has made no statement about future plans for GM corn.

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Agriculture still employs a fairly large sector of the Mexican workforce (18% in 2003), another indicator of the fact that it is not a fully developed country.  Yet even in agriculture, modernization provides for greater efficiency and better production, a sign of potential growth overall in a country that definitely needs it.  Their reservations about going full-speed farming revolution also shows economic prudence - as the "shock therapy" of Russia has shown, blindly jumping into reform is not necessarily as effective as gradual change.

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Spring Break: Beer and Bombs

Spring Break is approaching, and many college students, as have students of the past, are booking flights and reservations for Mexico.  However, as every previous post can testify, Mexico is in no way the safest place to be right now.  The University of Arizona in Tuscon is urging about 37000 students to stay out of Mexico, yet without a legal, or otherwise official, obligation, there is nothing really to stop the millions of wild teens from flocking to beaches around Cancun, Acapulco, and elsewhere.  Certain observers, such as Mexican Attorney General Eduardo Medina Mora, assert that "nine out of 10 people who have been killed in this fight are attributable to organized crime," and that any travelers should be able to avoid trouble by "behaving."  Ultimately, they are screwed.

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Tourism being the biggest example, the economies of America and Mexico are closely intertwined.  The industry created by the Spring Break rush is enormous, and arguably the most profitable week out of the year (ignoring whatever damage or trouble those damn kids get into).  The fact that recent escalations in violence might interfere with the industry, shows the enormous and pervasive effect the violence has not only in the political spectrum, but in the economic as well.  As we have observed in class, nothing does more to stabilize an oppressive regime, or oust a perfectly good one, than the economic conditions of the country in question.

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All signs point to the United States

It appears the drug wars in Mexico, and their violent nature, could hold root in the United States. With the United States' large demand for drugs from our Southern Neighbour, and the fact that they are considered crimes instead of public health problems, this creates a large "underground" trading networks which are the infrastructure of the modern cartel. In addition, the increasing use of Assault Weapons imported from the United States is a direct result of Congress not renewing a ban on the same weapons. It is interesting to see how various public policy choices of nations decide the fate of those around them.

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The Economic Slowdown

As a refreshing change of pace from the normal stream of doom and gloom regarding drug policy in Mexico, we are now treated to reports that the economy is suffering ramifications of the international recession. It contracted during the last quarter of 2009 by 1.2 percent, as the Central Bank suffered massive losses and the Peso is being devalued internationally. As international demand for products and industrial work dries up, so does a substantial form of income and jobs. A substantial portion of the economy is based on remittances, cash sent home from foreign nationals, which fall with the world economy. The Central Bank's efforts to adress this decline were ineffective, resulting in a loss of investor confidence and stock falling. Efforts to preserve the Pesos value by selling dollars directly also failed, further rocking faith in government ability to forestall disaster and negatively affecting civil participation. A poor economy leads to cycles of poverty and therefore less political involvement, worse educational standards as production for the family becomes the norm, and increased risk of state failure. However, whether this occurs remains to be seen-the rate at which the economy is slowing remains at about half of analysts predictions, suggesting possibility of averting disaster. 

http://www.forbes.com/feeds/reuters/2009/02/20/2009-02-20T223043Z_01_N20296423_RTRIDST_0_MEXICO-ECONOMY-WRAPUP-1.html

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Still Alive

Last week left us with a grim outlook on Mexico's future: utter collapse of economic and civil domains, leaving the country in ruins with no hope of resuscitation. But is it true? Do the drug wars and economic downfall indicate a ruined core, or are they just problems that any country has to deal with? Turns out, Mexico is nowhere close to losing control of territory, collapsing public services, or governmental failure. Thus, a new proposal to end the drug wars: legalize drugs. While this may seem like a radical alternative, it makes sense: without the need for incarcerations and (incredibly violent) underground drug cartels, they can become establishments that pump money into the failing economy.

"But "failed state" is the sort of shorthand that Washington has a way of turning into its own reality, the facts be damned. The Mexican government isn't on the verge of losing physical control of its territory, stopping public services or collapsing. But it is under tremendous pressure and has only nominal control in some places, including border cities such as Tijuana, near San Diego, and Juarez, which sits cheek-by-jowl with El Paso. Army troops patrol the streets, but the police, courts, journalists and citizenry are cowed by the less-visible but more-ruthless drug cartels."

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Japan's Isuzu Motors Relocating Production to Mexico

Isuzu Motors, Japan's largest producer of trucks, has relocated their productional facilities to Cuautitlan, Mexico, to "lower costs". As the process of globalization continues, we see the logic of strategically stratified production in areas of lower minimum wage and environmental regulations unfold. It also indicates Mexico's willingness to be a player in a larger scheme of economic trading networks.

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The End

With the subsequent collapse of the world economy, the new US President, stimulus package, and Gaza, the troubles in Mexico havn't gained much world attention.  About a week ago, drug gangs broke into police radio frequencies and sent death threats to officers which they promptly carried out.  They name the officer and then the officer shows up a couple of hours later with a bullet in his or her head.  On Thursday, LA Times ran a map showing that there were 7337 drug related murders in the past two years.  Now with the President Calderon’s call to an all out war on drugs, the death toll has topped even the count in Iraq.  Many people are now questioning whether or not Mexico will even be able to finish the war on drugs before it collapses.  This is following the news of the bond issue happening just a couple days ago.  Nobody is even willing to buy the governments bonds after they were put up for “sale”.  With their economy melting, drug cartels abounding, 45,000 troops killing, Mexico’s future looks…scary.  The violence of the drug cartels have even come across the border with five men in Alabama tortured and killed over a drug debt of $400,000.  350 kidnappings have occurred in the past two years.  Soon enough, we may not be studying Mexico as a “Developing Democratic Nation” anymore.  "So far it hasn't turned up on President Obama's radar. But a collapsing Mexico off the southern U.S. border can't be ignored forever."

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You May Want to Reconsider Your Vacation Destination

With the massive increase in drug activity combined with tough economic competition throughout Mexico's entirety, over 200 American citizens have been murdered since 2004 alone, making for a dangerous vacation location that warrants reconsideration.

"More than 200 American citizens have been killed since 2004 in Mexico's escalating wave of violence, amounting to the highest number of unnatural deaths in any foreign country outside military combat zones, according to the U.S. State Department."

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Peso Rebounds

Mexico Peso gains value for the first time in months as the Banco de Mexico has gone from total transparency to the exact opposite. By keeping traders guessing as to how many peso’s Banco de Mexico is buying from banks a day, it is moving away from the predictable set-auction system using the uncertainty to lower the speculation against the peso. The intervention by the government into the market system is in response to the global recession. Mexico itself has been deeply affected by the recession in the US as exports are cut. Right now it is 13.8 peso’s to one dollar. Economists are estimating that it can rise to 13.2 peso’s to one dollar by the end of the year. “We decided to intervene when it became clear there were elements in the market trying to destabilize the peso to make a profit,” Carstens said at a Mexican homebuilding conference in New York. “We reserve the right to intervene when the market situation demands intervention.” This entire market situation, in Mexico and abroad, reflect that entirety of globalization and the free market identity that the world has adopted. It also deals with each individual nation trying to stay afloat in such a dire world economy.

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America-Great Country, or the Greatest

The mexican government has launched efforts to teach every child starting at kindergarten the English language in an effort to increase global economic integration. Northern counties find it more important to know english in order to work. They plan to train 85,000 teachers in 500 schools to accomplish this monumental task. Until now, English has been mandatory from grades seven through nine, however due to differences in income some students do not attend school at all in this age area while some began at preschool. This is another vivid example of the growing income gap, government attempts to solve it, and effects on employment opportunities and opportunities.

http://www.chron.com/disp/story.mpl/front/6241783.html

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Mexican Peso Takes the Sharpest Downturn in Years

It appears as if all of Latin America is being sucked into the economic vaccuum created by the United States' economic decline, and Mexico is no exception. A previous competitor to the US Dollar, the Peso shows little chance of catching up now, with a gross contraction of 1.8%, and that number is expected to rise as 2009 continues.


"The steepest decline in Mexico’s peso in 13 years blindsided everyone from UBS AG economists to Gustavo Huitron, the local marketing manager for Mercedes-Benz.

After weakening 20 percent last year, the currency fell to a record low of 14.4484 per dollar today. RBS Greenwich Capital Markets in Greenwich, Connecticut, now predicts another 4.5 percent drop by June 30. The peso’s worst performance since 1995’s so-called Tequila Crisis is being driven by the U.S. recession and falling oil prices, which are cutting Mexican exports and government revenues."

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