Mixed signals keep many Mexicans on edge about drug war strategy, a ‘swooning’ economy, and the Mexican-US GDP gap

In October, 2013, some business journals were inventively discovering ways that the “unexpected” gap between Mexico’s economy and that of the United States would “fade.”

They seemed to have swallowed dreams that aides of Mexico’s “activist” president, Enrique Peña Nieto, were peddling: The president was actually going to do what he’d promised during his campaign.  He was going to drop the dramatic perp-walks of high-ranking cartlistas, a practice of his predecessor Felipe Calderon, president from 2006-2012.   Instead, he would concentrate on bettering Mexico’s economy, lifting the nation at last onto the podium of authentic middle class nations.  To do this would mean that Peña Nieto would have to make controversial changes in the Mexican Constitution, and engineer stunning reforms that foreign economic and political leaders would applaud and, of course, benefit from. 

But wait a minute, people on the street were saying.  Peña Nieto’s administration was parading captured cartel jefes repeatedly, and soto voce backing the strategy of tracking down other drug capos as the solution to Mexico’s awesomely virulent violence.  But yes, he still believed lifting Mexico’s economy would win the drug war, said his Institutional Revolutionary Party (PRI).   But large chunks of Mexican society still believed something else:  The decades-long “paz mafioso,” the “arrangement” that the Sinaloa cartel had with PRI governments – until the party was ousted from office in 2000 after 71 consecutive years of one-party rule.  Then stunningly came a series of take-downs of top-ranked drug jefes, two of them in two weeks.  Good luck or new strategy?

And Peña Nieto’s desire to place his country’s oil production in the hands of foreigners seemed sure to occur.  But not just yet.  As 2013 drew to an end, Mexico’s economy struggled on and the unimpaired aggressive activity of cartel operations – extortion, kidnappings, killings – and their domination over much of the economy in southern Michoacan and Guerrero states continued growing.  Then abruptly, two top officials in charge of Mexico’s federal police resigned.  Just after he was elected, Peña Nieto, with much publicity, had brought Colombian security chief, General Oscar Naranjo, aboard.  He was to provide fresh insights into more effective strategies to bring down growing numbers of drug cartels.  He resigned after 18 months.   General Manuel Mondragon y Kalb was given the task of hurriedly making good on the president’s soaring – and immediately doubted – security vow: To invent a complex, intricately trained, totally loyal 50,000-man “gendamerie.”  The qualifications, as well as the necessary high-bar training, began to be doubted by superior drug and security experts here and abroad.  Foreign agencies Mexico had to rely upon in trying to reshape its anti-cartel tools kept saying that an effective gendamarie could not be created in just six years – the length of Nieto’s term in office.   The first “revisions” of Peña Nieto’s dream deeply cut the number of gendarmes.  International dissection of the plan became so withering that the number of gendarmes was reduced from 50,000 to just 5,000 as the new president took office.  Mondragon resigned March 18.     

As time has lurched quickly on, Peña Nieto’s optimism often became forced. Quaintly, the economy has not been behaving as he had predicted.  At the presidential palace tautology was traded for a tourniquet.   

By the 20th celebration of the North American Free Trade Agreement Summit, February 18, as the Peña Nieto administration was busy trying to bandage present shortcomings, a new, larger trade deal was being contemplated.  President Barack Obama’s aides were quietly talking of a “secret” Trans-Pacific Partnership.  The Obama administration is negotiating directly with “other” nations a deal tagged by some as “NAFTA on steroids.”  The plan was instantly and ardently eyed by Peña Nieto as Mexico’s economy toyed with a nose dive.  WikiLeaks outed a chapter of the trade deal, called by some, “A Christmas wish list for major corporations.”

It is true that with two so-called cartel “untouchables” felled by Peña Nieto’s government in a matter of weeks, much of Mexico believed the president could breathe easier.  Yet few hard-eyed analysts of cartel fortunes believe there will be a resulting permanent dent in drug sales, growing power moves and brutal crimes.  That, to a great extent, is because none of Mexico’s governments since the days of Cortes has been able to control the corruption assiduously cultivated by New Spain and its long string of offspring.

Jorge Chabat, professor at Mexico City’s Center for Economic  Research and Teaching, a go-to expert for insight into the nation’s cartel developments, told reporters that “at the very least” this (the capture of Miguel Angel Treviño Morales, jefe of Los Zetas, and more impressively Joaquin “El Chapo” Guzman, boss of the vast Sinaloa Cartel, along with the killing of Knights Templar founder Nazario Moreno Gonzales, indicated that “... there is a part of the Mexican state that is ... capable of functioning.”

The tartness here stems in part from the fact that Mexico’s previous GDP lag has grown.  It’s GDP climbed a meager 0.7 percent seasonally adjusted annual rate during 2013’s fourth quarter, compared with 3.2 percent U.S. GDP growth.  According to fresh figures, U.S. growth averaged 2.7 percent last year as Mexico grew just 0.7 percent.  Mexico’s manufacturing shrank as U.S. manufacturers expanded at a refreshing pace.  “Mexico’s early construction swoon reflected financial difficulties in Mexico’s homebuilding companies,” said one report.

On the drug front, one analyst emphasized that cartels are just one kind of business preying on Mexicans.  And that the wrong kind of energy reform could open the gate for still more predators.  “Countless ‘legal’ businesses here, in the U.S., and elsewhere are doing business with the cartels,” noted the report.  “Cartels patronize hotels, restaurants, clubs, casinos, racetracks, malls, a slew of businesses, including agro-industry and high-end real estate.  All are laundering cartel money with government protection.  And a mere fraction have been prosecuted,” said the report.  While Mexico’s state-owned oil company Pemex is massively corrupt, cartels created the 1,127 percent spike in illegal pipeline siphoning since 2006.  But again, they are far from the only predators.  In 2004 the son of a former first lady boasted how he obtained contracts for a service company, Oceanografía, now mired in a fraud suit involving Citigroup and accused of money laundering.  Chinese firms do business with the Knights Templar, buying huge shipments of iron ore from cartel controlled mines.  In return it sells them precursor chemicals for crystal meth and cocaine.  And now some warn that energy reforms could set Mexico on the suicidal course taken by Putin’s “Yeltsin-style Russia,” where only Russian oligarchs reaped rewards.  If Mexicans see their oil going the same way, how might they respond? asked one journalist.  The vigilante movement, plus armed protests against mining and logging, are worrying signals that people are losing patience in a country awash with guns, he reported.

But, ask others, could wise, sternly disciplined energy reform set the standard for a decent business environment – at last?  A national standard that citizens would insist on?