Political Risk Latin America Blog @PolRiskLatam

Parties, candidates hint at energy policy in a new administration

Posted in Uncategorized by politicalrisklatam on July 27, 2011

by Jeremy Martin for MexBizNews, July 27th, 2011.

In less than 12 months, Mexico will elect a new president. Surely, the security concerns gripping the country will dominate the campaigns. But, given energy’s role for the country’s economic well being, what candidates say on that topic will be important.

Across the parties and presumed candidates, there have indeed been hints and signals as to their thoughts on energy that are worth further assessment.

Beginning with the incumbent party, President Felipe Calderon’s National Action Party (PAN), there is much to dissect.

The president, energy secretary in his predecessor’s administration, has not completely shied from confronting Mexico’s energy dilemma. Not as deep as was hoped for, the energy reform of 2008 was, nevertheless, an important incremental step – and clear delineation of his government’s and the PAN’s position.

But there are two more recent developments that point up the PAN’s continued desire for “deeper” energy reform.

First were comments made in May by President Calderon. By expressing his hope for further energy reforms during his sexenio, he ignited a round of discussion and intrigue just as the election calendar was unfolding. But it was the response that underscored the PAN’s position on energy and is worth noting: Taking another shot at Pemex reform legislation was largely embraced by most PAN lawmakers.

Second are revelations that emerged from an internal party document crafted and circulated by PAN lower house member and presidential aspirant Josefina Vazquez Mota. Long on platitudes including commitment to oil sovereignty, the document did appear to reaffirm the PAN’s desire to remake Pemex and specifically in terms of fiscal reform, competitivity, and efficiency at the firm.

The outgoing PAN administration’s comments coupled with those made by PAN legislators send fairly clear signals as to the party’s platform, or at least their wishes, on energy policy and reform going into 2012.

Similarly transparent to date, but on the other side of the energy equation, resides the Party of the Democratic Revolution (PRD).

The party, led by Andres Manuel Lopez Obrador in the last election, spearheaded the anti-reform movement in 2008. The PRD, at least with Lopez Obrador at the helm, appears to remain firmly opposed to deep reform at Pemex and particularly to efforts to increase the firm’s ability to contract with private – and especially foreign – companies.

But more than either of the other major parties, the PRD’s internal deliberations to determine their nominee could conceivably alter the party’s broader views on energy. (continue reading… )


Central America’s dirty drug wars

Posted in News and Articles, Political Risk by politicalrisklatam on July 26, 2011

Financial Times Editorial, July 25th, 2011.

Last week, Mexico seized more than 800 tonnes of precursor chemicals – enough to make several billion dollars worth of methamphetamine. The week before, the Mexican army also discovered the biggest marijuana field ever found in the country: a 120 hectare farm, yielding an average crop of 120 tonnes, worth $160m a year. These were rare triumphs in Mexico’s four- year assault on organised crime, which has so far cost 40,000 lives but done little to slow the flow of illegal drugs north to the US.

Of course, the idea that drug problems are caused by illegal drugs themselves is an illusion. Such problems are caused instead by the desire to consume drugs and the illicit industry that arises to meet that desire. Interdiction can only achieve so much. Even if the US built a 50ft wall around itself, drug traffickers would simply build 51ft ladders. What fighting organised crime can hope to do, however, is to raise the standards of law and order in the producing country, a good in its own right. It can also boost – if only slightly – the cost of illegal drugs. (continue reading… )

Evaluating Mexico’s “New Security Model”

Posted in News and Articles, Political Risk by politicalrisklatam on July 25, 2011

by Latintelligence, July 25th, 2011.

Mexico’s recent state level elections informally hail the beginning of the presidential election season. The PRI triumph positions Enrique Peña Nieto, the outgoing State of Mexico governor, as the PRI’s candidate, and the one which everyone must beat.

As the politicking begins, so too does the legacy shaping. And here for the current administration no issue is more important than security. Perhaps the hallmark of the Calderón administration has been the creation of the Federal Police. Genaro Garcia Luna, the Secretary of Public Security (SSP) and head of this new force has just released a new book, Para Entender: El Nuevo Modelo de Seguridad to explain Mexico’s “New Security Model.” It is worth a read in order to understand what the government is officially trying to do – then one can judge how far it has progressed down that path.

Mexico’s new model comprises three essential parts. The first is technology – led by the much heralded Plataforma México, a comprehensive national crime database. Its goal is to make information easily accessible, searchable, and actionable for law enforcement across the nation. The second is people, working to make “Mexico’s finest” live up to the moniker. This involves creating a truly professional force through new ways of recruiting, vetting, training, and career planning. It has also meant changing the Constitution to give the federal police more powers than they previously had, including the ability to investigate crimes. The third arm is the prison system, seen more often as both a revolving door for powerful criminals and a training ground for those just starting out. The model envisions expanding and upgrading the current overcrowded and run-down facilities and professionalizing the staff. (continue reading… )


Scandal erupts over power of Mexican union leader

Posted in News and Articles, Political Risk by politicalrisklatam on July 13, 2011

by E. Eduardo Castillo for  The Miami Herald, July 6th, 2011.

Elba Esther Gordillo is probably Mexico’s most powerful woman, president of the nation’s biggest union and a potential kingmaker in next year’s presidential election.

Now she’s fighting allegations from a former ally that she tried to extort nearly $2 million a month from a federal agency in a scandal that has raised questions about how far reform has taken root in Mexico following the 2000 ouster of the long-ruling Institutional Revolution Party, or PRI.

The accusation hurled by the former head of Mexico’s social security system for government workers comes as Mexico’s two largest political parties struggle over how avidly they should woo Gordillo, who has built a uniquely independent position of power as head of the 1.5-million-member teacher’s union.

Miguel Angel Yunes said Tuesday that Gordillo had met with him at a San Diego hotel in 2007 and demanded his agency give 20 million pesos ($1.7 million) a month to finance activities of a new political party created by her allies.

Gordillo, who called the claim “rash, frivolous and slanderous,” has beaten back years of attacks from union dissidents, political foes and journalists who have seen her as a symbol of Mexico’s corrupt, old-style politics. Rivals have accused her of corruption, misuse of union funds and even a murder, but prosecutors who investigated never brought a charge against her. (continue reading… )


Elba Esther Gordillo

Despite Violence, U.S. Firms Expand in Mexico

Posted in News and Articles, Political Risk by politicalrisklatam on July 12, 2011

by Randal C. Archibold for The New York Times, July 10th, 2011.

When the latest bloody headlines from the drug war in Mexico reach headquarters in New York, Ken Chandler, the manager of an American electronics manufacturing plant here, jumps on the phone.

He is not begging to come home. He is begging to stay.

“We try to put them at ease, to say it is not time to pack up,” said Mr. Chandler, who oversees the company’s operations in this border city, where the military arrived last week to help purge drug cartel members from the police department.

Not that his employer, Spellman High Voltage, needs much assurance. Like a crop of other manufacturers at the border, including six companies in this city alone, Spellman is expanding its operations, with a new plant under construction after making a calculation that offers one of the starker paradoxes of these violent days in Mexico. (continue reading… )

Mexico’s presidential campaign: The questions that matter

Posted in News and Articles, Political Risk by politicalrisklatam on July 11, 2011

by The Economist – Americas View, July 11th, 2011.

The United States’ ambassador in Mexico notoriously described the presidential candidates of the ruling National Action Party as a “grey” sort of bunch. In a questionnaire last week in El Universal, a daily newspaper, the leading panistas show off their human side. Alongside serious questions about the campaign, we learn about their favourite films (ominously, The Godfather is a popular choice), smells (good earthy Mexican countryside ones prevail), and even which actor or actress they fancy most (two candidates boost their internationalist credentials by going for Jennifer Aniston and Juliette Binoche; the rest play it safe by sticking with mexicanas).

The final question is that classic interview killer: what is your greatest weakness? As a colleague on the Financial Times noted recently, the favoured technique is to list a weakness that is actually a strength. Three candidates deliver classics of the genre: “Persistence to the point of stubbornness,” boasts Santiago Creel, the current front-runner in most polls. “Being addicted to work,” claims Josefina Vázquez Mota, hot on his heels. “Perhaps I spend too much time reading,” admits Emilio González, governor of Jalisco.

A different tactic is employed by Ernesto Cordero and Alonso Lujambio, the secretaries of finance and education respectively, who both confess to taco-based weaknesses. Javier Lozano, the labour secretary, is a little more honest, if not modest, about his weaknesses: “Nothing in particular,” he says.

You can read the whole hard-hitting interview (in Spanish) here. Serious reporting will resume later this week.

An expensive handbag fight

Posted in News and Articles, Political Risk by politicalrisklatam on July 8, 2011

by The Economist – Americas View, July 8th, 2011.

In many countries, teachers’ unions confine themselves to bickering about bureaucracy (in Britain, they even complain when the government tries to remove it). But in Latin America, and especially in Mexico, they are mighty things. Mexico’s National Union of Education Workers (SNTE) is the single biggest union (of any sort, not just education) in Latin America, with more than 1.2m members. Its power is one of the reasons why Mexico’s education system is roughly as good as that of Jordan, which is half as rich.

The union’s boss, Elba Esther Gordillo, is one of Mexico’s most extraordinary political creations. During a lifetime of public service, she has accumulated a fortune that reportedly includes mansions in Mexico City and California and a private jet. “La Maestra” (“the teacher”), as Ms Gordillo likes to be known, was spotted the other day in $1,200 shoes and with a $5,500 handbag, according to a local Mexican paper. The SNTE’s members’ dues run to some $60m a year. A recent audit of one taxpayer-funded education programme found irregularities in the records of 90,000 of its recipients. One teacher was receiving the equivalent of $66,000 a month.

The extent of Ms Gordillo’s political power has recently been revealed in more detail. Last week La Maestra confirmed the long-circulating rumour that before the 2006 election she made a “political arrangement” with Felipe Calderón, now the president, that she would back his candidacy in return for his agreement to appoint allies of hers to posts in the government. Mr Calderón, who won by the narrowest of margins, duly obliged, appointing Miguel Ángel Yunes to head the ISSSTE, the social security agency that deals with public sector workers, including teachers. (continue reading… )

The Institutional Revolutionary party’s return to power

Posted in News and Articles, Political Risk by politicalrisklatam on July 7, 2011

by Rodrigo Camarena for The Guardian, July 7th, 2011.

The party that ruled Mexico for seven decades by a mix of autocracy, populism and patronage is making ominous advances.

As the largest democracy in the western hemisphere celebrated its 235th birthday on Monday, its neighbour to the south, Mexico, recoiled at the spectre of a return to its autocratic past.

As results from Sunday’s race for the governorship of Mexico State (surrounding Mexico City) were released, the outcome was unmistakable. The centre-left Institutional Revolutionary party (PRI) – which ruled Mexico uninterruptedly for 71 years – decimated the opposition in a landslide victory with 62.6% of votes cast, against the leftist Democratic Revolutionary party’s (PRD) 21.1%, and 12.4% for Mexican President Felipe Calderón’s National Action party (PAN).

The PRI’s candidate, Eruviel Ávila, had long been a favourite to win the gubernatorial elections. The PRI has governed the state since the early 20th century and expectations for their removal from power were swiftly dashed after the PAN and PRD failed to continue their electoral alliance against the party (as they had successfully done in five out of the eight gubernatorial elections held last year). While less than half of the state’s voters participated in this weekend’s election, and only 24% of the state’s residents voted for the PRI, Ávila’s victory was assured thanks to strong participation from state employees and support from the country’s powerful teachers’ union. Many see the race for Mexico state as a bellwether for the 2012 presidential elections, in which the current governor of Mexico state, Enrique Peña Nieto, is leading in early opinion polls. (continue reading… )

Report Card 2011: Mexico Corporate Security

Posted in News and Articles, Political Risk by politicalrisklatam on July 6, 2011

by The American Chamber & Kroll Tendencias, July 2011.

In an annual survey conducted by Kroll and the American Chamber, a majority of respondents from local and multinational firms say the security situation in Mexico has further deteriorated. Some firms have considered moving operations, but most
are learning to adapt.

News of drug gang executions and bloody turf battles are daily occurrences in Mexico. It is no wonder then that companies doing business there are concerned. A recent survey of executives from local and multinational companies measures the depth of that concern. More than 90 percent of respondents feel there has been no improvement in security over the past year and more than two thirds think the country is less safe. Overall, 45 percent of company executives feel their companies are at greater risk today than one year ago.  The upshot?  Eight percent of companies surveyed say they have considered moving their operations to another country, while 27 percent say they have reconsidered investment plans in Mexico.

The Impact of Security in Mexico on the Private Sector is the name of the study which resulted from this third annual survey conducted by the American Chamber/Mexico (AmCham) and Kroll. The study reflects the opinion of more than 500 executives, who are members of the three AmCham organizations in Mexico City, Guadalajara, and Monterrey, as well as the Japanese Chamber of Commerce and Industry, and the Canadian Chamber of Commerce.  A total of 4,232 surveys were sent by email to managing directors, CFOs and heads of security around the country. Nearly 80 percent of those who participated in the survey were from multinational firms.

The report notes that not all  regions of the country are as infiltrated by the drug gangs as the northern states of Tamaulipas, Nuevo Leon and Chihuahua. In fact, in some areas, such as Queretero, home to a growing aerospace industry, companies are investing and thriving. Still, the influence of the drug cartels spreads far and wide. Of most concern to company executives is the threat of extortion by organized crime. That threat can manifest itself in a number of security risks for businesses, according to the survey. Topping the list is aggression against employees, followed by breaches in the companies’ supply chains, and internal fraud.

For the first time, the AmCham/Kroll survey asked companies if the Mexico’s security challenges had prompted them to consider moving their operations to another country. An overwhelming majority of companies — 87 percent — said “no”, while 8 percent of companies, most of which with fewer than 500 employees, said “yes.” For companies with large investments in Mexico, uprooting from Mexico is not an option. As a result, their focus is on adapting to the situation and implementing preventative measures to reduce their exposure to organized crime. (continue reading… )

Download the full Report in English here.

Download the full Report in Spanish here.

The Way Forward

Posted in News and Articles, Political Risk by politicalrisklatam on June 30, 2011

by Jorge G. Castañeda for Time Magazine, June 30th, 2011.

Since time immemorial, Mexicans have argued that were it not for U.S. demand for illicit substances, Mexico would have a manageable drug problem. More recently, we have also contended that absent the U.S.’s laxity on arms sales and its tolerance for the possession of extraordinarily dangerous weapons, the violence in our country would not be what it has become. Lately our leaders have added a new gripe: Americans are hypocrites because they support prohibitionist and costly drug-enforcement policies — yet, through the specious fallacy of medical marijuana, are legalizing drugs without saying so.

Needless to say, these three points are absolutely valid, true, irrefutable … and futile. They are the equivalent of believing that flowers and fruits would thrive in the desert if only it rained. They would, but it won’t. Americans have not, and will not, reduce their overall consumption of drugs; they will not repeal the Second Amendment or reinstate the assault-weapons ban, which was introduced in 1994 and lapsed 10 years later; and the case against hypocrisy has always been overstated.

When Barack Obama met Mexican President Felipe Calderón recently, he is said to have told him that U.S. drug consumption has dropped over the past 40 years and that the U.S. jails more people for drug-related offenses than any other wealthy country, by far.

Unfortunately, on the second point, Obama was right. The first point is more debatable. After Richard Nixon declared a war on drugs in 1971, U.S. consumption jumped through the late ’70s and dropped slightly in the early ’80s. Since the mid-’90s, overall demand has remained constant.

On weapons, there are two problems in addition to futile Mexican posturing. First, firepower is fungible. Even granting that most arms used in Mexico come from the U.S. (in fact, only the traceable ones do), there is no reason to suppose that if they stopped moving south, other sources and suppliers would not fill the void. Otherwise, the abundance of guns in countries from Brazil to Afghanistan would be inexplicable.

Most important, though, violence in Mexico did not increase when, in 2004, the assault-weapons ban expired and George W. Bush declined to resubmit it to Congress. (Obama hasn’t either.) Willful homicide and every other form of crime had been diminishing in Mexico since the early 1990s and continued to do so until late 2007, precisely when Calderón’s war on drugs went into high gear. As for medical marijuana, it is quite true that its use in most U.S. states amounts to legalization without admitting it. There is nothing wrong with this, although full-fledged legalization of marijuana production, commerce and consumption would be better. But if U.S. society feels more comfortable with the hypocritical regulation of pot and other drugs, so be it. What is the point of Mexicans’ lecturing Americans about this, other than scoring debating points? (continue reading… )