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With open hearts, the world’s second-largest population of Roman Catholics welcomed the Pope to Mexico this month. Consolation proved brief. With harsh counsel, he warned against ignoring the massive moral and social fallout from organized drug crime. It’s the biggest challenge for the most unpopular President in the history of Mexican polling – and the reason he’s still in power, Jack Nott-Bower reports.
THE UNPOPULARITY of Enrique Peña Nieto isn’t entirely his fault. Diving prices of oil and commodities have soured fortunes, punishing the economy.
But the President hasn’t helped his own ratings either. In a country beset by the constant fear of kidnap and drug wars, Peña Nieto’s reputation has been battered by the government’s botched investigation into the disappearance of 43 student teachers in Guerrero in September 2014.
And then there was the escape of Joaquin Guzmán Loera, or El Chapo, the world’s most notorious drug lord, from a maximum-security prison – for the second time.
Mexicans enraptured by Peña Nieto’s telegenic performances in 2012 and his support for the marginalised instead now recognize ‘business as usual’: another quasi-authoritarian and corrupt Institutional Revolutionary Party (PRI) government being propped up by tight crony networks and backstage deals with organised crime.
For all the PRI’s center-left rhetoric, it has failed to ease the gap between the majority living in rural poverty and a globalised minority in thriving industrial cities.
Roads and railways link the country’s industrial hubs of Mexico City, Monterrey, Guadalajara and Tijuana to the US border and major ports. Yet huge swathes of countryside remain entirely unconnected.
Foreign expertise would almost certainly help decentralize wealth flows, create jobs and realise the country’s enormous extractive potential. But investors in the oil and shale gas industry face the greatest risk of kidnap, intimidation or extortion by illicit networks of power.
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It’s not all down hill for Peña Nieto.
Despite crashing popularity, the PRI’s tentacles help it maintain a form of political stability. The party demonstrated its prowess in reeling in smaller parties, such as the Greens and New Alliance, to retain a congressional majority last June.
Its perceived association with organised crime pays off in fear mongering. State and municipal level politicians are scared to challenge the status quo. Opposition elites tend to make do with “case-by-case” political alliances – alianzocracia – between traditionally opposing parties as their safest means of challenging the PRI while maintaining security.
Such paranoia is well justified. The criminal networks that invest money and blood in sophisticated co-option channels with governing elites don’t take kindly to the risk of political transition. Newly elected governors and mayors face a constant threat of assassination, kidnap and manipulation if they are seen to openly threaten the political order enforced by illicit networks.
On New Year’s Day, Gisela Mota, a 33-year-old federal congresswoman for the leftist Democratic Revolution Party (PRD), took office as Mayor of the city of Temixco. She declared a “frontal and direct” fight against crime in the disputed drug territory around 60 miles south of Mexico City. Mota lasted until 7 the next morning, when four gunmen burst into her house and killed her in front of her mother and nieces.
The young mayor had been openly supporting Peña Nieto’s new ‘Mando Único’ – a security initiative that aims to shut off criminal access to local authorities by merging local police units under a central command. Yet many locals believe the real reason for her death to be more disturbing, pointing to an ongoing struggle for regional influence between opposing factions of the embattled PRD.
In the state of Guerrero – a key trafficking route from Mexico City to the port of Acapulco – 42-year-old mayoral candidate Aidé Nava González was found a year ago with her head decapitated. On a sheet covering her body her assassins had sprayed a ‘narcomanta’ – a drug gang warning. Her husband – a former mayor – had also been murdered. Her son, abducted in 2014, has never been found.
The violence has had a predictably detrimental effect on the investment climate in states that went through local political transitions last year, including Guerrero, Colima and Jalisco. The hotspots for local elections this June are in the states of Tamaulipas, Sinaloa and Veracruz.
Key among the new wave of politicians is Jaime ‘El Bronco’ Rodríguez, the first-ever independent candidate to secure a gubernatorial position.
El Bronco’s campaign to end the ‘camarillas,’ or crony regional networks, is particularly significant as he governs Nuevo León, Mexico’s second-most important strategic industrial centre after the Federal District. Rather than disrupting business, well-calculated appointments to his cabinet and pledges to investigate ‘hundreds’ of local corruption cases this year and improve infrastructure are encouraging investors.
Another force for change is the ultra left-wing National Regeneration Movement (Morena), led by Andrés Manuel López Obrador, or AMLO. A presidential candidate in 2006 and 2012, AMLO’s rhetoric appeals to the marginalised majority, particularly in the central State of Mexico (Edomex). But unlike El Bronco, AMLO’s talk of reversing current market-friendly economic reforms is creating uncertainty for investors, even though many of Peña Nieto’s policies have been undermined by the slide in commodity prices.
Other opposition parties are starting to build their alliances to challenge the PRI in the run-up to the 2018 presidential vote. Strange bedfellows include the center-right National Action Party (PAN) cosying with the left-wing Party of the Democratic Revolution (PRD).
Opposition to the status quo is also coming from groups of anti-drug vigilantes, known as autodefensas. These armed networks, most prominent in the central-western state of Michoacán, have sworn to take the protection of local communities into their own hands and banish cartel repression.
In some cases they have been more effective than the state security forces.
Peña Nieto has been cutting funds and subsidies for state-level and municipal law enforcement, supposedly to streamline a more efficient, federal-level security approach spearheaded by the National Crime Prevention Program. But the outlook for security, especially in remote areas, is bleak.
The challenge of opposing the current order politically or with arms can’t be underestimated. Even the autodefensas are vulnerable to infiltration by cartel remnants promoting alternative profit-making scenarios to their members.
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Since the basis for the PRI was founded in 1929, Mexico’s largest party has maintained a quasi-authoritarian hold on politics through its decades-old association with ‘camarillas,’ the most prominent being Peña Nieto’s Atlacomulco Group.
Contrary to his romantic promises of 2012 to combat organized crime, the President has maintained loyalty to his inner circle and the links to cartels have proliferated. Observers point to the return of pax mafiosa, an informal system of protectionist agreements between federal-level politicians and criminal elites that characterised the ‘security strategies’ of previous PRI administrations.
In a startling display of their potency, the New Generation Jalisco Cartel (CJNG) – led by Nemesio Oseguera Cervantes, alias El Mencho – shot down a military helicopter with a rocket-propelled grenade just outside Guadalajara in the state of Jalisco last May.
While the CJNG has sustained losses to its high command, including the capture last July of El Mencho’s son – Rubén Oseguera Cervantes, or El Menchito – the cartel has also been building financial resources through association with Los Cuinis – a specialist money laundering network led by Abigael González Valencia, alias El Cuini.
Enough loopholes remain for a lucrative business in illicit cash transfers, in spite of UN-led initiatives last year to standardize anti-money laundering and counter-terrorist financing prevention measures across banks, brokerages and investment funds.
One of the CJNG’s favored tricks is riding fraudulent operations through bonafide businesses under the camouflage of ‘legitimate tax payer’ status by exploiting flaws in the Tax Registry’s Federal Contributors account system, or RFC.
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The CJNG’s biggest rival is El Chapo’s Sinaloa cartel. It’s also suffered major blows to its leadership as a result of Peña Nieto’s militaristic ‘kingpin strategy’ of targeting the highest command. The cartel is thought to be profiting through use of the hawala technique of loyalty-based broking, commonplace in South Asia, the Middle East and Africa, to avoid direct transfers of cash between a sender and a recipient.
More options for cloaking illicit proceeds come from these groups’ tight business coordination with other transnational networks, particularly Los Urabeños and FARC in Colombia (more in tomorrow’s Frontera Deep Dive on Colombia).
The cartels are searching for new business activities. Their proceeds from drugs are threatened by the decriminalisation of marijuana in a handful of US states and the Mexican government’s use of military force to dismantle trafficking networks and production facilities. A Supreme Court verdict in Mexico may set a precedent for legalizing marijuana for recreational use nationwide. Such a move would reverberate throughout Latin America.
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Jesus Never Wanted Hit Men
This is not to say that drug trafficking is on the wane – the Sinaloa and CJNG cartels will continue to dominate this trade – but it does mean there’s a greater likelihood of diversification into other areas, including sporadic exploitation of the energy and mining sectors.
While most foreign companies wading into Mexico’s rich oil reserves following Peña Nieto’s 2014 energy reforms focus on offshore production in the Gulf of Mexico – keeping them relatively remote from criminal influence – they nevertheless run reputational risk by engaging with local partners given the levels of corruption. Danger of kidnap for ransom and extortion will be highest for investors operating on land in the states of Tamaulipas, Nuevo León, Guerrero, Jalisco, Sinaloa and Michoacán.
It’s in Michoacán, the state straddling between Mexico’s two biggest cities and the Pacific Ocean – a major trafficking route and methamphetamine production hub – that Pope Francis spoke directly to the youth: “Jesus, who gives us hope, would never ask us to be hit men.”
And then he addressed the nation:
“What temptation can come to us from places often dominated by violence, corruption, drug trafficking, disregard for human dignity and indifference in the face of suffering and vulnerability?” asked the Pope. “We can sum it up in one word: resignation.”
Resignation, he warned, is one of the devil’s favorite weapons to overcome us. Do not hide, the Pope cautioned another audience of clergy and bishops, “behind anodyne denunciations.”
The message reverberated loudly through the police and the web of other public authorities whose complicity enables the drug lords.
Points to Watch:
- Mexico will not see any major short-term economic recovery through 2016; the country is handcuffed to the fall in global commodity prices, while gaps in regulatory consolidation and on-going security concerns in strategic areas will continue to slow the promised FDI influx.
- Despite public disillusionment, a continuation of the status quo will be the primary source of political stability as it ensures accessibility to the country’s huge natural resource potential.
- As El Bronco looks to secure his image as the independent symbol for anti-corruption and anti-cronyism, López Obrador will continue to capitalise on Peña Nieto’s meagre economic fortunes over the year ahead to gather support from the divided left. This could fast-track Morena to an eventual presidential bid in 2018.
- In continuing to procrastinate from alleviating internal divisions, opposition parties will look to coalesce against the dominant PRI in an effort to dislodge its political dominance in 2016. However, Peña Nieto will remain confident in the strength of his inner political circle, which will be crucial for satisfying his reformist agenda.
- Mexico’s criminal arena will continue to disperse and restructure. The system of cartels, sub-networks and street gangs will become more intricate, unpredictable and difficult to navigate for public sector officials and investors alike. Businesses operating in remote areas and troubled municipalities, particularly in the states of Guerrero, Michoacán and Tamaulipas, will face heightened kidnap and extortion risks as criminals look to diversify their revenue. In tandem, local political transitions and a gradual centralisation of the country’s police forces may encourage violent backlashes.
- Through the 2016 National Anti-Corruption System, the government will seek to demonstrate greater activism in developing and enforcing new punishment and prevention measures. Counter-illicit financing regulations will continue to increase in scope and strength, filtering even the most sophisticated criminal networks out of regular financial streams.
The author is Jack Nott-Bower, Latin America Analyst at West Sands Advisory Limited. A Spanish speaker, Jack has lived in Mexico and traveled through the Americas. His analysis focuses on political, criminal and governance dynamics throughout the region.
West Sands Advisory Limited is a business intelligence, investigations and political advisory firm that has, since 2006, helped clients identify opportunities and reduce risk in emerging and frontier markets http://www.westsandsadvisory.com.