For a few years now, I have been saying, half-seriously, half-flippantly, that Mexico is the new Colombia when it comes to narcotics trafficking. CALM DOWN - I know it's not a perfect analogy and for those of you Gringo Latin Americanists who like to prove your legitimacy by poking holes in other people's theories, be forewarned that I have made this observation to a few Mexicans over the years, NOT ONE of whom was at all pleased with me for suggesting the comparison. So, if any of you want to fire away at me for saying this, go ahead,
but I assure you that whatever diatribe you levy at me I have already been subjected to with 10 times the ferocity from our Mexican colleagues. Seriously, save your breath for some other future dispute that you will no doubt have with me.
In any event, I bring this up now only because the New York-based political risk consultancy Eurasia Group has raised exactly the same question and doesn't do a bad job answering it to the contrary. Five chief differences between Colombia's narco-status during the Escobar era and Mexico today, as spelled out by Allyson Benton and Patrick Esteruelas in Foreign Policy:
- The Mexican government still maintains control over its territory and has not ceded ground to narcotraffickers at any time.
- Although the Mexican government's fight against the cartels has resulted in higher rates of violence, the hostility remains largely contained in a few states and among narcotraffickers vying for improved positions within the cartels or between them.
- Mexico's drug trafficking violence on a per capita basis remains significantly lower than Colombia's.
- Mexico's narcotraffickers have not targeted civilians in order to support a campaign of fear against the government, even if they do continue to target public officials specifically involved in the fight against them.
- Mexico's narcotraffickers have no unifying political agenda.
They then close with the following:
In the end, the stark contrasts between Mexico and Colombia explain why investor confidence in Mexico does not appear to have waned as a result of the country's public security woes. As long as President Calderon stays firm in his stance against organized crime, investors will continue to base their judgments about Mexico on the government's capacity to push through badly needed fiscal and economic reforms rather than the level of narcotrafficking violence.
To the list of differences I would add:
6: Building on 1 and 4, no part of Mexico, to my knowledge, has descended into a no-go zone. In other words, the average civilian remains free to travel by road anywhere in the country, unlike Colombia up until fairly recently.
With regard to foreign investment sentiment, there are a few additional items that our Eurasia colleagues miss.
- From a purely financial logistics standpoint, Mexico has not and I believe will continue to not have to rely on capital controls to keep its economy in shape, unlike Colombia during the Escobar years. Not coincidentally, the Mexican peso enjoys and will continue to enjoy full convertibility in the international foreign exchange market.
- No matter what one personally thinks of NAFTA, Mexico's participation in the agreement, like it or not, offers some solace to foreign investors concerned with political risk fallout.
As far as investors continuing "to base their judgments about Mexico on the government's capacity to push through badly needed fiscal and economic reforms rather than the level of narcotrafficking violence," I agree in theory, but taking this a step further, I do not believe that the government will indeed push through these reforms and I am not alone on this though there are certainly diverging views even within the financial community. Taking this yet even another step further, another thing I have been saying since Calderón came into office in 2006 is that Mexico will lose its investment grade status before his administration is out. Earlier this year, both former IMF Director Claudio Loser and current Banxico Governor Guillermo Ortiz went public with statements to a similar effect.
Hi Robert,
Thanks for the plug. I agree with your additional points. Too bad we had a space limitation in our internet blog post, otherwise I could have gone on for ages about the differences between Mexico and Colombia.
I, too, am skeptical about the passage of reforms, but at the very least the government continues to try to do so, and investors continue to believe that they are at least making efforts in this direction, successful or not.
Allyson Benton