Pubdate: Tue, 16 Feb 2010
Source: Financial Times (UK)
Copyright: The Financial Times Limited 2010
Contact:  http://www.ft.com/
Details: http://www.mapinc.org/media/154
Author: Gideon Rachman
Bookmark: http://www.mapinc.org/topic/Mexico x

WHY MEXICO IS THE MISSING BRIC

How does it feel to be Joaquin "El Chapo" (Shorty) Guzman? Last year 
Forbes magazine listed him as the 701st-richest man in the world. But 
unlike other billionaires, Mr Guzman cannot enjoy his fortune by 
spending time on yachts or in fancy restaurants. As Mexico's leading 
drugs baron, he has the country's army on his tail - and so has to 
hide out in a mountainous region of 60,000 square kilometres.

The fate of Mr Guzman and the other Mexican drugs criminals is more 
than just a crime story. It has global political ramifications. 
Countries that were once classified as mere "emerging markets" are 
now being re-classified as "rising powers". Brazil, India and China - 
together with Russia - have been famously tagged as the "Brics", and 
are now global political players.

With a population of more than 112m people, a per capita income that 
is more than double that of China and privileged access to the US 
market, Mexico should be in this group of rising powers. But the 
drugs problem is blighting its future.

The figures are horrifying. Last year, the death toll in Mexico's 
drugs war was more than 6,500. By comparison, over the same period 
the conflict in Afghanistan claimed the lives of some 2,400 
civilians. Drug-related violence killed 238 Mexicans in the first 10 
days of this year alone. In late 2008, a Pentagon study notoriously 
suggested that Mexico was on its way to becoming a "failed state". 
Since then drugs violence has only intensified.

Fortunately, you need only spend five minutes in the country to 
realise that any comparison between Mexico and a truly failing state, 
such as Afghanistan, is silly. Mexico City, the capital, is a vast, 
bustling and fairly wealthy city. The drugs violence is dreadful - 
but it largely lacks the random quality that truly terrorises a 
country. About 90 per cent of victims are said to be members of 
warring drugs cartels. Most violence is confined to three relatively 
small regions - above all, the benighted border city of Ciudad 
Juarez, where more than 2,500 people were murdered last year.

But the drugs war is still severely damaging Mexico. Ciudad Juarez is 
not some dusty, desert outpost - it is a major base for 
manufacturers, aiming at the US market. Across Mexico, local 
businessmen worry about extortion and kidnapping - while foreign 
investors hesitate.

Mexico might be able to cope better with the drugs issue if it were 
not also suffering from other ailments. But 2009 was an economic 
disaster for the country. While China and India grew strongly and 
Brazil barely lost ground, the Mexican economy tanked, shrinking by 
almost 7 per cent.

Everything seemed to conspire against the country last year. The US, 
which takes 80 per cent of its exports, was in recession. The oil 
price slumped. An outbreak of swine flu devastated tourism. All that 
seemed to be missing was a plague of locusts.

But even when Mexico's run of bad luck ends it will still face 
serious economic problems. China's manufacturing miracle has helped 
Brazil, which is a major exporter of commodities, but it has been a 
big headache for Mexico - which has based its economic strategy 
around manufacturing for the US market.

Economic underperformance has been matched by diplomatic 
underperformance. As a member of the newly influential G20 group of 
leading economies, the Mexicans should be well placed. Instead, 
Brazil has been anointed as the unofficial leader of Latin America. 
Felipe Calderon, Mexico's president, is serious and hard-working, but 
he lacks the charisma and high profile of Brazil's President Luiz 
Inacio Lula da Silva. Brazil's voice matters a lot in world trade 
talks and in global climate change negotiations, while Mexico's views 
barely feature.

What can Mexico do to turn this situation around? The country will 
host the next United Nations climate summit in December although that 
might prove to be something of a poisoned chalice. Some public 
intellectuals in Mexico are beginning to argue that Mr Calderon 
should make a quiet accommodation with the drugs gangs, to restore 
social peace. That would surely be a mistake. A situation in which 
criminals are permanently ceded control of parts of the country - and 
can continue to buy influence and power unmolested in the rest of the 
nation - cannot be a basis for stability. Police reform, social 
programmes and improved intelligence co-operation with the US are 
better options.

But as well as battling on in the struggle against the illegal drugs 
cartels, the Mexican government needs to take on the legal business 
cartels. Oddly enough, it is not a good sign that the current holder 
of the unofficial title of the "world's richest man" is a Mexican 
Carlos Slim. Mr Slim is a gifted businessmen who has built up a 
telecommunications empire across Latin America. But his vast wealth 
testifies to the uncompetitive nature of the Mexican telecoms market 
in which he built his initial fortune. It is widely acknowledged in 
Mexico that the country would make huge gains if it allowed more 
competition in everything from energy to construction and retailing.

There is, however, one positive side to the inefficiency of the 
Mexican economy. It means that the country still has huge untapped 
resources. The year 2010 - which marks the 200th anniversary of 
Mexican independence and the 100th anniversary of the Mexican 
revolution - would be a fitting year in which to unleash that potential. 
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MAP posted-by: Richard Lake