Mexico's Drug Woes a Mounting Threat to Commerce

The U.S.-Mexico border is seeing increased drug trafficking and related violence, spelling a bleak future for border cities and businesses.

By Andrew C. Schneider, Associate Editor, The Kiplinger Letter

May 27, 2008

A failed state on the U.S. border? It's a growing possibility. Mexican President Felipe Calderón's campaign against the drug cartels is getting increasingly deadly, with the gangs killing federal officials at will, almost certainly with inside help. The latest assassinated, Edgar Millán Gómez, was Mexico's counterpart to the U.S.' FBI director.

The strength and wealth of drug cartels are fueling corruption in Mexico, and there's clearly a growing danger that the rule of law will break down completely. The situation is analogous to that of Colombia in the 1980s, but on a far larger scale and with far more serious potential consequences for the U.S. Mexico has a population more than twice as large as Colombia's. Its economy is the 14th-largest in the world and represents the U.S.' second-largest export market. And unlike Colombia, it shares a 1952-mile border with the U.S.

The cartels are operating against the Mexican authorities from the U.S. side of the border. They're sending money, guns and chemicals for making drugs southward, while shipping methamphetamines, cocaine, heroin and marijuana northward, putting U.S. towns and ranches from Texas to California on the front lines. The violence encompasses Mexico's maquiladora belt that produces goods for U.S. firms before shipping them north for sale. Moreover, the drug battles add extra fire to the immigration debate, with threatened communities demanding the U.S. fence off the border.

The huge resources the cartels can call on enable them to bribe government officials at all levels -- soldiers included, as evidenced by the emergence of Los Zetas, a cartel made up of Mexican Army deserters. Those officials they can't bribe, they can kill. Faced with a choice between being bought and being shot, many officials are caving. George Friedman, founder and CEO of private intelligence firm Stratfor, illustrates the problem in a recent article: "Government officials, seeing the futility of resistance, effectively become tools of the cartels. The government thus becomes both an arena for competition among the cartels and an instrument used by one cartel against another."

Millán's murder on May 8 capped a week in which six senior Mexican police officials were killed, including the federal police's director of organized crime investigations. Drug cartel hits on police officers are far from rare in Mexico, but up to now, most of those targeted have been at the state and local levels. Such attacks were concentrated near the U.S.-Mexican border, where the Mexican army and federal police are now heavily deployed as part of the Calderón government's crackdown. But the most recent hits have taken place in Mexico City itself. That may force the Mexican government to spread out its troops further to protect the capital, diluting its efforts farther north. Moreover, the shootings come at a time when violence between rival cartels is escalating, taxing government forces even more.

President Bush's proposed aid may not be nearly enough. Bush is asking Congress to appropriate an additional $1.4 billion for Mexico in 2008 and 2009. The request, part of a joint U.S.-Mexican strategy known as the Mérida Initiative, would purchase advanced equipment for the Mexican army, navy and federal police, including helicopters, surveillance planes, night vision gear, software and forensic and customs inspection equipment. It also would pay for more law enforcement training groups, helping to vet recruits and train them to better investigate organized crime. And it would fund needed soft power initiatives, such as helping enact a major overall of the justice system just passed by the Mexican Congress.

Capitol Hill will approve the aid package, but the funds pale in comparison to those available to the cartels. Mexico's drug trade with the U.S. amounts to hundreds of billions of dollars per year. That's a situation unlikely to change as long as demand for illegal drugs remains high in the U.S.

Retired U.S. Army Gen. Barry McCaffrey, director of the White House Office of National Drug Control Policy under President Clinton, notes one positive in the drug battles: Cartels are starting to feel more pressure from Mexico's federal police, as evidenced by their return attacks. Previously, only the Mexican Army, which is partnered with the federals in the counter-narcotics campaign, was viewed as both strong enough and clean enough to have a big impact on the cartels. Still, the outcome remains very much in doubt. "If Mexico can't do this and ends up in the hands of a narco state, we are really in trouble," says McCaffrey.

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