Mexico turned a corner in 2000 with the election of Vicente Fox. His party, the PAN, was an abrupt break with the dictatorial rule of the PRI dating back to the 1920’s and the decade after the 1920 Revolution. The election brings Mexico to a crossroads and the path the country takes will be significant not just for Mexico but for the Amerivas.

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here are four economic pillars of today’s Mexican state that earn foreign currency critical to the survival of the Mexican economy and society. Today Mexico must import about 40 percent of its food, much of its technology and export earnings are critical. If those pillars fall, then the third largest economy in the Americas fails and that failure is on America’s doorstep with 110 million people, Texas’ largest import customer and the third ranking source of foreign oil for the United States.

Foremost is oil among the pillars with exports providing the most basic source of income to run the Mexican government from the President’s salary to pay of teachers, doctors, police and soldiers. Mexico’s largest fields are declining rapidly and estimates are that by mid-decade Mexico will not have sufficient production to meet internal consumption and provide exports.

Second is income from tourism. Mexican resorts on the south side of the Yucatan and north from Acapulco to Tijuana feature some of the finest beaches in the world and are readily accessible in a few hours from North America. Oil riches in the last two decades have provided the infrastructure of roads, utilities and airports to substantially increase the likelihood of tourism. Since 2005 tourism is down sharply because of fear of violence.

Third is export earnings from maquila manufacturing. Visible in this area are the large numbers of light manufacturing and assembly plants particularly in the north of Mexico that feed the American market. The advantage of Mexico is its cheaper labor perhaps as low as ten dollars a day as compared fifty dollars in the United States. The globalization of labor has meant that the Mexican workers must compete with others such as China and India where daily rates may be as low as two dollars.

Fourth is “loaned workers” that reside in the United States and send remittances back to families in Mexico. The American recession and the bust in home building and financing have sharply curtailed the availability of jobs in the States for Mexican workers.

Juarez-El Paso: The Canary in the Mine

No community in North America provides a better warning of the potential chaos that can come from a failed nation state and the market for drugs, trafficked persons and dirty money than this twin city of 1.5 million on the Mexican side and 700,000 on the American side. Since 1950 Juarez has doubled in size each decade and was one of the early innovators in the maqila concept of duty-free assembly work. The promise of jobs and the hope of a Mexico more like America drew tens of thousands for work in these factories. But with the collapse of real estate and the decline of the American economy much of the promise has vanished. Added to that misery is an open war between two cartels, La Linea-the Juarez Cartel and the Sinaloa for the control of the plaza that moves drugs and other contraband back and forth between Mexico and the United States.

In an effort to control the cartels and with recognition of a highly corrupt municipal and state police, President Calderon in 2008 sent 7,000 Federal troops to patrol the town. That did not succeed and in the last 2 years 4, 200 people have been killed with 500 in January and February. While many those killed were cartel members others were soldiers, police and importantly civilians. The war against civilians took a more ominous turn on Saturday, March 13 when three civilian employees of the American consulate were killed in the afternoon in Juarez in two events in what some saw as coordinated. Mexican authorities joined by the FBI and the DEA suspect that a home grown street and prison gang, the Aztecas may have done the contract killing for one of the cartels. On the El Paso side this group is known as the Barrio Aztecas and formed in the Texas prison system two decades ago. This alliance represents a new front in the war with the cartels where American gangs work in contract relations with the Mexican cartels. High unemployment on both sides of the border assures a steady supply of foot soldiers

The impact of this violence has recently been estimated to have forced 400,000 residents of Juarez to flee the city. Since 2005, 10,600 businesses—roughly 40% of Juárez’s businesses—have closed their doors and maybe 10,000 homes abandoned. People with means have fled to El Paso and the Juarez mayor keeps a home there. With the average household income in Juarez about one fourth of that in El Paso, there is likely a huge increase in the poverty population of the city with an attendant demand on services such as education, health and public housing. The El Paso Police Chief has grown so concerned about being outgunned by the cartels that he got support from the El Paso City Council to provide over 1,000 combat rifles to his police force.

In Juarez people have lost faith in the government and are fleeing to the United States and in some cases calling for an American takeover to protect them from the cartels. There are between ten and twenty million people in northern Mexican states that border on Texas and if Juarez-El Paso is a pattern that repeats then the waves of refugees coming in the days ahead to Texas will far exceed the experiences with any Gulf hurricane.

Four alternative scenarios are possible for Mexico.

Mexico has arrived at a crisis point. Events are deteriorating rapidly At this point all have about equal probabilities.

Reprive

World economy rebounds. Oil prices rise to $200 a barrel, Mexico permits foreign investments and spins off PEMEX which modernizes engineering, refining and exploration. Corruption is curtailed and profits soar. Situation stabilizes to a significant degree.

Collapse in progress

Oil plays out in Mexico’s top producing fields, Mexico cedes control over the south and north of the country and 20 million refugees head to the northern cities and the United States. Millions will come to Texas alone. Mexico is a failed state with guerilla bands controlling much of the countryside and several of the larger low income neighborhoods in Mexico City. Staged attacks on American border cities occur with regular frequency and local police are overwhelmed facing cartels that are better organized, funded and equipped. American border cities are overwhelmed with refugees and violent gangs.

American Protectorate

Cartels use hit squads to attack American law enforcement in border cities on both sides. The United States intervenes with military forces as it has done in Haiti and creates a protectorate for the Mexican Federal government south to Monterrey, Saltillo and Durango. The traditional northern antipathy toward the “chilangos” of Mexico City grows and a process of tying the northern Mexican states closely to the American Southwest accelerates. Leftist and nationalistic mobs burn and sack the American Embassy in Mexico City.

Revival of Pax Americana

American economy revives and joint American and Mexican efforts suppress cartel activity with attendant boosts in tourism, maquilas and domestic growth. America sharply reduces illegal drug consumption. Mexico increases its historical ties with Central America and opens the region to the south to economic growth and channels American technological knowhow through all of Latin America.