The Mexican Mirage

The new political party, Morena, captured the Presidency, several Governors’ Offices and other state and municipal offices with the election of Andres Manuel Lopez Obrador on Sunday, July 1, 2018. Hopes are very high in Mexico that fundamental change will occur.

Examine the proposed changes and what will need to occur for the proposals to be achieved. Fundamentally these proposed changes are central to the survival of Mexico and has great consequences for Texas. Today, for example, it is estimated that one million jobs in Texas derive from trade with Mexico. A collapsing Mexico will send starving and disparate millions of people to Texas.

Here, currently, are the promises that the new President, Lopez Obrador and his party have made to Mexico:

1. Mexico will obey the democratic rule of the law. That addresses the recurrent violence, corruption and impunity at all levels in Mexican society and culture.
2. De-centralization will begin of the national government from Mexico City moving functions to other locales. The promise is to move more than thirty federal functions out of the Federal District in the heart of Mexico City to other states. The plan will include stipends to move persons critical to those functions. It is additionally proposed to address the vulnerability of Mexico City to earthquakes and flooding by improving the infrastructure but also working to reduce the population and resources concentrated in Mexico City.
3. Revitalize Mexican agricultural production. Make the nation self-sufficient in corn, beans, sorghum, beef, chicken, eggs. The nation was self-sufficient until late in the 20^th Century but today must import substantial percentages of basic food items.
4. Save the energy sector. Mexico has large oil reserves and potential energy from solar, wind and thermal springs. But it must import gasoline and diesel.
5. Promote economic development but not increase taxes or the public debt. The President’s charge is that existing contracts with the private sector are loaded with corruption. Savings from ending corruption will pay for new projects and jobs, housing for persons displaced by earthquakes, etc. Provide internet access to all of Mexico with free hot spots at some locales.
6. Access to free education at all levels. A monthly scholarship will be granted and low-income university students will receive allowances of MXN$2,400 (120 dollars) per month.
7. Provide guaranteed employment through apprenticeships for 2.3 million young people, with monthly wages of MXN$3,600 (180 dollars).
8. The pension of senior citizens and retirees will be doubled to MXN$2,600 (130 dollars) per month

We will in the coming weeks examine all of these important goals, how they will be achieved and the progress. We will start with perhaps the most immediate.

Number 1. Solving The Problems Of Violence, Corruption and Impunity

There are a number of factors that account for these problems and cannot be solved such as moving an office by a Presidential decree. Lowering violence has to be a priority if for no other reason than it is at record levels, makes citizens across the nation feel unsafe and will suppress vacation and business travel to Mexico. Part of the violence comes from highly organized criminal groups that until they are broken apart and prosecuted will use violence to control others. Corruption in Mexico dates at least back to the years as a colony of Spain. Distances in travel and time resulted in limited and sporadic authority from the Crown and the delegates. Rather than local control from local assemblies as developed in the American colonies and then the United States, Mexico has retained cultural patterns of extreme hierarchy. This creates conditions favorable for corruption and not being held responsible, thus impunity. For AMLO as the President is known, and his party, Morena to achieve this goal will require deep and extensive cultural and institutional change. It will necessitate prosecuting thousands of persons involved in crime. It will involve broad and deep change in hundreds of government offices. It will require leadership, as an example, to address the threat of not accepting bribes leading to death of police officers. The Mexicans have a term for this: plota o plumo! Accept the bribe: silver or you will be killed-lead. Mexican government will require more effort to move from a single civil-like (Napoleonic) court system to a dual civil and criminal system like the United States.

These are deep, necessary cultural changes and will take years to accomplish. If they are not changed, little else can. This is where the new President has chosen to start. We will, in future comments, examine each of these eight campaign declarations, how they must occur and the progress. This chart is from the U.S. State Department in mid-2017 of travel advisories to the states of Mexico. Travel danger has worsened across Mexico since then.

Governments-States have many responsibilities including in modern times: maintaining the integrity of the geographical area, ensuring transportation and communication, controlling communicable diseases and in the case of the wealthier states providing for the general education and welfare. However, the first and most basic function is protecting citizens from violence. States that cannot do that are Failed States. Mexico is now entering that world. 2017 was its most violent year since regular data collection began and 2018 is more violent. Mexico has 130 million people but now every state has high levels of violence. Two of the most violent are states on the border with Texas: Tamaulipas which reaches from Laredo to Brownsville and Chihuahua that has one major Texas city as a border city: El Paso.

Here is the road at the border into one of the Mexican cities: And the city proper: But one of its neighborhoods is less appealing: 

This neighborhood is far too typical in much of Mexico. Average daily wages are $10.00. Average educational level is the 7th grade. Both Central Americans where life is even more harsh and now Mexicans are seeking to leave and head north in record numbers! Recorded legal and illegal immigration is about 1.5 million each year. I expect it to rise.

Mexico is at a critical crossroads this year with elections across the nation including the Presidential election. My slides provide a contextual review.

Powerpoint Slides

Writing this early on Thanksgiving morning, roasting turkey that we will have with pumpkin and pecan pies, I think of trade. Turkey, pumpkin, pecan and corn, we will have that as well, were food items that were introduced to the Pilgrims in 1621 by the Wampanoag tribe that was indigenous to the Massachusetts Bay where the Mayflower had landed. This harvest observance became a national tradition in 1789 with George Washington’s declaration.

The harvest tradition reminds one of foods then trade that accompanied what in time became the United States. During the coming decades from the 1600’s most trade was among the regions of the United States not international. Two significant exceptions were the international trades of cotton and people. The South was an area of exceptional cotton growing conditions and the cotton was sought by textile mills in England and later New England. Gathering cotton was very labor intensive and by the early 1800’s that labor was significantly done by slaves. Most came from West and Central Africa, initially captured by West Africans and sold into slave markets in Africa, and then in North and South America.

American Colossus

After the Civil War with the exceptions of smaller conflicts within the Caribbean and Mexico, American engagement with the larger world was limited as the country was absorbed with national development. Factory manufacturing emerged in northern states like Michigan, Ohio and Illinois. Intensive agriculture in the Midwest, south and west including Texas and California, created national markets. Detroit, Cleveland and Chicago became known for auto and electronic manufacturing, Ft. Worth for cattle stock yards, Kansas City also for cattle and grains, the Central Valley in California for fresh fruits, vegetables and nuts, Idaho for potatoes, Orlando, Florida for oranges and grapefruit and followed by the Rio Grande Valley’s citrus and onions.

During the 20^th Century the United States grew to the most prosperous nation in the world by internal trade and then supplying goods to England and Europe during WWI and WWII. There was little relative American engagement in WWI but more in WWII, but with European and then Japanese economies decimated including the destruction of factories, roads and farms, wealth flowed to America.

Foreign Challengers

That flow began to ebb by 1970 and by 1980 American manufacturing was facing brutal competition from much of the world. Initially it was “knock off” products such as consumer electronics that illegally copied American patents and designs but used far less expensive labor. However with the OPEC embargo of the 1980’s, more fuel-efficient and better-designed Japanese auto imports gained a foothold. Even the ancient pre-WWII design of the VW “bug”, became a favorite because of its low price and superior gasoline mileage. The Volkswagon then led a wave of German imports from Mercedes and BMW that featured more sophisticated engineering and design than the American companies: General Motors, Ford and Chrysler. The result was that American manufacturers had their backs to the wall with cheaper and in some cases superior imports.

As American manufacturers lost ground to Asian and European imports of cars, appliances, steel, clothing and some food items, a notion of comparative advantage took hold in American thinking. Learning from the Asians, mainly the Japanese and Europe, proposals were made to leverage the unique advantages of countries in North America to increase success in world trade including winning back American markets.

Free Trade To Make America Competitive

These were the comparative advantages for the countries of North America: Canada-natural resources; United States-manufacturing and engineering prowess and higher education; Mexico-low cost labor. This was the core of NAFTA and was achieved by lowering export-import rules and tariffs of products made in one of these countries when exported to the other. There was strong political resistance to NAFTA with the states of greatest manufacturing dominance and heavy union membership opposed. President GHW Bush did not succeed in passing the legislation but his successor, President Clinton, did.

The free trade legislation was a boon for growth and prosperity for cities in northern Mexico as first American and then Japanese, German and Korean companies located assembly facilities using lower cost (@50 cents an hour) labor and proximity to the American markets. Juarez was a clear example doubling in population each decade but by 1995 Mexico’s industrial giant, Monterrey began to boom eclipsing Juarez in many ways, though 140 miles south of Laredo or 150 miles from McAllen, but with well-maintained highways and train lines provided ready access to Texas and then to all of the U.S. and Canada.

Stepping Back From Globalization

By 2016 expanding trade as we trace it back to 1621 had begun to change. Early indicators are textile manufacturers moving from low cost regions like Mexico and Central America or Southeast Asia back to American cities near where cotton is grown such as South Carolina and Georgia. These are southern towns that benefited from textiles leaving New England in the 60’s for cheaper non-union Southern labor and proximity to where cotton is grown. The movement back to the United States is growing at rapid rates as the advantages of being near both the raw material and the consumer markets outweigh the higher cost of labor.

Substituting Technology for Labor

But there is another item in the equation and that is these returning manufacturers use technology that only requires 1/10^th or less of the labor as that needed before the movement to foreign sites began! The process of substituting artificial intelligence and robotics is accelerating across the United States. Textiles are a clear example but at the level of the consumer it can be seen by self-check out at Walmart and credit card purchases at McDonalds or Starbucks eliminating cashiers and thus human labor.

Another change is a shift away in the political dynamics of the 1990’s that created the push to free trade. The shift is clearest in states like Illinois, Ohio, Michigan and Pennsylvania that reliably voted Democratic but gave majorities to the Republicans in 2016 securing the election for Donald Trump. What politicians missed were the economic disasters of Chicago, Detroit, Cleveland and other cities formerly prosperous from manufacturing now with high levels of unemployment, crime and bankruptcy.

A related change is movement away from large scale political centralization that created groupings like the Common Market from highly independent states like Germany, England, France, Spain and others that united after WWII in an open market without trade, currency and travel barriers. Such centralization reached a peak at the end of the 20^th Century. The movement away is most clear with Great Britain’s exit from the Common Market (Brexit). Other independence movements are developing in Spain, Germany and France as well as in NAFTA.

As trade moves away from globalization and toward local production and control, countries that were the greatest beneficiaries are now in disarray. For Texans that is visible and threatening in Mexico. It is not just economic growth that is slowing in Mexico but also belief in the ability of the Mexican state to protect and enrich lives. Lack of confidence in the state and the level of violence this year is the highest since the end of the Mexican Revolution in 1929. Mexico by the end of October recorded 20,878 murders and the projected number at the end of December is 23,000.

As automation proceeds, the need for low-cost Mexican labor will decline. There will be initially two consequences. One will be that more Mexicans will try to join the stream of persons from Central America seeking to escape to the United States. The second is further disintegration of the Mexican State with the 5 or 6 large Cartels metastasizing into smaller and more violent groups. As long as a drug market exists in the United States, the fuel that feeds the Mexican Cartels will continue. Pressure on public safety will occur first along the Mexican border with hot spots at El Paso, Presidio, Eagle Pass, McAllen and Brownsville. These are the fundamental and long-term challenges to public safety first in Texas and then to all of the United States.

La Bestia near northern Guatemala

Additional Readings

http://thehill.com/opinion/international/361797-will-elections-in-honduras-be-a-step-forward-or-another-step-backward

http://www.latimes.com/projects/la-me-mexico-housing/

http://diario.mx/Local/2017-11-23_7d6019bb/asesinan-a-11-personas-en-2-dias/

http://mexiconewsdaily.com/news/mexicos-troubles-earn-a-blunt-condemnation/

https://www.reuters.com/article/us-mexico-violence/mexico-suffers-deadliest-month-on-record-2017-set-to-be-worst-year-idUSKBN1DL2Z6

http://www.businessinsider.com/homicides-hit-new-high-mexico-alongside-increase-in-robberies-2017-11

http://www.businessinsider.com/mexican-states-manipulating-crime-data-2016-11

https://www.reuters.com/article/us-telefonica-guatemala-violence/telefonica-suspends-customer-service-operations-in-guatemala-after-killings-idUSKBN1DD051

The Presidential Race of 2018

The violence in northern Mexico of the years of the Calderon Administration opened the door for the national return of the PRI and led to the election of the former governor of the State of Mexico, Enrique Peña Nieto. The administration of Peña Nieto will end next summer. The election is to be held around July 1, 2018 and the inauguration of the new President on December 1, 2018. But under his administration the PRI has touched the lowest level ever of public support with currently about 15% approval ratings a decline from the 38% of the popular vote in his election in 2012.

The public disaffection comes from several areas. One is the lack of transparency and corruption of police and the military in many areas of Mexico. It began on a positive note in 2012 as Mexico was weary of the military combat efforts taken by President Calderon. But Peña Nieto’s first large scale failure was his administration’s inability to investigate and explain the capture and murder of 43 teachers’ college students from a rural area of the western state of Guerrero. To date there is no explanation of this matter though many in Mexico and elsewhere feel it was committed by a cartel, local police and with support by the Mexican army.

Two comes from the failure of Mexico’s relations with the United States, particularly President Donald Trump, who is seen by Mexicans as anti-Mexico and seeking to end NAFTA. Indeed much of Trump’s electoral success in traditional manufacturing states of the middle of the country including Pennsylvania, Michigan and Ohio was fueled by traditional Democrats that suffered the loss of manufacturing jobs in the last two decades and viewed NAFTA as the mechanism that stole the jobs. Though less than expectations, NAFTA has brought prosperity to many in Mexico and placed Mexico in the world of leading manufacturing nations. The threats of ending NAFTA or of U.S. sanctions that result in tariffs on Mexican products to the United States have created serious concerns about the PRI’s leadership.

Three is the failure that comes from the growing list of corruption among PRI personalities from the President through several governors and mayors. Early in President Pena Nieto’s term evidence appeared in Mexican news media that centered on a mansion in the luxurious Lomas de Chapultepec neighborhood, purchased by First Lady Angelica Rivera on credit from an entity that was part of Grupo Higa, a company owned by Juan Armando Hinojosa Cantú, which had received millions of dollars in contracts from Peña Nieto when he was governor of the State of Mexico. The company had also won a contract, subsequently canceled, to build a high-speed train between Mexico City and Queretaro, about 120 miles northwest of the capital. First Lady Rivera later returned the mansion, and a government investigation subsequently found no wrongdoing by Peña Nieto or his wife. But the scandal contributed early to Peña Nieto’s plummeting approval ratings and the sense that corruption was one of the central failings of his government.

Peña Nieto came into the Presidency having previously served as the Governor of the State of Mexico. He has glamourous boyish good looks and was very popular with women voters In 1993, Peña Nieto married his first wife, Mónica Pretelini (b. 1963) and the couple had three children: Paulina, Alejandro and Nicole. Peña Nieto had two illegitimate children during this first marriage; a son with Maritza Díaz Hernández, and another child, with an undisclosed woman, who died as an infant. Pretelini died on January 11, 2007 as the result of an epileptic episode. Pretelini had a vital role during the campaign of Peña Nieto’s governorship.

In 2008, Peña Nieto began a relationship with Televisa soap opera actress Angélica Rivera, who he had hired to help publicize his political campaign for the State of Mexico. The couple married in November 2011, although media outlets have questioned the validity of the marriage as of 2015, alleging that Mexico’s Catholic Church bent rules or that the marriage could have been a publicity stunt to help his presidential campaign. Peña Nieto has said that he provides for the son he fathered with Hernández, but has little contact with him. His support for the child became a political issue during the 2012 presidential election, when both Hernández and rival candidate Josefina Vazquez Mota accused him of not supporting the child.

Corrupt Governors

Perhaps Peña Nieto’s path of corruption set the tone for his administration. During Peña Nieto’s term significant numbers of officials of his party, the PRI, have been prosecuted for corruption as have two more from the opposition party, PAN. Among those of the PRI convicted before Pena Nieto’s term is Mario Villanueva, who governed in Quintana Roo from 1993 to 1999, and is serving a 22-year sentence on a money-laundering conviction.

Among the most visible to Texas is Tomas Yarrington, Governor of the State of Tamaulipas from 1999-2005, who was implicated in money laundering for both the Gulf and Zetas Cartels and plotting the assassination of Rodolfo Torre Cantú in Cantu’s campaign in 2010 for Tamaulipas Governor. Yarrington had avoided arrest until apprehended in Italy in April of 2017. Mexican news sources claim he has three children with a former professor at Texas State University in San Marcos, Sindy Chapa, who knew Yarrington when she attended college at UT Brownsville from her home in Matamoros. She held at least two very expensive properties that were seized by the U.S. Justice Department and the IRS as part of a money laundering scheme moving payoffs from the Gulf and Zeta Cartels to Yarrington and Ms. Chapa purchasing property for him. She is now a faculty member at Florida State University.

I lived and worked in El Paso years ago and that experience was a springboard to a couple of decades working in Mexico, mainly Mexico City with the Federal Government and Mexico’s National University as well as the State of Texas. Those were the early years of the development of the North American Free Trade Agreement and the accelerating industrialization and urbanization of Mexico. Through The University and The State of Texas, we crafted a number of agreements to further higher education and research collaboration as well as improved local government ties in border cities. I moved from much of my research in Mexico in the late 1990’s as violence began to grow in Mexican cities.

I keep an eye on Juarez across the border from El Paso as an indicator of social conditions in Mexico. From about 2003 to 2010 it grew to become the most violent city in the world averaging almost 10 murders daily in 2010. Journalists are targets of the Cartels in Mexico and in some areas because of corruption of law enforcement as well, a free press does not exist and acquaintances in cities like Laredo and McAllen say they use internet media like Facebook for reports of organized crime activity. Juarez still has some functioning newspapers and tv/radio and one is the “el diario de Juarez”. Here is a story from an El Paso television station picking up an El Diario report on murders Wednesday and Thursday of this week: http://www.kvia.com/crime/el-diario-21-killed-in-juarez-over-48-hour-period/569512436 

Violence is rising in Mexico and this is moving back toward the levels of the previous decade. Economic problems are growing in Mexico with a sliding peso, low oil prices and a corrupt and backward state oil monopoly, PEMEX. Much like our state, oil is vital to the Mexican economy. Adding instability is next year, 2018, a Presidential Election Year and campaigns have begun. A historic safety valve of Mexican economy problems has been Mexicans working in the United States and sending remittances back to their families in Mexico. The Trump Administration is starting to highlight that practice, his notion of building a great wall on our southern border, as well as pressuring manufacturers in Mexico that export to the United States to move their factories to the U.S. or face import tariffs. This particular theme of President Trump is reflective of economic problems in cities and states in much of the United States hit by the loss of manufacturing jobs including Illinois, Michigan, Ohio, Maine, New Jersey, Connecticut, etc.

Keep two more things in mind. One is that violence and poverty will push more of the 127 million Mexicans to leave Mexico and the only route is north and there are 40 million more in greater poverty south of Mexico in Central America and then the failed state of Venezuela and the failing one, Brazil even farther south. Two is that much of Mexican government and, particularly law enforcement, is compromised by the Mexican Cartels. The “plazas” at Mexican border cities like Juarez or Nuevo Laredo or Reynosa are critical to control for the movement of illegal drugs and human trafficking. Likely the increase in violence in Juarez is two or more Cartels warring for control of the “plaza” to El Paso and thus the American market!

Here are a couple of more news items. One is from Fred Burton and his indefatigable research reflecting on the changing nature of Mexican cartel activity:

And this link is to a discussion of probably the most important violence in Mexico for us in Texas in our neighboring state of Tamaulipas that stretches from Laredo east all the way to Brownsville!

http://www.businessinsider.com/cartel-gang-violence-in-reynosa-nuevo-laredo-matamoros-mexico-border-2017-6

Texas has been intertwined with Mexico since the days of Spanish colonialism. But in the last decade and in the coming years this relationship will grow and be far more complex. The 50,000+ “unaccompanied minors” mainly from Central America not Mexico that crossed in 2014 into Texas, many at McAllen, overwhelming our marginal foster care systems is only a hint of things that may come.

A sad Christmas day message. It follows the pattern of how failed states decline and break apart.

When I was in college, I had an acquaintance from one of my calculus classes that was a mechanical engineering major. He was from Caracas, Venezuela and was the son of an executive in one of the country’s oil firms. He had been in college in Venezuela and was a few years older than the average college junior or senior. He drove a Porsche and prided himself in doing much of the maintenance and was active in some auto race club in Venezuela. We viewed him as an international “play boy”. After getting his bachelor’s degree he planned to return to Venezuela as an engineer. Among my college acquaintances he seemed to be one of the really wealthy ones. He reflected the oil wealth we saw from students from the Middle East. I had no idea back then how that country’s fortunes could change.

Three years ago I had a graduate teaching assistant in my summer class that was from Caracas as well. Both parents were physicians. By then reports were frequent in the media of the collapse of the Chavez and now Maduro economy as part of the failed Castro-oriented government. We had several conversations about her home country that semester and the next as she worked for my research group. She was married to a Cuban, who was also studying in our country in Washington, D.C. She described her home neighborhood in Caracas as prosperous and peaceful but said she had a several block walk from a nearby bus station when coming in from the airport and that she always wore older clothes and hid her cell phone. She said showing the phone would invite muggers. The last I heard from her, a year ago, was they had jobs in the Washington, D.C. Area and though both homesick for Cuba or Venezuela, were postponing their returns.

This pattern of economic and now social decay encompasses more than this country, Venezuela, extending through Brazil and much of Central America into Mexico. Latin America contains many of the world’s most violent cities with Acapulco in some countings, the world’s most violent. The promise of globalization from the 1980’s to 2010 with export jobs and rising incomes has ended. Regrettably, Venezuela may show the path for many other countries.

National collapses don’t typically happen abruptly. Decay begins in areas such as neighborhoods that then develop higher crime rates. Overall crime measures such as homicide rates are fairly dependable and rising rates correlate with rising decay. In time, cities and then larger geographical areas become unstable. The trend is evident in Mexico where states such as Guerrero (Acapulco), Michocoan, Tamaulipas (Matamoros, Reynosa, Nuevo Laredo) have professional crime groups, cartels, that challenge the state for control.

As “sanctuary hopes” abound in several American cities, the math is not promising. Much of the unanticipated strength of the vote for Donald Trump came from cities and states thought to be safe Democratic areas such as Michigan, Ohio, Pennsylvania, Missouri, West Virginia, etc. These states have cities such as Detroit, Cleveland, Chicago, Pittsburg, St. Louis that were formally bustling manufacturing cities now filed with unemployment and rising crime with St. Louis being among the 50 most violent cities in the world. Those persons, those neighborhoods seem be part of the calculus missed by the pollsters in this year’s Presidential Elections. In Europe, millions are being displaced and overwhelming limited immigrant resources. We see signs of that in the United States. This will be a strong theme in the next four years. Trump proposes to stop immigration. How that is done is not offered and the millions seeking sanctuary grow.

The solutions do not seem apparent.

http://www.nytimes.com/2016/12/25/world/americas/venezuela-hunger.html?_r=0