Some History

During the 1980’s and 1990’s I had offices in Mexico City funded by our Federal government to assist Mexico in improving its government organizations as our Survey Research had done in Texas Government. During those years the Texas economy was creating new businesses in electronics such as Texas Instruments, IBM, National Instruments, Advanced Micro Devices, etc. as well as developing many joint manufacturing endeavors along the border with Mexico. The North American Free Trade Agreement was being developed and Washington saw urbanization and modernization in Mexico as strengthening the American economy with very low cost labor in Mexico making manufacturing more competitive with companies in Europe, Japan and South Korea.

Boom Times For Mexico

For my colleagues in the Mexican border cities and Mexico City, it was an exciting time. Mexico had discovered substantial oil deposits in the Gulf of Mexico and coupled with border industrialization, Mexico transformed from an agrarian nation to one largely urbanized and industrialized. Yet by the year 2000 there were two changes that made me uneasy. One was the shift away from a Mexico that was controlled by a single political party, the PRI (Party of the Institutional Revolution) that had governed the nation since 1939. In 2000 Vicente Fox, a PAN (National Action Party) candidate won the Presidency and then in 2006, a second PAN victory was achieved by Felipe Calderon. Whether it was a lessening of political control with the decline of the PRI or simply the opening of Mexico, violence began to markedly increase.

Growing Violence

The violence was most visible in Juarez, Chihuahua across from El Paso. I was involved in running an extension of our graduate program in 1990 to West Texas and southern New Mexico, and would be in El Paso and often Juarez weekly during that decade. I watched the violence build under President Fox and then accelerate in 2006 as Felipe Calderon became President. President Calderon did not trust Mexican local and state police forces and used the Army and particularly the Navy-Marines to suppress the violent conflicts. In addition to Juarez, there was violence in Nuevo Laredo, Matamoros and Reynosa.

The violence stemmed from two sources. One was conflict between Mexican Federal law enforcement, particularly the Marines with the Army against criminal groups called cartels that sought to control border access (the plazas) into the United States. The second source was conflict between cartels, themselves, for control of the plazas in the border cities. In Juarez it appeared between the local Juarez Cartel and the Sinaloa Cartel from the state of Sinaloa, immediately west of the state of Chihuahua. In Nuevo Laredo it appeared to be between three cartels, the Gulf Cartel, probably the oldest cartel on the border, the Zetas, that had originally been members of the Mexican Army and had initially worked as guards for the Gulf Cartel and the Sinaloa Cartel.

The violence reached a peak in 2010 with Juarez averaging 10 homicides a day. The rate began to decline during the last two years of the Presidency of Calderon and continued to decline for two more years in the term of Enrique Pena Nieto, who was a member of the PRI. The current President is Andres Manual Lopez Obredor known as AMLO, who heads a new liberal party called MORENA or the National Regeneration Movement. The last year, 2018, of Pena Nieto’s term was the most violent in recent history in Mexico and this first year of AMLO’s ending in December will be even more violent. The basic measure, homicides, were 33,341 in 2018 and 2019 will end, if December continues at the current rate, with over 34,000.

Since the year 2,000 Mexico has grown more violent and part of the explanation is the growth of organized crime and for the United States the fact that much of proceeds that support crime in Mexico comes from trafficking of drugs and people by the Cartels into the United States. Texas with the longest border with Mexico is particularly vulnerable.

Recent Events

Four recent events have garnered attention to the violence in Mexico and the power of the Cartels.

• One is the trial and sentencing in New York of the head of the Sinaloa Cartel, Joaquin “el Chapo” Guzman. The trial has helped detail the wealth and strength of this criminal enterprise based on smuggling drugs into the United States.
• Two, is the murder south of Arizona and New Mexico of 9 women and children, 3 mothers and their children, the Lebaron family that had dual American and Mexican citizenship and lived in a dairy farming community in northern Chihuahua about 100 miles south of El Paso.
• Three is the arrest this week in Dallas by Federal officers of Genaro Garcia Luna, who lives in Florida, for receiving funds from the Sinaloa Cartel when he was the ranking Federal law enforcement official in Mexico in the Administrations of Fox and then Calderon!
• Four is that there are reports that President Fox and members of his family also received payoffs. Payoffs have been said to have gone to the wife of President Pena Nieto as well.

The situation has resulted in the families of the le Baron’s calling for labeling the Cartels as terrorists and causing the same level of military action that is directed at Middle East terrorism. President Trump initially did that but then in discussions with the Mexican President backed off. However two U. S. Senators, Tom Cotton of Arkansas and Ted Cruz of Texas, have filed a bill that represents a movement in this direction.

The bottom line today is:

• Mexico has rising crime and violence and will set a record for murders this year;
• Organized crime in Mexico corrupts governments including chief law enforcement officials and Presidents;
• Mexico’s economy is slowing and now is in recession with no growth;
• American labor unions and citizens especially in the industrial areas of the United States are demanding trade sanctions against Mexico as NAFTA proved to destroy jobs in our most industrialized regions;
• Violence across Mexico is starting to negatively affect tourism, one of the largest sources of jobs in Mexico;
• As Mexico’s problems grow, it is less effective in blocking the flow of immigrants from Central America and elsewhere in the world coming through Mexico to enter the United States.
• This story from the weekend’s NY Times illustrates the extent to which participation in organized crime is a career path for thousands of young Mexicans: https://www.nytimes.com/2019/12/14/world/americas/sicario-mexico-drug-cartels.html?searchResultPosition=10

Related Readings:

https://www.foxnews.com/world/mexico-homicide-count-gang-violence

https://www.nytimes.com/aponline/2019/12/02/world/americas/ap-lt-mexico-coahuila-gunbattle.html

https://www.npr.org/2019/12/10/786792134/former-top-mexican-security-official-arrested-on-cocaine-trafficking-charges

https://cis.org/Bensman/Bill-Would-Designate-Mexican-Cartels-Something-Other-Terrorists

I summarized my book on Mexico with these alternatives in 2013. Alternatives Three and Four below are now in play as President Trump’s statements about Mexico from Tuesday, November 26, 2019 reach world media.

Reprieve
World economy rebounds. Oil prices rise to $200 a barrel, Mexico permits foreign investments and spins off PEMEX which modernizes engineering, refining and exploration. Oil discoveries increase as does production. Corruption is curtailed and profits soar. With job growth fewer young men are lured into the cartels. 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 as the capital is consumed with providing services and order to the 25 million in Mexico City, 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. Cartels use tactics like narcobloqueos of stealing 18 wheelers and stopping them on streets to create traffic jams and undermine civic trust. 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 inundated with refugees and violent gangs. Residents in all Texas cities as well as Kansas City, Atlanta, Chicago and most southern Californian cities now like Mexico City fear kidnapping and ransom.

American Protectorate
Cartels use hit squads (Mexican sicarios) 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. Many in northern Mexico openly call for the U. S. to annex them with Monterrey as the capital of the Mexican states seeking admission to the Union. 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. Mexican migration returns to Mexico and both Mexicans and Americans increase investment and ties throughout Latin America.

The brutal murders of 3 young mothers and 6 children in the Mexican state of Sinaloa and near Chihuahua and Arizona and New Mexico has put an American perspective on the horrendous violence being inflicted on all people in Mexico. This editorial commentary from Tuesday’s NY Times is a start of recognition:

It may take an Iraq-style ‘surge’ to save Mexico from the drug-cartel insurgents.

The violence that has exploded in the northern state of Sinaloa in late October and Monday, November 6, 2019 that resulted in the murder of at least 9 persons, women and children could signal a collapse of the expectations that Mexicans have had with their new President. Deterioration has increased all year and is accelerating. This paper below is a caution to Texas State Agencies.

This paper examines some aspects of formal organizations including what the success and failures of an organization can mean for a person and a community and a state. Encounters with formal organizations start, typically, with education as early as day care and most employment is in a formal organization. For most Americans, encounters with formal organizations will start with births at a hospital, maybe day care and then elementary school.

Formal organizations are a dominant feature of modern societies. But with the exception of the military until the 20^th Century most Americans had little contact with such organizations. Family and the neighborhood were the dominant social features.

For Americans, Europeans, Japanese and South Koreans that has completely changed in the last hundred years. Families in these countries are typically the nuclear family of parents and children without the presence of kin like grandparents, cousins, aunts, etc. Increasingly more persons do not marry or have children or wait into nearly middle age to have a child. Small family size and drops in family formation are the most extreme among these countries in Japan where there have been net population decreases since 2010. Japan permits very little immigration; so it may represent for some nations the future. For the Japanese, more so than these other countries, the formal organization can be the primary social anchor!

Thus the study and functioning of formal organizations is an ever-larger issue in the modern world. Part of the study is how best to construct and operate such important parts, the organization, of our society.

IBM as an example of organization change, survival and success

In the 1970’s I worked with offices IBM (International Business Machines) had in Austin to help them think about organizational designs that would permit their success in creating and selling computers. IBM had its beginnings building mechanical calculators, punch card tabulating machines, cash registers and scales at the start of the 20^th Century. By the 1930’s its machines found wide use by many countries when they compiled censuses of their population. Punched cards were used to record data such as on persons and then the cards were run through mechanical tabulating machines where a punched hole in the card would represent some data point such as the age, ethnicity, gender or residence of a person.

By the 1950’s IBM had moved from card sorters/readers of punched cards to computers. Cards as well as electronic typewriters were used to enter data into the computer and then programs were written to count, sum, analyze, map, display and print calculations. The data that had been entered with a typewriter or a card was stored on a tape or rotating disk where it could be read and analyzed and findings printed out. Moving to electronic storage from cards improved speed and flexibility. IBM would sell and maintain these computers, the 360 and 370 were the main ones, as well as renting time to customers.

The company was highly profitable until the beginnings of the 21^st Century but the flow of innovation in technology much of which IBM was involved in creating changed the realty of computing. Firms like Xerox, Hewlett Packard, Apple and Tandy-Radio Shack began to sell computers that would fit on a desktop and could be bought for less than $5,000 rather than the millions of dollars that a mainframe computer would cost and filled a large building. Aware of this developing competition, IBM moved a set of its engineers away from his headquarters in New York to Boca Raton, Florida to help IBM think about and then invent a computer that was a radical change from its main frame and that was to create a desktop computer. IBM developed its own brand of desktop machines released in 1981 including from programmable typewriters to desktop computers and the complex programming including, the operating system and various applications.

Then in 2005 IBM then turned from a manufacturer of hardware to a company that focused upon selling computer services. It sold its personal computer business to a Chinese firm, Lenovo. It changed as a company more from an organization that had factories that built computers and related items like disk drives, circuits, storage media to an enterprise that sold services like weather forecasting, health data storage and interpretation, cloud computing and many other services. It changed its business from building and selling computers and related equipment to selling services including from very large computers-super computers and doing research on the leading edge of computing like developing a quantum computer. Such a computer promises to be an advance from current computing as much as the IBM 360 was from the tabulating machines of the 1950’s.

This path of IBM from a manufacturer of calculators and cash registers to a firm that sells complex computer services with a high rate of change and innovation is a useful model of how organizations must change. This is a path that business organizations must follow and so must government agencies. Let’s look at some facts beyond the IBM example that set the stage for why we must work on continuously building our organizations in the State of Texas.

Setting A Perspective For Challenges to Texas

In general there are several broad challenges to life in our state. One set of challenges comes from the geographical location of the state. Texas more than any of the 50 states has a unique situation represented by the border with Mexico. The length of the border and the size of cities on both sides are many times those cities along most of the rest of the border in New Mexico, Arizona and California. More than a century and a half ago, Texas was part of Mexico and Texans fought and won a revolution against Mexico even as Mexico fought efforts by Spain and France to keep it a colony.

Significant cultural continuity exists between Texas and Mexico as well as high levels of trade and tourism. But there are complex relations with another nation that no other state must navigate!

Differences Between Texas and Mexico

While having some similarities in history and geography, average incomes, education levels and standards of living are very different and are moving apart in many ways. In 1900 the economies and many of the communities in both Texas and Mexico were similar. Life was mainly in rural areas and small towns. Families were self-sufficient through raising crops and animals for local consumption. Travel, trade and even awareness of the larger world were all quite limited. But individuals and families were less dependent on state and national events. Economies were local and only wars or massive weather events like hurricanes or earthquakes would affect farms and villages.

Railroads, highways, large-scale farming, forestry and ranching began processes to consolidate family farms in Texas and with growing factories, Texas began becoming urbanized. Air travel became frequent. First the telephone and then a variety of broadcast and internet technologies linked communities across the state and to national and international events. Today the state is mainly urban with 90% of the population in a complex from Dallas, west to Ft. Worth, south to Austin then San Antonio, east to Houston and back north to Dallas. Most Texans work in some form of formal organization: factories, refineries, banks, corporate offices, large farms, government agencies and business parks. Solitary workers like a cowhand of old or the self-sufficient family with the woman in the kitchen and the man in the field is the past… more than a hundred years in the past.

Mexico, by comparison, is where Texas was in the 1950’s, early in its process of becoming urbanized and securing jobs in organizations not on farms and ranches. The nation is largely urbanized with about 80% of the population living in large cities like Mexico City with more than 25 million in the City and surrounding towns. However substantial regions in Mexico’s southern states have communities where Spanish is not the first language, paved roads, water and sewage utilities, electricity and telecommunications are primitive. In these regions the dominant social organization is the extended family and the neighborhood.

Mexico has 32 states and additionally its Federal District. The states vary tremendously in terms of education and wealth from north to south. The wealthiest and highest educated state is Nuevo Leon that touches Texas near Laredo. There are 60 different languages spoken mainly, and again, in the southern states and 7% of the 130 million citizens exist on less than 2 dollars a day.[i] Unlike the rural population that had their land to fall back on, the Mexican urban population is highly dependent on daily earnings with the average family having less than the equivalent of 40 dollars in savings. This means holding a job is critical.

Education particularly to the high school level and college is a serious shortcoming in Mexico. Fewer than half the population finish high school and less than a quarter have some college years.

Lack of school attendance is one part of the deficiency in Mexican education. The other parts are the capacity of the educational programs and the preparation of teachers. For university admissions, there have been periods of time when students had to be selected for admission. But there have been other times including a recent decree by the new Mexican President, Lopez Obrador, that everyone that wishes to go to college will be admitted. As in the past courses and majors that require laboratories and equipment are overwhelmed and students do not get appropriate education. The other problem with open admission is inadequate numbers of teachers per students as well as unqualified teachers. Mexican secondary education is unionized and teaching positions are traded and sold rather than persons being selected and promoted on merit.

Mexico is far behind in its institutions and skilled personnel required for the educational preparation for the societies of the 21^st Century. While its lower cost labor has provided jobs to manufacturers from America, Europe and Asia, automation offers less costly ways of providing labor in manufacturing and services industries, year after year. Automation is rapidly removing the advantage to manufacturers that low cost labor from Mexico provides.

Population Change In Texas

Texas has grown in population consistently since the 1800’s with its estimated population in 2018 of 28.70 million, up substantially from 25.1 million in 2010. Its annual growth rate of 1.80% ranks 3rd in the nation. Texas has three cities with more than 1 million people: Dallas, Houston and San Antonio, which are in the category of the 10 most populous cities in the nation. Texas continues to become more urbanized. From 2010-2018 Austin was the most rapidly growing city in the nation. Ethnic ratios are changing with Hispanics projected to be the largest ethnic group by 2022. By 2040 the state’s population is expected to be 45 million.

Texas Economy

Texas is the largest exporting state in the nation whose products include electronic and computer gear, agriculture, refined petroleum and chemicals. Texas’ steady population growth creates pressure on the state’s infrastructure of highways, rails, airports, telecommunications, water, energy, health, public safety and education resources. While Texas is the nation’s largest producer and refiner of petroleum, it has, interestingly, achieved leadership in solar and wind energy. It generates the greatest amount of renewable energy in the United States and one Texas city, Georgetown, has its city electrical grid entirely fed by renewable sources. As energy efficiencies improve from lighting to heating to other demands, Texas could meet all of its domestic energy needs with electricity and export that energy as well. How that will affect areas involved in production and refining of petroleum is unclear.

Texas’ Prosperity Dependent on Export Relations, Primarily Mexico

The prosperity but also the safety of Mexico is not simply a border issue. Texas is the nation’s foremost exporting state and Mexico is the largest customer of Texas’ exports. Those exports to Mexico totaled over 109.7 billion dollars in 2018 and helped ensure more than 1 million jobs for Texans. A unique arrangement comes from border factories that do most of the labor-intensive manufacturing activities in Mexico with Mexican employees but the design, direction and some of the more complex manufacturing is done on the Texas side. The in-bond or maquila factories were devised by a Mexican businessman and political leader in Juarez, Jaime Bermudez in the 1980’s, and have transformed the border and much of Mexico’s manufacturing resources to world competitive factories.

Trade between Mexico, the United States and Canada was significantly expanded with the NAFTA trade agreement that largely eliminated tariffs on products between these three nations. However those relationships are being examined in the context of tariffs being applied by many countries. Part to the success of Donald Trump in the 2016 election was his promises to bring the jobs back to states like Illinois, Ohio, Pennsylvania and Michigan that were the homes or major manufacturing sites of many major American manufacturers including General Motors, Chrysler, Ford, International Harvester, John Deere, Caterpillar, U. S. Steel, General Electric, Motorola, Zenith, Frigidaire, Penn Central and hundreds of other companies that had labor unions that were an if not the bedrock of the Democratic Party. During the campaign and since he has charged many countries and companies with trade practice that abuse the United States as well theft of intellectual property. He pledged in his campaign to bring the jobs back and also to build a wall along the border with Mexico to control trade and immigration. As the list of trading nations on the last page of this paper notes, Texas prosperity is not only in the hands of Texans but people from a number of countries.

Challenges From Mexico-Crime, Corruption, Impunity

Since 2000 Mexico has experienced growing crime and violence in all of its states. The causes are likely a result of traditions in the culture that permit small-scale corruption such as the expectation that a person pays money, the mordida, directly to a police officer when they incur an official contact. The pattern extends to government positions that are purchased or secured through patronage with a strong emphasis on politics being a spoils system. Rather than organizations that operate with fairness and transparency, there are patterns of cronyism, impunity and corruption.

Government corruption was rooted in the colonial system and was a major if not the major reason for Mexico’s three major revolutions in 1810 against Spain, then in 1862 against France and most recently in 1910 against a pattern of dictatorial control from Mexico City. Part of that corruption, today, is organized gangs in Mexico relatively free of Mexican government opposition that bring several types of contraband into Texas and then to other parts of the United States and Canada. The pattern of drug smuggling is not new and goes back almost a hundred years to gangs in Matamoros and Reynosa that brought alcohol to cities like Houston and Galveston during Prohibition in the years from 1920 to 1933. These early Mexican gangs were created by the same opportunities that saw the growth of large scale gangs in Chicago, Detroit, New York City; indeed the cities of the urban north. Much of the alcohol that they in America’s northern cities smuggled came from Canada.

For the past two decades Mexican drug activities via cartels, have been a growing feature of the border with Mexico. Smuggled drugs include cocaine sourced from South America, morphine increasingly grown in poppy fields in western Mexico, marihuana grown throughout Mexico and in the last decade synthetic drugs such as methamphetamines and fentanyl sourced from chemicals from China and brought to the Pacific ports of Mexico. The Drug Enforcement Agency estimated in 2014 the annual volume of illegal drugs is about 100 billion dollars up IH 35 or a variety of routes from McAllen and Brownsville to connect to IH 10 to Houston and then north and east.

The unique challenges Texas faces are of a neighbor with high crime and violence, it cannot control. Mexico reached the highest level ever recorded in 2017 then in 2018 even higher and the first 9 months of 2019 are higher still. Texas is left with urging the United States Federal Government to be more effective in controlling the national border, anticipating events in Mexico and being very watchful of that country and increasingly most of Central America.

Immigration

Immigration has become a prominent topic since 2014 nationally and across the world. Immigration is a characteristic of human societies. In antiquity small human groups would migrate with the weather and available crops and animal resources. As recent as the 1880’s the Comanche Indians would spend summers in the northern plains of Texas near cities like Amarillo, Abilene and western Oklahoma. Then with the winter they would migrate following herds of bison (buffalo) as far south as Saltillo in the southern part of the Mexican state of Coahuila. While some say with a romantic turn of words that immigration is part of America, statements often do not completely reflect the impact of immigration in all nations and certainly in the Americas. North America has seen in the last 15,000 years several immigrations from north to south. About 1200, it is suspected that a drought in the Four Corners area of the western United States created a migration south to the area of today’s Mexico City and those migrants became the Aztec.

A larger immigration was Europeans coming to North America. The impact of Spanish immigration to Mexico led to a drop in the population of the native cultures (American Indians) from 10 million to 1 million in a century. The magnitude was similar in the United States over two centuries. These millions of deaths came primarily from exposure to diseases against which the native populations of North America had no developed immunities. The next cause of the loss of life was the destruction of traditional means of livelihood and the third was from warfare.

Immigration continued to the United States during the 19^th and 20^th Century with persons coming from China, Ireland, Italy and Poland, but mainly from Europe. There was substantial Mexican immigration during the 1910 Mexican Revolution and various European groups during and after the two World Wars. In the later half of the 20^th Century, a pattern developed of seasonal Mexican immigration to work various harvests in the United States with Mexicans sending funds, remittances, back to families in Mexico. The importance of such funds is that they represent the third or fourth largest source of income to Mexico only exceeded by tourism, manufacturing and agricultural exports.

Several changes in labor force issues and immigration began to occur in the 21^st Century. A trend that began in the last two decades of the 20^th Century was moving labor-intensive activities to low wage countries as we earlier noted. NAFTA was the approach in North America. This caused job losses in many manufacturing communities of the United States and job gains in Mexico. But the advantages of low-cost labor are now being eroded by technologies that required much less labor, particularly low-skilled labor. Manufacturing site decisions have begun to shift to where the market was not where low cost labor was. Moreover, the labor required in these new technologies was not low-cost but highly educated and capable of continuous education and change.

This has created severe problems for areas of the world with low educational levels. It is most evident in Latin America where the average educational level in Mexico is about the 6^th grade and much less in the countries of Central America except for Costa Rica. Poverty is increasing and as well as violence. These are the forces that drive attempts to immigrate to the United States. A generation ago those migrants would have filled low wage jobs in America. But such jobs are disappearing. The immigrant populations now pose heavy and continuous burdens on government services from health to education to safety. The chart below is from the Border Patrol and is a monthly tally of persons caught attempting to enter the United States without official papers and procedures.

Current legal immigration levels have risen to 1 million each year. As the chart above indicates we are now seeing a second million attempting to simply enter the United States apart from legal immigration paths. The majority of those numbers are appearing on the Texas border with Mexico.

Summary

These then are among the organizational challenges faced by Texas agencies:

• Continuous efforts to adapt and use technology to maintain efficiency and effectiveness and responsive to a business and citizen environment that does the same. Technology moves very rapidly and Texas government must keep pace.
• Adapt to growth and urbanization but with attendant rising costs of living for employees. With the majority of state of Texas employees living in or near Austin and with the cost of housing now among the highest in the state, more and more state employees have to commute as many as 70 miles each way each day to find housing that meets the level of income from a state agency position.
• Integrate migrants from other parts of the country and immigrants into Texas communities.
• Address challenges coming from high rates of immigration including high percentages of children, low education and skill levels and health issues.
• Economic disruption of trade with Mexico. The impact of negotiations around tariffs affect Mexico trade but also trade with Europe and particularly Asia.

Summary

More than any other state, Texas has agencies that promote development and research in the fulfillment of their functions. Organizational assessment and development is a priority in all of state government. This has paid important dividends in making the state more attractive than other regions in the country and created one of the most dynamic economies in the nation. But issues exist both from within the state and from the outside. These are among the major issues:

• Growing population that will cause rising property prices, road and street congestion, increased demands for health and human services.
• Increasing demand for skilled high tech workers and concomitant decline in jobs for low educated and trained persons
• Increasing business sectors that will result in higher wages in the private sector and issues for government salaries.
• Exposure to world trade with more complex markets and rapid changes in the Texas economy.
• Concerns about the soundness of major trading partners and issues around tariffs: Here are Annual Percentages of Trade with the major trading partners starting with the largest: Mexico, Canada, China…
• Mexico              36.9%
• Canada,               8.7%
• China                    6.2%
• Brazil                    3.8%
• South Korea.    3.7%
• Japan                   3.4%
• Netherlands    2.7%
• Singapore         2.2%
• Stability of Mexico and Immigration: Illegal immigration attempts are at record levels posing critical issues of safety, congestion, cost and resolution. Creates substantial problems of travel and joint manufacturing and product shipping along the border.

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.