One of the most fascinating aspects of the drug trade is the unceasing ingenuity of traffickers.  Navy inspectors at the port of Progreso, in Yucutan, recently uncovered a new strategy—hiding cocaine in frozen sharks.  They noticed something amiss during routine X-ray inspections of two shipping containers on board the freighter Dover Strait.  Directing their suspicions to a cache of frozen sharks, they split one open to find it filled with black rectangular bags filled with cocaine. In all, the navy recovered almost a ton of cocaine (867 kilograms). The cargo was loaded in Costa Rica and bound for the U.S. Similar ploys are well known in the Andes, where law enforcement has come to expect drug barons utilizing submarines to transfer cocaine and money laundering schemes that produce perfect forgeries by bleaching the ink off one dollar bills and using the paper to reprint Franklins.  But such wiles are an ominous addition to the conflict in Mexico.  As American and Mexican authorities crackdown on the trade along the border, similar tales of seagoing and air trafficking are sure to continue.

Drug violence in Mexico has decreased this year, though gruesome narratives still dominate headlines.  In the first quarter of 2009 deaths from drug violence dropped 25% compared the same period in 2008, thanks to the deployment of 50,000 troops to 18 anomic locales by President Calderón in February. The violence is shocking, but instructive—while the vast majority of those killed are drug thugs, law enforcement and the church are increasingly in the crosshairs.

A shootout between cartel members and soldiers on June 6 left 16 gangsters and two soldiers dead in Acapulco. This clash illustrates a key caveat in Mexico’s battle with narco-gangs—civilians are largely insulated from the violence. Of the 6,300 that were killed in 2008, fewer than 250 were civilians.  Over 90% of the deaths have been intra-gang, as rival cartels contest territory and reputation. As federal forces crackdown on the trade, the cartel’s wrath is evident.

Last weekend a priest and two seminarians were gunned down in Arcelia, in the state of Guerrero. The responsible party is yet unknown, but the murders were certainly the act of a drug gang. The clergy’s vehicle was reportedly followed after mass, riddled with gunfire, then the three men’s bodies were removed and shot in the back.  This marks the first incidence of clergymen being directly targeted.  Some speculate that one of the seminarians had a family member in a drug gang and the killings were a reprisal. Regardless, this may spark a new chapter in Mexico’s struggle, sucking the church further into the fray.

The church is a ubiquitous and revered presence in Mexican society, capable of swaying public opinion and policy. As the drug trade grew from 2004 on, many priests denounced the cartels, engendering a spate of threats. An estimated 1,000 priests have been threatened, and 20 have been relocated for their safety.  In April, the archbishop of the state of Durango remarked that everyone knew where Mexico’s most wanted man, cartel kingpin Joaquín “El Chapo” Guzmán, lives. The statement, a critique of the government’s efforts, ratcheted up fears that the church would be marked for retribution by Guzmán’s cartel. 

Few things are sacred at the nexus of narco-trafficking and organized crime. Once sacrilege is perpetrated it quickly becomes commonplace. Soldiers and police who prove impervious to corruption are targeted for assassination. As the Catholic Church, a bedrock of Mexican society, wades into the conflict with pronouncements about the effect of gang violence or the location of drug kingpins, it too will likely receive the unenviable attention of the cartels. 

A fire swept through the ABC day care center in Hermosillo, capital city of the northern state of Sonora, on Friday afternoon.   The New York Times reports 38 children are dead, between six months of age and five years.  Another 30 are wounded, some from asphyxia, and others from burns.  The children with serious burns are in intensive care in Mexico and Sacramento, California.  

The community’s response has been swift, but bewildered as to how this happened.  Shortly after fire engulfed the center around 3p.m. neighbors tried to rescue as many children as possible. “We passed their little bodies from one of us to the next to get them out,” said Roberto Bustamente, who aided the effort. Others are left wondering. A local policemen on the scene reportedly cried out, “Where’s God?”

Media accounts indicate the fire started next door to the day care, at a tire warehouse. In the wake of deadly nightclub fires in 2000 and 2008, important questions remain. Why was a state-run day care facility located next to a building with highly flammable materials? Also, recent visitors have noted that emergency exits were blocked off. Rescuers were forced to knock through brick walls in order to try and save the children.  Windows in the center, which passed safety inspections on May 26, were mounted high, making them inaccessible. President Calderón has ordered an investigation, iterating his “profound pain” to the children’s families.

The drug trade embodies a ruthless logic. In a world where governments have limited resources, and the financial incentives for trafficking are great (90% of a cocaine shipment can be “lost” and the endeavor is still profitable), slaying the industry can seem impossible. If demand remains strong, successful governmental action— arrests, seizures and eradication—pushes the street price up, incentivizing new players. Supply and demand works with merciless efficiency when it comes to illegal drugs. 

The drug trade also has a distinct “ballooning effect.” Efface it here and it pops up there.  This was evident in the Andes in the 1990s, as coca eradication policies in Bolivia and Peru resulted in the retrenchment of the industry in Colombia, even after the fall of the Cali cartel. Now a form of ballooning is gripping North America. 

Since instituting a “surge” against drug cartels, President Calderon’s plans are working, only to relocate the cartel’s operations to the Bahamas or US.  A series of Department of Justice studies have concluded that Mexican operations now present the “greatest organized crime threat” in the US and American gangs are co-opting Mexican cartels to traffic cocaine and marijuana. Equally worrying, on May 6^th, The Los Angeles Times reported the leader of the Sinaloa cartel, “El Chapo,” has given members of his syndicate permission to use deadly force in the US in order to protect its operations, which are more precious with every success Mexican law enforcement enjoys.

Gang violence has also spiked in Canada. This is “directly related” to crackdowns in Mexico, according to Pat Fogarty, a senior member of the Royal Canadian Mounted Police, interviewed in this week’s Economist.   A spate of recent arrests in Mexico has disrupted the cocaine distribution chain to Vancouver, forcing street dealers to secure their supplies. “The price goes up and the guns come out,” states Fogarty.  

A long-term solution will have to engage the supply-side of the equation. In February an op-ed in The Wall Street Journal concluded, “Latin American governments have followed US advice in trying to stop the flow of drugs from the point of origin. That policy has had little effect.”  Massive amounts of US aid have been doled out to Colombia, Afghanistan and more recently Mexico.  As a result, the world’s supply of drugs has scantly diminished while the violence associated with the drug trade is trending up in the US and Canada.

A Pentagon study published late last year lumped Mexico with Pakistan as countries prone to “rapid and sudden collapse.”  This report, The Joint Operating Environment 2008, or “The JOE,” gave weight to a view coalescing in the US since 2007: Mexico was teetering on the brink of becoming a “failed state.” Armed with this government-endorsed ammunition, prognosticators warned of Mexico’s demise, including forecasts that President Obama would have to “fully militarize” the border and possibly invade Mexico before he leaves office.  NPR suggested a humanitarian crisis could emerge, with millions of Mexicans fleeing north.  An implosion of this magnitude would surely destabilize American border states, with more dour effects to follow. Such assessments often mixed security concerns with fear mongering, and at times a tinge of racism, to argue for hawkish policy shifts by the US. However, many perverted the context of the JOE. So, for the sake of accuracy, here is the relevant part:

In terms of worst-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico…(As opposed to Pakistan) The Mexican possibility may seem less likely, but the government, its politicians, police, and judicial infrastructure are all under sustained assault and pressure by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone.

This is the only paragraph in the 50-page study that discusses Mexico.  One should also bear in mind the purpose of the report is to weigh potential threats to US security over the next quarter century.

Undoubtedly, ongoing drug wars are ravaging several parts of Mexico and this is cause for concern. More than 9,000 people have been killed since 2007 as a result of drug-related violence.  The pace of gang killings has only slowed of late, as more than 50,000 soldiers and federal police have been nestled into the most violent parts of the country. In addition to the immediate security challenges, Mexico’s reliance on the faltering US economy—over 80% of its trade takes place with America—prevents it from growing its way out of socioeconomic strife, as may be the case in China or India.

The situation in Mexico is brighter than this portrayal. The murder rate in Mexico (11:100,000) is twice that of the United States, but this figure is lower than murder rates in Brazil, El Salvador and Colombia, to name just a few. While drug cartels in Tijuana and Juárez pose an enormous security problem, in recent months the governments’ efforts have achieved a 25% decline in deaths over the same period last year.  Simultaneously, the Mexican government has responded to the outbreak of H1N1, in part by virtually shutting down Mexico City, the world’s second-largest metropolitan center, for five days.  And on May 26^th the Mexican government carried out the biggest raid since the drug war began, targeting local officials in the state of Michoacán.  As covered by The Los Angeles Times, the federal operation arrested 27 officials, including ten mayors and one judge, suspected of supporting the drug trade. This raid is unlikely to hamper the flow of drugs through Mexico, but it is important for removing the political cover enjoyed by the cartels.

Over the past month, Mexico has demonstrated why it is not a failed state. Failed states such as Somalia, or even Pakistan or Afghanistan, cannot stifle gangs, terrorists or pirates, nor can they muster an effective response to public health problems. The ability to address such disparate problems speaks to the power of the federal government. Mexico is not a hub of anarchy where lawlessness reigns, but a country ensnared by proximity to an epicenter of drug consumption, an epicenter that also produces massive quantities of arms but needs to do more to monitor their sale. Corruption persists among bureaucrats, local officials and law enforcement because of low pay and scant advancement opportunities for those who lack political connections, but recent events indicate the government is making in-roads into the corruption dilemma.  From America, overreaction is the second-worst response to Mexico’s plight, following only ignorance, because it fuels xenophobia and nationalist rhetoric that throws moderation and nuanced engagement to the wind.

The fever of global panic has broken. Mexico is receding from the headlines, though H1N1 continues to claim lives—85 worldwide as of May 22^nd.  With the luxury of some hindsight, several trends are becoming apparent.  My posts over the next few days will discuss some of the more salient trends.

First, the Calderón administration deserves more credit.  The Mexican government has frequently been criticized for its dilatory, “woefully inadequate” response to the emergence of H1N1.  Mexico may have been slow in recognizing the threat it was facing. Once it did, the government moved swiftly, coordinating a response with the CDC, shutting down Mexico City, and appealing to the international community for assistance.  Many nations that were strident in their initial criticisms have been less outspoken regarding Mexico’s successes, even though the WHO has praised Mexico for its “responsibility and transparency”.  The proscriptions of the Mexican government slowed the spread of the virus and enabled the outside world to marshal a suitable response.  Whether other nations did this or not—and thankfully a good many did—was not a product of Mexican dithering.

This stands in contrast to other nations’ responses to similar crises and to Mexico’s own crisis response in the past.  China denied the emergence of SARS from November 2002 through March 2003, then shunned outside assistance.  As a result, the death toll surpassed 700 before SARS was quelled.  Mexico has also done a commendable job given its previous record. In September 1985 a massive earthquake struck Mexico, killing at least 5,000. The one-party PRI-controlled state stifled news coverage and even refused an offer of assistance from the US. 

This ordeal underscores why democracies are crucial to the world’s security and prosperity.  Despite stiff economic repercussions, Mexico combated H1N1 with transparency, external cooperation and sound public health policies.  The reaction of China and the PRI to other crises was secretive, suppressive and intransigent.  No system of government can be inoculated against natural disasters, but relatively stable democracies have proven more adept at negotiating such calamities with fewer lives lost and less disruption to the international system as a whole.  

Mexican immigration to the US bodes well for the American economy.  This is a politically inconvenient phenomenon—one of correlation and not causation—but when Mexican migration to the US increases, the US economy grows and unemployment ebbs.  The most prominent example is the decade after passage of the NAFTA. Amidst howls of a “giant sucking sound” of lost jobs and a shrinking manufacturing sector the United States experienced its most vibrant economic growth since the post-War boom.   Unemployment dipped below 5% for much of this time, a historic low in the US.   Simultaneously, this era witnessed dramatic increases of Hispanic immigration, primarily from Mexico, to the US.

Given this, the steep decline of Mexican immigration to the US reaffirms the severe contraction of the US economy. Since August 2008, Mexican immigration to other countries (the vast majority head to the US) is down 25%, about 226,000, according to a front-page story in Friday’s New York Times.  The logic is simple. “If jobs are available people come,” states Jeffrey Passel, a researcher at the Pew Hispanic Center,  “If jobs are not available, people don’t come.”  The US economy represents the single largest “pull factor” in world migration: people are drawn to the dynamism of the world’s largest economy.

Anecdotal evidence is also portentous.  Shelter houses along the Mexican side of the border, patronized by those looking to sneak into the US, are largely vacant.  On the American side, Border Patrol excursions are returning to their base in Calexico, California, empty. Young Mexicans are migrating to parts of northern Mexico only to turn back, weary and dejected.  One 17-year-old boy interviewed for the story traveled from the West Coast state of Michoacán to a shelter house only to hear that that his prospective job in Washington State fell through.  He opted to stay in Mexico: “There is work back home, but it doesn’t pay anything.”

Of course, this doesn’t mean Mexicans already living in the US are chompin’ at the bit to return. Roughly 11 million Mexicans live in the US, and in 2008 some 450,000 returned to Mexico, about the same number that reverse migrated in 2007.  Given the enormous socioeconomic problems facing Mexico those already in the US seem contented to stay.  “There may be a crisis in the United States,” reckons the director of one Mexican research institute, “but…we have been in an economic crisis in Mexico for many years.”  The persistence of drug wars, a lack of advancement opportunities in many parts of Mexico, exorbitant prices demanded by ‘coyotes’ for passage across the border, not to mention the recent toll of H1N1—all combine to make roughing out a recession in the US the lesser of two limbos. 

If enhanced border security plays a role in this trend the data is less clear, perhaps because deterrence is hard to quantify.  In March, various news outlets, including The Los Angeles Times and Huffington Post, reported that Border Patrol arrests are at their lowest point since the 1970s.  As quoted in The Los Angeles Times, Demetrios Papademetriou, president of the Migration Policy Institute, believes “The information they (migrants) are getting basically says there are no opportunities here.”  Recent high-profile arrests of drug kingpins have kept the border in the news but the day-to-day story is one of economics trumping risk.   

Mexico is writhing from H1N1 two weeks after “swine flu” entered the global lexicon.  At least 64 people are dead there as a result of the virus, over 2,600 have been made ill, and the economy is crippled. Mexico’s stock market and currency were initially pummeled from already depressed levels.  Mexico City was closed down for five days, costing the city some $88 million per day, according to Mayor Marcelo Ebrard. As businesses and schools re-open the direct costs to Mexico’s economy eclipse $2.2 billion, according to one AP report.  The Bank of Mexico has predicted that the economy could contract by as much as 6.8% this year, and the bout with H1N1 could precipitate a further drop of 0.3-0.5% of GDP, calculates Mexico’s finance minister Agustin Carstens.

The long-term effects are equally worrying.  Alma Guillermoprieto discusses many corrosive trends in her “Postcard from Mexico” in this week’s New Yorker. Tourism, Mexico’s third-largest source of revenue, accounting for 8% of GDP, is hobbled just as the traditional busy season begins. The Economist notes that hotel occupancy rates are in the single digits.  Bad as this may seem, ignorance could easily make matters worse.  Refusals by local governments to acknowledge and combat the epidemic could easily produce lingering doubts that stymie tourism beyond this season. For instance, Guillermoprieto cites the state of Quintana Roo, which officially claims zero confirmed cases of the illness, even though its resort hub of Cancun has hosted several tourists who later tested positive for H1N1.   

Other nations’ responses to the flu strain have run the gamut from cool and cooperative to zany and xenophobic.  President Obama handled the virus’ spread to the US in his typically smooth demeanor. The Chinese government overreacted by quarantining at least 71 Mexican citizens living there, even though they had no symptoms and were at no particular risk for having the virus.  (The Chinese government was also the first to offer financial assistance, totaling $5 million, to Mexico.) The Egyptian government plans to cull some 250,000 pigs over the next few months, a measure decried by both the EU and WHO and explained by The Economist as a maneuver of political convenience in an article entitled “What a waste”.  Amidst more serious hysterics, the response of the Afghan government is inanely noteworthy; as reported by Reuters the lone pig in Afghanistan was quarantined last week, isolated from its exhibit mates at the Kabul zoo. 

Fear of the virus, which scientists actually regard as a Euro-Asiatic genome, has also frayed Mexico’s relations with many of its Latin American neighbors.  Two Mexican soccer teams were forced to withdraw from the Copa Libertadores, Latin America’s equivalent of Europe’s Champions League, after their scheduled opponents from Brazil and Uruguay refused to play in Mexico.  Cuba was the first nation to impose an outright travel ban to Mexico, with Argentina shortly following suit.  In South America, nerves are heightened by the calendar—fall weather is approaching, and with it the onset of flu season.   All this, not to mention the gravity of Mexico’s other problems, bodes ill for a nation whose prosperity relies heavily on the movement of goods and people across its borders. 

Normality is returning to Mexico City. Unfortunately, the Mexican economy is not. The economy is clearly beginning to lag, which has enormous implications for public finances and employment. The Ministry of Finance has just revealed that federal income has decreased while government expenditures have increased. This cannot be good for the national debt. It seems that the H1N1 virus turned out to be less harmful for the country than the international financial crisis.

Apparently, the outbreak of the H1N1 was effectively managed. This does not mean that the dozens of deaths were meaningless, that tourism was not affected, or that the stress in Sino-Mexican relations will soon be forgotten. In spite of this, it seems that the federal government did avoid a major health incident. Although the country did not have a vaccine for the social effects of the outbreak, it controlled it and now things are beginning to return to normality.

The Mexican economy, however, did get a vaccine against the effects of the financial crisis—a loan from the IMF. Yet, the economy has been hardly hit and only a long and painful treatment will be able to get Mexico back in shape. But how did a healthy economy manage to get so sick? Well, maybe the economy was not doing that well in the first place. Remember the reduction in remittances and the weak peso of October 2008? It is unfortunate that the IMF loan was only approved in April 2009. By then, the Mexican economy was already infected.

The schools are closed. Soccer matches are played in empty stadiums and movie theaters have closed their doors. There are no public events and it is no longer possible to have lunch in a restaurant. The army has been giving out masks out on the streets. Shopping malls are nearly empty, as well as the hallways of supermarkets. This is life in Mexico City.

The outbreak of the swine flu has left the city paralyzed and the country closely monitored by its neighbors and international organizations. Countries around the globe are considering canceling flights to Mexico. Tourism has already dropped: who would go to a country hit by a deadly virus? This will not help the Mexican economy.

The Mexican government seems to be on top of things. Indeed, the number of suspected cases of the virus decreases day by day. However, a city of more than 24 million people cannot leave on takeouts and children need to go to school. The question everybody in Mexico City is asking is when will this be over? More importantly, how will the country recover from the economic and social consequences of the outbreak? Only time will tell.