Mexico

Today I stumbled upon a fascinating BBC World News that shows another aspect of this fascinating and diverse country: a photo article on Mexico’s female “luchadores”.  Check it out here.

Results from the first phase of unofficial referendums on oil privatization are in.  More than 83% of citizens of Mexico City said no to the questions: “With the whole cycle of oil production under state auspices, do you agree that the private sector should play a role?” and “In general, are you in agreement with the proposed energy reforms in Congress?”

This is the first of three referendums, with the other two taking place on August 10th and 24th.  Although they do not carry legal weight, the first “no” will pose a serious annoyance to the Calderón administration’s proposed reforms to keep Pemex in the black.  Since 2005, “daily [Pemex oil] production has dropped more than 300,000 barrels per day, or some 10% of the total” (see Economist article here).

That said, Mexico’s economic policy is a paradox.  The country that has the world’s most free trade agreements (see post here) is also the same place that appears to vehemently oppose private sector participation to keep Pemex afloat, despite heavy losses in spite of all-time highs for oil prices.

Today World Trade Organization (WTO) Director Pascal Lamy confirmed that the latest round of WTO talks collapsed after nine days because of a dispute between developed and developing countries over “safeguard clauses” to protect lesser-developed economies from a flood of imports. For Mexico, this means increased reliance on its existing plethora of free trade agreements.

Some analysts say the collapse of talks symbolizes the end of the latest round of negotiations begun in 2001 that would arguably increase the world’s economy by $100 billion. Instead, countries will continue to negotiate free trade agreements on a regional or bilateral level, rather than a global basis.  Mexico is one of the best examples.  The country’s ruling political establishment has wholly embraced free trade and liberalization, having signed the most number of free trade agreements in the world.  These include full agreements with the US and Canada (NAFTA), the EU, Japan, nearly all of Central America, Chile, Uruguay, and Bolivia, in addition to framework agreements with South America’s MERCOSUR.

As a result, few countries are left trading with Mexico without a free trade agreement.  However, the existing agreements, particularly with the US, the EU, and Japan, pit Mexico’s economy against rich-world subsidies, most notably in agricultural and manufacturing sectors.  Notably, the stumbling block of safeguard clauses that brought down the latest round of WTO talks was resolved in NAFTA by a gradual lessening of tariffs and non-tariff barriers over a period of seven years.  Additionally, much work remains to be done to liberalize telecommunications and financial sectors.  On average, services account for 70% of a developed country’s economy, 50% of a developing country’s, yet only make up 19% of world trade.  Notwithstanding, the existing agreements leave Mexico with significantly more prospects for trade.

Pictured: Mexico’s Permanent Representative to the WTO, Fernando de Mateo y Venturini (center)

Today, the Mayor of Mexico City and the Local Assembly have organized an unofficial referendum on oil reform. The referendum opens a new chapter on the impact of democracy on strategic public policy. Indeed, the referendum—a democratic institution—has the potential to stop or dramatically alter the progress made during the open debate—another democratic institution—over oil reform that took place during the last two months.

The debate over oil reform is the central part of an agreement between Mexico’s main political forces that took place in early May 2008. According to the agreement, the Senate would organize a series of debates over different aspects of the oil industry in Mexico. More than a hundred and fifty intellectuals, high-ranking officials, members of congress, and scientists, among other leaders of Mexican society, discussed potential solutions to the many problems of the aging Mexican oil industry. The series of debates ended in July 22nd.

The debate has proven to be a fantastic exercise on democratic principles. Indeed, the debate brought together opposing political forces, ideas, and positions in a forum of tranquility and democratic discussion. In spite of this, another democratic device, that is, a referendum, could threaten the progress made in the debate.

The government of Mexico City has organized a referendum on the involvement of private companies in the oil industry and the approval of the initiatives produced during the debates. Depending on the votes, this could seriously halt the initiatives that the oil industry requires to survive in the following decades (high oil prices are not a sufficient condition for the long-term success of the industry). Although the results of the vote are not binding, the political tide generated by them might put pressure on the implementation and structure of the initiatives presented by the debaters.

However, the referendum might have the opposite effect. If voters decide that they support foreign involvement in the Mexican oil industry, and that they approve the initiatives produced during the debate; then the industry might experience changes in a short period of time. This is unlikely to happen (although voters can sometimes give some surprises). Indeed, the perceived role of the industry on national sovereignty, the rhetoric of the opposition forces, the conservatism of the ruling coalition, and the particular phrasing of the questions in the referendum, are not likely to produce support towards progressive oil reform.

Many times when writing on this blog I feel that the worst of Mexico comes out.  For that reason, today’s post reveals some of the best Mexico has to offer in a one of the provinces stricken by the drug war - Michoacán.  This New York Times article exposes an interesting trip to Michoacán, leaving the writer to argue that it is an “undiscovered Oaxaca.”  “The only ambush,” writes Gisela Williams, “was the orange-and-black clouds of monarch butterflies, fluttering above our windshield.”

Tropical storm Dolly was upgraded to a Level 2 hurricane only a few hours before it’s due to hit the land border near Brownsville, Texas and Matamoros.

Last week Barack Obama and John McCain once again aimed to court the Latino vote in the United States by presenting their platforms at the annual gathering National Council of La Raza in San Diego. The text of their speeches is available here.

John McCain talked about growing the economy through low taxes on minority-owned businesses and comprehensive immigration reform and continued support of free trade (NAFTA, DR-CAFTA, Colombia, and eventually a hemisphere-wide agreement).  He also emphasized his credentials and appreciation of latinos as he as served as Senator from Arizona.  Notably, he suggested Barack Obama should visit Latin America for the first time.

Barack Obama promoted a legal path to citizenship for undocumented immigrants, tax relief to low-income families, and emphasizing affordable college education.

On July 18th, the Mexican Navy intercepted a mini submarine that was transporting more than 5 tons of cocaine. This is a significant operation that highlights the ability of Mexican armed forces to combat drug trafficking by air, land, and sea. Bilateral cooperation between the United States and Mexico contributed to the capture of the submarine. Given the current context, it is important to ask whether foreign assistance in the form provided by the Mérida Initiative or Plan Colombia actually reduce drug trafficking.

Answering such a question is not an easy task. Indeed, there are methodological issues that do not allow to test whether military assistance provided by one country (or countries) to another actually reduce drug trafficking. A large transfer of resources to combat drugs is public information. Drug cartels can observe this transfer. Having observed the transfer, they can modify their activities accordingly. However, this modification is not observable—although intelligence agencies should be able to observe these activities. Cartels can improve their efforts and become even more difficult to catch (they become better drug traffickers); or they can reduce their efforts, thus giving the impression that the aid is working (they play a low profile). This last event is a response to the transfer, not a response to the actual implementation of the funds provided by the transfer.

But high office is run by politicians and not by researchers. Indeed, it is always good to show the photos of a submarine being taken over by Special Forces. We can expect observing more dramatic seizures of drugs under a new bilateral relationship between Mexico and the United States. The question is whether those seizures will be masking other types of illegal operations that make use of even more fantastic ways of transporting drugs across countries.

There were two finds in Mexico this week that I thought really interesting:

1) the Mexican navy for the first time caught a drugs submarine from Colombia carrying 6 tons of cocaine (see BBC video here)

2) a cemetery outside Monterrey that was thought to contain only Mexican soldiers from the Mexican-American war was found to contain the remains of four Americans.  Story here.

The complaints this week from the Mexican Congress about being spied on by the nation’s intelligence agency (CISEN) provide an interesting find.  Although CISEN’s Director, Guillermo Valdes, came under fire from the allegations, his findings allege that drug money is threatening the country’s institutions, along with the strong possibility that drug money was directly involved in some of the national Congress’s campaigns.