The Impact of the Drug Trade to Mexico’s Economy NS4540 Winter Term 2018 by LT Michael A. Tomsic

Outline Background Drug Economics How is Economy affected? Conclusion

Overview: Mexico Background: Gained Independence in 1824 Size: 1.964 km2 Population: 123.5M (2017) Economy: (2017) GDP (US$): 1,124.3B Exports (359.3B) Main Partners: USA, Canada, China, Spain, Brazil Automobiles, electronics, televisions, computers, mobile phones, oil and oil products Imports (372.8B) Main Partners: USA, China, Japan, Germany, South Korea Metalworking machines, steel mill products, agricultural machinery and metals

Population (Millions) Comparison GDP per capita, PPP 2012 2013 2014 2015 2016 2017 U.S 51,403.00 52,742.00 54,668 56,437 57,608 59,495 Mexico 10,137.00 10,659.00 10,846.00 9,522.00 8,562.00 9,249 Brazil 12,367.00 12,295.00 12,112 8,810 8,727.00 10,020 Population (Millions) 314.2 315 317.5 319.9 322.2 324.5 117.05 118.4 119.71 121.01 122.27 123.52 199 201 202.8 204.5 206.1 207.6 Corruption Index 73 74 76 78 34 35 30 29 43 42 38 40 Unemployment Rate 8.30% 7.70% 6.60% 5.70% 4.90% 4.10% 4.80% 4.30% 3.90% 3.80% 7.40% 7.10% 6.80% 8.50% 11.50% 13.40% Alex Bihar

Mexico - 2017 65/100 Freedom of the World 65/179 Economic Freedom Index 20/180 Corruption Perception Index Alex Bihar

What drugs are being trafficked Mexican Drug Trafficking Organizations (DTO’s) are the largest foreign suppliers of: Marijuana, heroin, methamphetamines and cocaine (to the US) Legalization of marijuana? Cartels have begun to abandon the transferring of marijuana across US because of 28 states legalizing it Mexico has considered legalizing marijuana for medical use Overall net? Estimated tens of billions of dollars are made every year from drug sales

Largest Operating Cartels Sinaloa Formerly lead by El Chapo, largest international footprint Jalisco New Generation Splintered from Sinaloa in 2010, more violent than the rest, has no problem openly engaging with authorities or other cartels Juarez Largest rival to Sinaloa Gulf One of the smallest due to recent arrests of high profile leaders Los Zetas Splintered from Gulf in 2007, originally a paramilitary group, the most technologically, advanced, sophisticated cartel Beltran-Leyva Organization Created by four brothers who broke off from Sinaloa in 2008, loyalists still operate in Mexico since brothers have either been killed or arrested

Cartels – Gaining influence Domestic Neutralizing government opposition Institutional Revolutionary Party (PRI) – in power for 70 years Were exploited by DTOs to create a network of corruption for lucrative bribes National Action Party (PAN) – Vicente Fox His election in 2000 upended the 70 year equilibrium between the state actors and the cartels 2017 violence can be associated with attempting to reestablish impunity in the government International After US stepped into the Caribbean ring in the 1980s, Mexican DTO’s became wholesalers instead of Colombian couriers

President Felipe Calderon Declared war on cartels in 2006 after he took office Deployed military forces and assistance to replace local police Killed 25 of the top 37 most wanted drug kingpins in Mexico His more direct approach had drawbacks Splintered bigger cartels into 60-80 smaller ones Territorial rivalries intensified and violence spread Cartels/gangs turned to kidnapping and extortion Mayors and former mayors were killed, with the hopes of vying for local political power 120,000 registered homicides during his reign

How did drugs flourish in Mexico? U.S. entrance in 1984, announcing “War on Drugs” Kingpin Strategy DEA Agent Enrique Camarena was taken, tortured, and killed by the Tijuana cartel for his involvement in an investigation against the cartel. U.S. initial efforts pushed the flow of drugs from the Caribbean basin into Mexico and allowed them to flourish. The death of Pablo Escobar and the creation of a joint U.S.-Colombian military operation created a vacuum which was filled by Mexico’s drug trafficking organizations (DTO’s) Kingpin Strategy – cutting off the head, the body would die; failure. For Mexico, the heads of organizations were replaced with other heads who were more violent and competed for the same resources, territory and trafficking routes.

How much does it actually cost? Economic Implications How much does it actually cost?

-A measure of resiliency for economic sectors in Mexico -A measure of resiliency for economic sectors in Mexico. The higher the score, the less that sector is affected by violence -Big companies operating in Mexico are not affected by gang/cartel crimes

-This map shows in green where economic complexity could grow, in red where complex economic sectors could struggle, and in white where there was not enough information to measure.

-2015: 19% of Mexico’s GDP, 2011: 38% of Mexico’s GDP -At its height, cost of violence was calculated at $213 billion ($2.92 trillion pesos) -Calculated: estimating the cost of crimes and violence contained by the government, then included “direct costs” like medical treatment; “indirect costs” like lost productivity and a “multiplier effect” like violence on an economy. -

Questions?

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