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

2. Outline
Background
Drug Economics
How is Economy affected?
Conclusion

3. Overview: Mexico Background: Gained Independence in 1824
Size: 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

4. 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

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

6. 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

7. 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

8. 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

9. 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 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

10. 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.

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

13. -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

14. -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.

15. -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. -

20. Questions?

21. Bibliography https://mwi.usma.edu/balancing-mexicos-economy-drug-war/