1. Travel security Travel security services for international travelers and expatriates Mexico: Managing Your Travel and Operational Risks June 23, 2010 Presented by: International SOS Copyright 2010 by International SOS and Control Risks

2. Travel security Travel security services for international travelers and expatriates Agenda 1.The Deployment of Approximately 50,000 Troops 2. Mexico’s Recovery from Global Recession 3.The US – Mexico Relationship in 2010 4.Ryder’s Best Practices 5.Question & Answer Session

3. Travel security Travel security services for international travelers and expatriates Business Implications of Troop Deployment Violence exacerbated in key business regions Map – deaths since 2006 and industry coincidence 6,000 + 10,000 + 5,000 + 2,000 + 20,000 + = baseline number of troops deployed since 2006 INDUSTRY Export-oriented manufacturing (Maquiladoras) Oil refining Petrochemicals Tourism Agriculture Mining

4. Travel security Travel security services for international travelers and expatriates Operational Risks Resulting from Troop Deployment Corruption Local authorities are often unreliable and corrupt Transparency International index ranks Mexico as 2 nd worst in the world in regards to bribery Insecure operating environment 75% of gun-related deaths occur during shootouts between the military and the cartels Factories have had to amend workers’ schedules due to volatile security situation Transportation of goods often disrupted Paying Bribes index, 2009

5. Travel security Travel security services for international travelers and expatriates Travel Risks in Current Security Environment Likelihood of business travelers being caught in the cross-fire between cartels and troops is still low especially outside northern border areas. But power dynamics between cartels are changing and rise in clashes with security forces raise indirect risks to personnel. Examples: Rise of shootouts in destinations frequented by travelers including tourism sites like Cuernavaca and Cancun and business hubs like Monterrey –December 2009 Killing of Beltran Leyva Cartel leader Operation takes place in Cuernavaca (Mexico City weekend retreat) inside upscale residential area. Two bystanders killed in attempt to capture cartel leader. –18 June 2010 12 bodies found near Cancun Popular ‘Spring Break’ destination also a transshipment point and consumer market for illicit drugs. Violent incidents tarnish the resort’s image, raise concerns for travelers –9 June 2010 ‘Los Zetas’ leader arrest in Monterrey triggers illegal road closures Is the safest city in Mexico as safe as it used to be?

6. Travel security Travel security services for international travelers and expatriates Business Implications of Recession Recession Mexico’s GDP contracted by 6.5% in 2009 (worst performance since 1995) –causes: low oil prices; overly trade-reliant on the US Main regions to suffer from recession – maquiladora regions (northern border) Recovery Oil price recovered, US consumption rates rebounded 2010 domestic pressures on President Calderon: beat the cartels, reform PEMEX 2011 security-spending will be on troop-deployments, intelligence, and capturing key cartel leaders How does it affect the business environment? Spending priority does not include (explicitly) protecting industrial areas or key trade routes for foreign business No planned reform of state or municipal police for longer-term gain No planned reform of judiciary – impunity for corrupt officials, unstable investment landscape

7. Travel security Travel security services for international travelers and expatriates Operational Risks Following Recession Extortion Extortion demands rapidly increasing Areas prone to narcotics related crime have seen a dramatic increase in ancillary crime as well Kidnap for ransom against Mexican-national businessmen and women Over 98% kidnappings victims are local nationals Mitigation Measures Many extortion and fraud cases have ‘insider’ component Adequate screening of employees is vital Reliable and trusted local management is imperative for all Mexican plants, factories, and offices

8. Travel security Travel security services for international travelers and expatriates Travel Risks Following Recession Poverty and unemployment remains the greatest cause of crime against business travelers  Petty and some violent crime  Extortion of employees  Express kidnapping

9. Travel security Travel security services for international travelers and expatriates Business Implications of US-Mexico Relations What is the Merida initiative? $1.6 billion over three years to Mexico and Central America $ 400 million to Mexico in intelligence, technology, training, and surveillance How will it help US business? Reduce capabilities of cartels to threaten employees, kidnap and extort Improve rapid-response of law enforcement agencies Bolster surveillance capacity of Mexican authorities enabling early-warning systems for business Strengthen the institutions of justice – key to improving business environment in the long term How does it fail US business? The $400 million spent has not improved the security situation so far Nothing explicit about helping US businesses or investment Border security issues, and maintaining trade flows are not mentioned Fails to address flow of arms into Mexico’s northern border region

10. Travel security Travel security services for international travelers and expatriates Operational Risks Resulting from US-Mexican Relations Arms Illicit trade flows southward – proliferation of arms DEA estimates that over 90% arms in Mexico originate in US Businesses shipping goods face road-block, vehicle search, and contamination risks Money Money flows south: Mexican drug trafficking organizations launder between $8 billion and $25 billion every year US businesses risk inadvertent involvement with illicit funds through partners, buyers, contractors etc. How can US companies detect laundered, or criminally tainted money?

11. Travel security Travel security services for international travelers and expatriates Travel Risks Related to US-Mexico Relations Current levels of violence to rise as the US-Mexico efforts continue to engage cartel command structure Threats to personnel will continue to rise primarily in the border areas  Road blocks  Car-jackings  Muggings  Stop and search

12. Travel security Travel security services for international travelers and expatriates Key policy change since 2006 Business implications Operational risksTravel risks In 2006, President Calderon chooses to militarize the solution to the drugs’ problem Violence is exacerbated in key states where US businesses have interests Insecure operating environment is created Increased levels of corruption in state and municipal police forces Top cartels are targeted, creating a power vacuum allowing smaller groups to contest major areas. Business travelers at risk of being in the wrong place at the wrong time. In 2010, Mexico’s recovery from the global recession exposes US businesses to more insecurity Government’s spending priorities do not explicitly include protecting US business operations or trade routes Unemployment produces crime against business operations: extortion, kidnap of nationals Poverty is a major cause of crime – including petty crime and express kidnapping committed against business travelers US- Mexico relationship becomes increasingly co- dependent US businesses cannot expect assistance in managing Mexican operations from the US government Two-way illicit trade flow: drugs move northward, arms and money move southward Continued inadvertent threats to personnel traveling in contested areas Key Take-Aways

13. Travel security Travel security services for international travelers and expatriates Risk mitigation Realize / discuss your risks with interested parties Understand your exposure Ground-proof your projects Conduct security gap analysis Inform students, faculty and family Define / fine-tune a travel /living abroad policy Create a crisis management plan Track project and individuals Provide security awareness training

14. Travel security Travel security services for international travelers and expatriates Q&A Questions?