Wednesday, April 29, 2009

The Slope Steepens


I remember Mexico's economic crisis in 1994, with its abrupt devaluation of the peso and the deep recession that followed. The country recovered brilliantly then, but I continue to have a bad feeling that Mexico is heading to where Colombia was in the 1990s.

The recession has already hammered both domestic industry and workers' remittances from overseas. The swine-flu outbreak is about to crush the third pillar of Mexico's economy, foreign tourism, with Mexico City hotel bookings suddenly off by 30-50 percent, according to NPR this morning.

Most worryingly, drug-gang violence continues to expand from the area around Ciudad Juarez to yesterday's city-wide ambushes of police in Tijuana.

From a reputational standpoint, things can't get much worse for Mexico--or can they?

Currently the Mexican government, corrupt and slow to act though it may be, does function; as others have noted, the trash gets picked up, kids go to school each morning, the food supply is safe, mail is delivered, certain commodities are kept relatively inexpensive. As a result, citizens have at least a minimal level of confidence that the federal government is legitimate.

However, that feeling could easily be shaken if either of two plausible events occurs: a) swine-flu deaths increase sharply and the government fails to intervene successfully or in time, or b) drug gangs stage a stand-up, set-piece battle with Mexico's military, signaling the emergence of an alternative power center in the country.

Either of these events would also cripple much-needed foreign direct investment.

In all, it looks a lot like Colombia circa 1990: potential and actual breakdown of public services and safety with an attendant erosion of faith in the central government, while the narcotraficantes provide an alternative source of jobs and infrastructure.

I'll really start worrying if I read newspaper stories about the narcos setting up their own courts to try criminals and settle civil disputes, aping the authority and legitimacy of the legitimate government just like the FARC.

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