Mexico News and Analysis, Dec 15-21, 2008

1. US military aid to arrive in January
2. Calderon rejects pact with cartels
3. Economic crisis


1. US military aid to arrive in January
The second payment from the Merida Initiative is scheduled to arrive in Mexico on January 20.  The US$116 million, approved last year by Congress as part of the Defense Department budget, will purchase high tech airplanes, purportedly for interdiction of illegal narcotics shipments.  Mexico’s Army and Air Force will receive the planes.

In related news, Secretary of State Condoleezza Rice and her Mexican counterpart, Patricia Espinosa, announced “the intention to establish, before the end of 2009, formal mechanisms for bilateral operations in Mexico” as part of President Calderon’s “war on drugs.”  US police and military operations in Mexican territory have been highly polemic over the years.  During the initial discussions of Plan Merida, both countries went out of their way to discard the possibility of bilateral actions within Mexican territory.  Now that US military financing is approved and in the pipeline, the issue of joint police/military actions is back on the agenda.


2. Calderon rejects pact with cartels
President Felipe Calderon this week rejected an informal pact with powerful drug cartels as a way of stemming the violence that is ravaging Mexico.  With more than 5,000 drug-related assassinations so far this year, including hundreds of police and military personnel, Ruben Aguilar, spokesman for former President Vicente Fox, called on Calderon to negotiate with the cartels, in effect legalizing the sale of narcotics.  The question of legalization has been on the national agenda since the Fox administration.  Many experts see drug trafficking as an uncontrolled form of capitalism that responds to supply and demand dynamics rather than law enforcement efforts.  Since demand north of the border will continue for the foreseeable future, many experts believe the only way to control the violence associated with narcotics, and the accompanying corruption of the State, is to legalize the product.


3. Economic crisis
Official unemployment reached 4.5% in November, the highest rate registered in the past eight years.  Workers are considered employed if they work at least one hour per month and Mexico does not have unemployment insurance for laid off workers, which explains the relatively low rate in relation to official unemployment in the US.  Less than half of Mexico’s workforce is employed in the formal sector, and some experts estimate as much as 25% of the workforce is under-employed in the informal sector.

In related news, the minimum wage will rise by 4.6% in 2009, equivalent to about US18 cents per day.  The daily minimum wage will vary between 54.8 pesos (US$4.20) in urban areas and along the border, and 51.95 pesos (US$3.99) in rural areas.  Annual inflation is currently 6.3%.  Coparmex, the leading business association in Mexico, said, “In the humanistic vision of Coparmex, our focus is on the person, and although we are not a social service organization, we consider that the function of business is the creation of value for society … and this is accomplished, in part, with a decent compensation for our collaborators.”  Arturo Alcalde, a leading labor lawyer, called the new minimum wage “a farse.”