Mexico News and Analysis, Dec 1-7, 2008

1. Economic crisis hits hard
2. More bad news for Secretary of Public Security
3. Police Chief arrested for drug ties
4. US releases part of military/police aid package


1. Economic crisis hits hard
Mexico expects to lose about 27,000 jobs, mainly in automobile plants, during 2009 as exports decline by an expected 16%.  The economy is expected to grow by only 0.3% in 2009, according to estimates offered by the Bank of Mexico.  Automobile production, the centerpiece of Mexico’s export economy, will decline by half in 2009, according to the Mexican Automobile Industry Association.  Automobiles and parts account for 20% of industrial production and one-fifth of the country’s exports.  In Ciudad Juarez, the five largest maquiladoras, Lear, Jones Plastic Engineering, Electrolux, Arneses de Juarez and Edumex, are working only partial shifts, with workers paid as little as two days a week. 

Despite financial problems faced by the US “Big Three” auto producers, investment in Mexican facilities has not declined this year.  Very possibly the automakers are banking on Mexico’s low wages – less than US$3 an hour in the automotive sector – to recover from their current financial problems. Yet new foreign investment in general declined by 56% during the first nine months of this year compared to the same period last year, according to the National Commission on Foreign Investments.  This follows a 15% decline during the first nine months of 2007 compared with 2006.

Despite the economic crisis, federal Senators plan to have a merry Christmas.  At least US$3.5 million will be distributed to 128 Senators in December, including their monthly expense accounts of US$10,000 plus a year-end bonus of US$13,000.


2. More bad news for Secretary of Public Security
One week after publicly defending his embattled Secretary of Public Security (SSP) Genaro Garcia Luna, President Felipe Calderon sent a mixed message this week by appointing Javier del Real Magallanes, a General and member of the Estado Mayor, to the post of Assistant Secretary for Strategy and Intelligence in the SSP.  Del Real Magallanes replaces Facundo Rosas, one of Garcia Luna’s closest collaborators.  The Army has little confidence in Garcia Luna, and the move gives the armed forces increasing influence in Calderon’s war on drugs, the centerpiece of his administration.  Del Real Magallanes will report first to the Secretary of National Defense (Sedena) and only secondarily to Garcia Luna.  Del Real Magallanes assumes a post with expanded powers under a modified SSP command structure as Garcia Luna has come under increasing suspicion of links with drug cartels.  Only last week, the Federal Attorney General interrogated his personal secretary, suspected of accepting money from cartels in exchange for intelligence.


3. Police Chief arrested for drug ties
Former federal police chief Gerardo Garay was arrested this week on charges of collaborating with the Sinaloa cartel and stealing money during a drug bust.  Garay had been under preliminary detention for a month, but the formal charges against him were released only this week.  Garay is one of three dozen high level officials arrested as part of “Operation Clean House,” initiated by the Attorney General after the arrest in January of Alfredo Beltran Leyva, a lieutenant in the Sinaloa cartel.  Beltran Leyva has apparently fingered a number of high level officials, perhaps in hopes of negotiating a short prison sentence. 

President Calderon announced his war on drugs with fanfare at the beginning of his presidency and deployed more than 30,000 soldiers to at least eleven states in an unsuccessful attempt to demolish Mexico’s powerful drug cartels.  The corruption of some of his leading officials may account, in part, for the failure.  Garay assumed his post earlier this year after his predecessor was murdered by cartel assassins.


4. US releases part of military/police aid package
The Bush administration released on Wednesday US$200 million in aid, part of a three-year, US$1.4 billion package dubbed the Merida Initiative that will provide training and equipment to Mexico’s police and army as part of the war on drugs.  The aid package includes special X-ray equipment for cargo containers and trucks, forensic equipment, polygraph machines, computer technology for tracking money laundering, and a computerized registry that will track police officers fired for corruption.  US Ambassador Antonio Garza was hardly upbeat in his formal presentation of the funds: “Sometimes the narcotraffickers are better coordinated and integrated in their transnational activities than those that are confronting them.”