Mexico News and Analysis: February 20 - March 4, 2012

1 - WAR ON DRUGS “NOT A FAILURE?”
2 - TOURIST OFFICIALS REFRAME SAFETY FOR VISITORS
3 - G20 MEETING IN MEXICO CITY

Homeland Security Secretary Janet Napolitano tread this week where politicians have failed for years - trying to prove a positive with a negative.  By characterizing President Felipe Calderon’s war on drugs as “not a failure,” Napolitano highlighted what everyone in Mexico already knows - the policy is a resounding failure.  The comments followed Napolitano’s meeting with Interior Minister Alejandro Poire.  In public remarks, Napolitano fed a campaign theme trumpeted recently by Calderon’s National Action Party (PAN) concerning Chapo Guzman, Mexico’s most powerful drug lord and one of the world’s richest people.  While Guzman remains at large after escaping from a high security federal prison under a previous PAN administration, Napolitano implied it’s only a matter of time before he’s caught.  Some political observers are predicting a capture in April or May, leading up to the July 1 presidential elections. 


“It took us ten years to find Osama bin Laden,” Napolitano reminded us.  “We are persistent when it comes to wrongdoers and those who do harm in both of our countries.”  The Obama administration appears to favor another PAN administration in Mexico, and will likely go to great lengths to influence the summer election, including providing intelligence on Guzman and his international drug operation centered in Sinaloa.  Napolitano is on a five day tour of Mexico and Central America, apparently trying to quash talk of drug decriminalization which is spreading among the political class in the region.  Drugs provide perhaps 5% of the region’s gross national product.  Without the cartels’ extensive money laundering operations using established banks, the region’s financial sector would likely crash.  Yet politicians want to regain the upper hand in drug sales, a situation that prevailed for much of the 20th century.

2 - TOURIST OFFICIALS REFRAME SAFETY FOR VISITORS
The armed robbery this week of 22 tourists on a land trip sponsored by the cruise ship Carnival Splendor found tourism officials struggling to defend the safety record in Mexico.  Rodolfo Lopez Negrete, head of the Mexico Tourism Board, characterized the robbery as “a rare and isolated incident.  While 22 people were involved in this incident, in all of 2011, 22 million international tourists visited Mexico, in addition to the many millions who arrived by cruise line.  The vast majority of these visitors enjoyed their stay in Mexico without incident.”  Last week, Secretary of Tourism Gloria Guevara declared that drug-related problems affect only about 80 of Mexico’s 2,500 counties.  Guevara commented on a newly issued State Department warning on travel to Mexico: “it is not perfect but is much better than the ones we saw before.”  The new warning, which includes maps to better help visitors understand Mexican geography, specifies certain regions where drug violence is rampant, mainly along the US-Mexico border and in a few isolated central states.

3 - G20 MEETING IN MEXICO CITY
The Euro zone crisis dominated the G20 meeting last week in Mexico City, with Mexican authorities pointing to their own tight fiscal policies as a guide for their wealthier counterparts.  The G20 was particularly focused on the financial health of the International Monetary Fund (IMF) which will likely be the final guarantor of Europe’s growing debt.  The final report “reaffirmed our commitment that the IMF should remain a quote-based institution and agreed that a feasible way to increase IMF resources in the short-run is through bilateral borrowing and note purchase agreements with a broad range of IMF members.”  Within days, Mexico’s Senate approved a 145% increase in the country’s IMF quota, meaning that now a developing southern country with its own substantial and unpayable foreign debt will be directly subsidizing the European bank bailout.  The Senate approved a quota of 8.9 billion Special Drawing Rights (SDRs, a kind of money whose value is based on a basket of four international currencies), equivalent to about US$14 billion, from 3.6 billion SDRs under previous agreements.  The change is supported by the PAN, the PRI and the “New Left” sector of the PRD.  If approved in the lower house, the move would marginally increase Mexico’s voting rights in the IMF.  The new contribution would be equivalent to the federal budget for the secretaries of Social Development, Defense and Public Security combined.  At the same meeting, Treasury Secretary Timothy Geitner announced, “we will not go to Congress to seek the authority necessary for a contribution from the United States.  We don’t think that’s necessary or desirable.”

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