[BretLudwig]

Mexico: On the Road to a Failed State?

By George Friedman

"Edgar Millan Gomez was shot dead in his own home in Mexico City on May
8. Millan Gomez was the highest-ranking law enforcement officer in Mexico,
responsible for overseeing most of Mexicos counternarcotics efforts. He
orchestrated the January arrest of one of the leaders of the Sinaloa
cartel, Alfredo Beltran Leyva. (Several Sinaloa members have been arrested
in Mexico City since the beginning of the year.) The week before, Roberto
Velasco Bravo died when he was shot in the head at close range by two
armed men near his home in Mexico City. He was the director of organized
criminal investigations in a tactical analysis unit of the federal police.
The Mexican government believes the Sinaloa drug cartel ordered the
assassinations of Velasco Bravo and Millan Gomez. Combined with the
assassination of other federal police officials in Mexico City, we now see
a pattern of intensifying warfare in Mexico City.

The fighting also extended to the killing of the son of the Sinaloa cartel
leader, Joaquin €œEl Chapo€� Guzman Loera, who was killed outside a
shopping center in Culiacan, the capital of Sinaloa state. Also killed was
the son of reputed top Sinaloa money launderer Blanca Margarita Cazares
Salazar in an attack carried out by 40 gunmen. According to sources, Los
Zetas, the enforcement arm of the rival Gulf cartel, carried out the
attack. Reports also indicate a split between Sinaloa and a resurgent
Juarez cartel, which also could have been behind the Millan Gomez
killing.
Spiraling Violence

Violence along the U.S.-Mexican border has been intensifying for several
years, and there have been attacks in Mexico City. But last week was
noteworthy not so much for the body count, but for the type of people
being killed. Very senior government police officials in Mexico City were
killed along with senior Sinaloa cartel operatives in Sinaloa state. In
other words, the killings are extending from low-level operatives to
higher-ranking ones, and the attacks are reaching into enemy territory, so
to speak. Mexican government officials are being killed in Mexico City,
Sinaloan operatives in Sinaloa. The conflict is becoming more intense and
placing senior officials at risk.

The killings pose a strategic problem for the Mexican government. The bulk
of its effective troops are deployed along the U.S. border, attempting to
suppress violence and smuggling among the grunts along the border, as well
as the well-known smuggling routes elsewhere in the country. The attacks in
Mexico raise the question of whether forces should be shifted from these
assignments to Mexico City to protect officials and break up the
infrastructure of the Sinaloa and other cartels there. The government also
faces the secondary task of suppressing violence between cartels. The
Sinaloa cartel struck in Mexico City not only to kill troublesome
officials and intimidate others, but also to pose a problem for the
Mexican government by increasing areas requiring forces, thereby requiring
the government to consider splitting its forces €” thus reducing the
government presence along the border. It was a strategically smart move by
Sinaloa, but no one has accused the cartels of being stupid.

Mexico now faces a classic problem. Multiple, well-armed organized groups
have emerged. They are fighting among themselves while simultaneously
fighting the government. The groups are fueled by vast amounts of money
earned via drug smuggling to the United States. The amount of money
involved €” estimated at some $40 billion a year €” is sufficient to
increase tension between these criminal groups and give them the resources
to conduct wars against each other. It also provides them with resources to
bribe and intimidate government officials. The resources they deploy in
some ways are superior to the resources the government employs.

Given the amount of money they have, the organized criminal groups can be
very effective in bribing government officials at all levels, from squad
leaders patrolling the border to high-ranking state and federal officials.
Given the resources they have, they can reach out and kill government
officials at all levels as well. Government officials are human; and faced
with the carrot of bribes and the stick of death, even the most
incorruptible is going to be cautious in executing operations against the
cartels.
Toward a Failed State?

There comes a moment when the imbalance in resources reverses the
relationship between government and cartels. Government officials, seeing
the futility of resistance, effectively become tools of the cartels. Since
there are multiple cartels, the area of competition ceases to be solely the
border towns, shifting to the corridors of power in Mexico City. Government
officials begin giving their primary loyalty not to the government but to
one of the cartels. The government thus becomes both an arena for
competition among the cartels and an instrument used by one cartel against
another. That is the prescription for what is called a €œfailed state€�
€” a state that no longer can function as a state. Lebanon in the 1980s
is one such example.

There are examples in American history as well. Chicago in the 1920s was
overwhelmed by a similar process. Smuggling alcohol created huge pools of
money on the U.S. side of the border, controlled by criminals both by
definition (bootlegging was illegal) and by inclination (people who engage
in one sort of illegality are prepared to be criminals, more broadly
understood). The smuggling laws gave these criminals huge amounts of
power, which they used to intimidate and effectively absorb the city
government. Facing a choice between being killed or being enriched, city
officials chose the latter. City government shifted from controlling the
criminals to being an arm of criminal power. In the meantime, various
criminal gangs competed with each other for power.

Chicago had a failed city government. The resources available to the
Chicago gangs were limited, however, and it was not possible for them to
carry out the same function in Washington. Ultimately, Washington deployed
resources in Chicago and destroyed one of the main gangs. But if Al Capone
had been able to carry out the same operation in Washington as he did in
Chicago, the United States could have become a failed state.

It is important to point out that we are not speaking here of corruption,
which exists in all governments everywhere. Instead, we are talking about
a systematic breakdown of the state, in which government is not simply
influenced by criminals, but becomes an instrument of criminals €” either
simply an arena for battling among groups or under the control of a
particular group. The state no longer can carry out its primary function
of imposing peace, and it becomes helpless, or itself a direct perpetrator
of crime. Corruption has been seen in Washington €” some triggered by
organized crime, but never state failure.

The Mexican state has not yet failed. If the activities of the last week
have become a pattern, however, we must begin thinking about the potential
for state failure. The killing of Millan Gomez transmitted a critical
message: No one is safe, no matter how high his rank or how well
protected, if he works against cartel interests. The killing of El
Chapos son transmitted the message that no one in the leading cartel is
safe from competing gangs, no matter how high his rank or how well
protected.

The killing of senior state police officials causes other officials to
recalculate their attitudes. The state is no longer seen as a competent
protector, and being a state official is seen as a liability €”
potentially a fatal liability €” unless protection is sought from a
cartel, a protection that can be very lucrative indeed for the protector.
The killing of senior cartel members intensifies conflict among cartels,
making it even more difficult for the government to control the situation
and intensifying the movement toward failure.

It is important to remember that Mexico has a tradition of failed
governments, particularly in the 19th and early 20th century. In those
periods, Mexico City became an arena for struggle among army officers and
regional groups straddling the line between criminal and political. The
Mexican army became an instrument in this struggle and its control a
prize. The one thing missing was the vast amounts of money at stake. So
there is a tradition of state failure in Mexico, and there are higher
stakes today than before.
The Drug Trades High Stakes

To benchmark the amount at stake, assume that the total amount of drug
trafficking is $40 billion, a frequently used figure, but hardly an exact
one by any means. In 2007, Mexico exported about $210 billion worth of
goods to the United States and imported about $136 billion from the United
States. If the drug trade is $40 billion dollars, it represents almost 20
percent of all exports to the United States. That in itself is huge, but
what makes it more important is that while the $210 billion is divided
among many businesses and individuals, the $40 billion is concentrated in
the hands of a few, fairly tightly controlled cartels. Sinaloa and Gulf,
currently the strongest, have vast resources at their disposal; a
substantial part of the economy can be controlled through this money. This
creates tremendous instability as other cartels vie for the top spot, with
the state lacking the resources to control the situation and having its
officials seduced and intimidated by the cartels.

We have seen failed states elsewhere. Colombia in the 1980s failed over
the same issue €” drug money. Lebanon failed in the 1970s and 1980s. The
Democratic Republic of the Congo was a failed state.

Mexicos potential failure is important for three reasons. First, Mexico
is a huge country, with a population of more than 100 million. Second, it
has a large economy €” the 14th-largest in the world. And third, it
shares an extended border with the worlds only global power, one that
has assumed for most of the 20th century that its domination of North
America and control of its borders is a foregone conclusion. If Mexico
fails, there are serious geopolitical repercussions. This is not simply a
criminal matter.

The amount of money accumulated in Mexico derives from smuggling
operations in the United States. Drugs go one way, money another. But all
the money doesnt have to return to Mexico or to third-party countries.
If Mexico fails, the leading cartels will compete in the United States,
and that competition will extend to the source of the money as well. We
have already seen cartel violence in the border areas of the United
States, but this risk is not limited to that. The same process that we see
under way in Mexico could extend to the United States; logic dictates that
it would.

The current issue is control of the source of drugs and of the supply
chain that delivers drugs to retail customers in the United States. The
struggle for control of the source and the supply chain also will involve
a struggle for control of markets. The process of intimidation of
government and police officials, as well as bribing them, can take place
in market towns such as Los Angeles or Chicago, as well as production
centers or transshipment points.
Cartel Incentives for U.S. Expansion

That means there are economic incentives for the cartels to extend their
operations into the United States. With those incentives comes intercartel
competition, and with that competition comes pressure on U.S. local, state
and, ultimately, federal government and police functions. Were that to
happen, the global implications obviously would be stunning. Imagine an
extreme case in which the Mexican scenario is acted out in the United
States. The effect on the global system economically and politically would
be astounding, since U.S. failure would see the world reshaping itself in
startling ways.

Failure for the United States is much harder than for Mexico, however. The
United States has a gross domestic product of about $14 trillion, while
Mexicos economy is about $900 billion. The impact of the cartels
money is vastly greater in Mexico than in the United States, where it
would be dwarfed by other pools of money with a powerful interest in
maintaining U.S. stability. The idea of a failed American state is
therefore far-fetched.

Less far-fetched is the extension of a Mexican failure into the
borderlands of the United States. Street-level violence already has
crossed the border. But a deeper, more-systemic corruption €”
particularly on the local level €” could easily extend into the United
States, along with paramilitary operations between cartels and between the
Mexican government and cartels.

U.S. Secretary of Defense Robert Gates recently visited Mexico, and there
are potential plans for U.S. aid in support of Mexican government
operations. But if the Mexican government became paralyzed and couldnt
carry out these operations, the U.S. government would face a stark and
unpleasant choice. It could attempt to protect the United States from the
violence defensively by sealing off Mexico or controlling the area north
of the border more effectively. Or, as it did in the early 20th century,
the United States could adopt a forward defense by sending U.S. troops
south of the border to fight the battle in Mexico.

There have been suggestions that the border be sealed. But Mexico is the
United States third-largest customer, and the United States is
Mexicos largest customer. This was the case well before NAFTA, and has
nothing to do with treaties and everything to do with economics and
geography. Cutting that trade would have catastrophic effects on both
sides of the border, and would guarantee the failure of the Mexican state.
It isnt going to happen.
The Impossibility of Sealing the Border

So long as vast quantities of goods flow across the border, the border
cannot be sealed. Immigration might be limited by a wall, but the goods
that cross the border do so at roads and bridges, and the sheer amount of
goods crossing the border makes careful inspection impossible. The drugs
will come across the border embedded in this trade as well as by other
routes. So will gunmen from the cartel and anything else needed to take
control of Los Angeles drug market.

A purely passive defense wont work unless the economic cost of blockade
is absorbed. The choices are a defensive posture to deal with the battle on
American soil if it spills over, or an offensive posture to suppress the
battle on the other side of the border. Bearing in mind that Mexico is not
a small country and that counterinsurgency is not the United States
strong suit, the latter is a dangerous game. But the first option isnt
likely to work either.

One way to deal with the problem would be ending the artificial price of
drugs by legalizing them. This would rapidly lower the price of drugs and
vastly reduce the money to be made in smuggling them. Nothing hurt the
American cartels more than the repeal of Prohibition, and nothing helped
them more than Prohibition itself. Nevertheless, from an objective point
of view, drug legalization isnt going to happen. There is no visible
political coalition of substantial size advocating this solution.
Therefore, U.S. drug policy will continue to raise the price of drugs
artificially, effective interdiction will be impossible, and the Mexican
cartels will prosper and make war on each other and on the Mexican state.

We are not yet at the worst-case scenario, and we may never get there.
Mexican President Felipe Calderon, perhaps with assistance from the United
States, may devise a strategy to immunize his government from intimidation
and corruption and take the war home to the cartels. This is a serious
possibility that should not be ruled out. Nevertheless, the events of last
week raise the serious possibility of a failed state in Mexico. That should
not be taken lightly, as it could change far more than Mexico."

http://www.stratfor.com/weekly/mexico_road_failed_state

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[RapidRonnie]

Mexico is not on the road to being a failed state: it has been one
since the days of Porfirio Diaz, that is, if it ever was a state to
begin with.

Once we understand that we can deal with Mexico sensibly. That is,
get our fingers around the balls of the ruling elite and then squeeze
until they decamp or agree to submit to a quiet campaign of nation
building.

Mexico has a hell of a lot of oil and a low wage worker base that is
radically more in our interest to support and utilize than China.