The Power and the Money

Positive campaigning is not all that it’s cracked up to be

 The 2006 presidential campaign in Mexico was especially nasty, with television ads claiming that AMLO was the second coming of Hugo Chávez and would destroy the country if elected. Mexico, however, lacks an equivalent of the First and Fourteenth amendments and, more importantly, the U.S. Supreme Court’s interpretation of both. (Article 6 of the Mexican constitution guarantees freedom of speech, “unless it offends good morals, infringes the rights of others, incites to crime, or disturbs the public order.” Article 7 unconditionally guarantees the right to write and publish, but that is more specific than speech in general.)

The result of the election, then, was a 2007 law that prohibited negative campaigning. (Mr. López Obrador’s subsequent behavior, and whether that retroactively justified otherwise scurrilous ads, is not relevant to this discussion.) The result is an oddly anodyne bunch of ads. TV ads emphasize personality, as do the print ads from the three major parties. The PRI candidate, Enrique Peña Nieto, is also running on the Green Party ticket, however, and is using that platform to run a bunch of rather interesting issue statements:

My favorite is “Life sentences for kidnappers,” but I didn’t get a picture. Above you have a subway ad proclaiming “Pensions for all adult over age 65” and “Your place guaranteed in high school.” The latter is pretty much already true, and the former will be interesting without new tax revenue.

Below you have “No to fees in the public schools,” with a picture of an angry white man scolding a woman who only wants the best for her child:

And a related billboard proclaiming “No more fees in public schools: Truly free education.”

The end result is oddly populist to an American, but honestly no worse than the populist positive ads run by Republicans all the time. So what’s the problem? Two things.

First, the internet is unregulated. This is, I think, less of an issue than it sounds. In general, the internet is not a push medium, except for paid adverts, which are (or will be) regulated. Whispering campaigns are of course terrible, but I would need evidence to be persuaded that they are worse in the age of the internet: e.g., that they convince anyone who wasn’t already basically on-board.

 Second, negative ads can convey real information. Patrick Corcoran argues this here. It makes sense that the truly scurrilous stuff will not convince a sophisticated electorate regardless of how it is disseminated, while real bad information may find it harder to be known. That said, I am not sure how this shakes out.

What I am sure of, however, is that the Green Party has no reason to exist other than as a subsidy-collecting machine, and is very far from Green. But that is a different issue.

The 2012 election in Mexico, early musings

 On Saturday there was a massive student march against the candidacy of Enrique Peña Nieto, the PRI candidate for the presidency of Mexico.

I have been asked more times than I can remember (by friends, family, and complete strangers, including taxi drivers and bartenders who are well-aware that I am a gringo) who I would vote for in the Mexican election. As with the United States, the answer is easy. I cannot vote for Andrés Manuel López Obrador for the simple reason of his reaction after the 2006 election.

So you cannot vote for the PRD in this election. If Ebrard were the candidate, things would be different, but he is not. AMLO, no f---ing way.

Then there is Mr. Peña Nieto. Uh. Erm. Uh-huh. Next post will discuss his campaign, which is actually somewhat amusing. I will even discuss the various positions on health policy. The problem is that I do not believe that he is not corrupt. Moreover, he is a member of a party that has not abandoned corruption. This is one of the few cases where my academic research and my heart push in the same direction: institutions matter more than policies, and regardless of policies, Enrique Peña Nieto and his party will not be good for the institutions.

Which leaves us with Josefina Vázquez Mota. Were I voting in the Mexican election, she would have my vote. With little enthusiasm, sadly. But she would have it. Am I wrong? I have PRD relatives, but they are not talking to me about the election. (Baseball yes, U.S. politics yes, Mexico no.) So help me out! Am I wrong? Who should an informed Mexican vote for? 

Do U.S. agents really drive black Suburbans in northern Mexico?

 When I last tooled around the violent areas of northern Mexico, I did so in a green Infiniti. Before that, a bright red 2002 Ford Focus SVT. Why those cars? Well, they were the ones we had on hand ... but we could also be pretty sure that nobody would be gunning for us, even with Texas and California plates.

So I read this post with some incredulity. Not the story. I completely believe that the Zetas would apologetically release USDA officials that they had accidentally detained on suspiscion of being narcos. What I do not believe is that the U.S. government would actually be dumb enough to put its officials in black suburbans. Caray.

This is not to say that it is impossible to travel incognito through cartel territory. It is not hard to project the impression that you are not involved in organized crime. In fact, it is rather easy. The secret, as you can see above, is to not try to hide ... while avoiding the obvious markets of a sicario or cartel honcho. Dress like a gringo sartorially aware Argentine or Spaniard and you will likely be fine.

Divorce in Mexico

 My time living in Mexico wasn’t the only time that I found myself arguing with incredulous observers that Mexican society was changing at blinding speed. When we were writing Mexico Since 1980, I got into some epic battles with one of my co-authors over the chapter on social policy in Mexico. He turned in a draft that made it seem as if the only change in Mexican families since 1950 was the decline in fertility. The quote: “Yet despite the magnitude of these changes, Mexico remains a surprisingly stable society in terms of such fundamental institutions as the family and religion.”

I argued that we couldn’t publish that. Marriages were less stable, and with almost half of all births occuring in “free unions,” abandonment was rife. It was so clearly and blatantly untrue that Mexico was a “surprisingly stable society” that we would look out-of-touch, almost crazy. The image of Mexico as stable and conservative would have been true in 1990, maybe even 1995 — it was not true in 2008.

The final version read as follows:

There has also been a substantial rise over time in family instability. One measure of this phenomenon is the growth in female-headed households, which as a proportion of all households increased from 12 percent in 1960 to 13.5 percent in 1976, 15.3 percent in 1990, 20.6 percent in 2000, and 23.1 percent in 2005. The increase in the number of female-headed families mainly reflects higher rates of divorce and abandonment. Indeed, although still low by European and U.S. standards, the proportion of marriages ending in divorce in Mexico rose from 4.4 percent in 1980 to 7.4 percent in 2000, and to 11.3 percent by 2004. In addition, since the 1990s growing numbers of men have abandoned their families (possibly temporarily) to seek work in the United States.

A skeptical reader might argue that the rising rate of family dissolution in Mexico is a side effect of the aging of the population. The logic behind this position is that the longer people live, the more likely their marriages are to end in divorce rather than death, and so the divorce rate is increasing in line with Mexican life spans. The data, however, do not support this hypothesis. Indeed, dissolution rates have risen fastest among new families. In married and cohabitating couples that formed before 1967, there was only a 7.4 percent chance of dissolution before 10 years had passed, whereas a couple that formed in 1987 (the last year for which data are available) had a 14 percent chance of breaking up before ten years had passed.

An even more skeptical reader might argue that an increase in the proportion of “extended families” (households in which uncles, aunts, cousins, brothers and sisters, and elderly grandparents live with a nuclear family composed of parents and their children) among Mexican households indicates that the Mexican family is as strong as ever. Between 1990 and 2000 the proportion of all family households defined as “extended” rose from 20.7 percent to 26.3 percent. It is equally likely, however, that this increase was an artifact of the interaction between economic distress and rising rates of single-parenthood and couple dissolution. Indeed, in the year 2000 some 60 percent of single mothers and 28 percent of female divorcees with children lived in “extended families” (that is, with their parents).

Now comes the irreplaceable Diego Valle with data on the current state of divorce in Mexico. (Hat tip: Gancho.) The short version? Divorce is rapidly increasing, but Mexico’s divorce rate is still at around the same level as the United States in the 1950s. The catch is that with half of all birth occuring out of wedlock, the true rate of family dissolution is higher. The long version? Very worth reading.

But there’s more! Here Diego digs into the divorce figures for the Federal District (aka, Mexico City) which adopted no-fault divorce in October 2008. In a brilliant analysis, he shows that the entire increase in divorce rates is driven by couples who married outside the D.F. In fact, divorces fell for people who married in Mexico City ... the implication being that the inexorable rise in Mexican divorce rates might not be so inexorable. (Read it!)

Of course, that begs the question of why D.F. divorces fell with no-fault. Diego hypothesizes (probably correctly) that the reason was the legalization of early abortion in April 2007. “Perhaps pregnancies that previously resulted in shotgun marriages now end in abortions. And it was precisely these marriages that were more likely to end in divorce. When looking at the age specific marriage totals, the younger the bride the bigger the percentage decrease in marriages compared to previous years. But this theory doesn't explain the fall in divorces among those marriages more than a few years old.”

For those of you who don’t know, Mexico City also legalized same-sex marriage in December 2009. (Coahuila has civil unions ... but more importantly, same-sex marriages performed in the D.F. are recognized by both the federal government and other states.) Abortion, no-fault divorce, same-sex marriage ... you have no idea how happy I am that we didn’t publish that early version of the chapter.

Mexico has changed!

 When I lived in Mexico, during the late 1990s, I often found myself arguing with people over the rate of cultural change in that country. It was blinding, even in those days before the internets and all that. And the pace has not slowed.

Evidence of change is not that the woman in the white dress handed out the order in which the presidential candidates were to speak. Evidence of change is that it was extremely controversial and prompted an apology by the organizers.

That said, wags could not help but declare her the winner of the debate. And having watched it, I can understand why. Plus, Enrique Peña Nieto is so far ahead that it does not really matter. As long as he does not throw up on himself, or confess to killing his ex-wife, then he is going to win. (For more on the ex-wife rumors, see here, or for a hella show go to minute 5:30 to see a state legislator cause a giant fuss after making the accusation on the floor of the Mexico state congress.)

A map of violence

 This interactive map of the violence in Mexico is amazing and incredibly useful. You can even download the data! Thank you, Mr. Del Valle.

Now if only I can find the equivalent data for the decades before 1990. That would be something. I still find myself astounded that nobody in Mexico seems to have bothered to compile mortality data at the county level before then.

Here is a short and useful summary of what we know about the MOCOs, although its recommendations are so vague as to be nearly useless. The most important piece of information is that serious attempts to estimate the export revenues earned by the cartels in 2011 ranges between $4.7 and $8.1 billion. The U.S. government, on the other hand, makes estimates between $13.8 and $29 billion. The U.S. government appears to be wrong.

The market for stolen oil

 “In a reversal of the classic Western movie, Mexican criminals have sought refuge with their ill-gotten gains by crossing the Rio Grande to the North, where the Mexican government has no authority to follow.”

—Pemex, in a suit before the U.S. District Court for the Southern District of Texas

So, stolen oil from Pemex makes its way to the United States. How, you ask? It’s a reasonable question. Oil has a high value-to-weight ratio, but cocaine it isn’t. You can’t smuggle economically-viable quantities in jerrycans. Plus, if you’re moving crude oil or natural gas condensate, you can’t then flog it on a streetcorner. You need to sell it to a refinery.

The answer: give the refineries plausible deniability. Fake paperwork to get it over the border, then sell it to a reputable middleman. How did this work?

On May 29, 2011, we got the answer, when Pemex filed a federal lawsuit in the southern district of Texas against a group of American refineries for knowingly buying stolen natural gas condensate.

Here’s the value chain. The condensate is produced in Mexico’s Burgos gas field, located near the U.S. border across the northern stretch of Tamaulipas, Nuevo León, and a little bit of Coahuila. Pemex produces gas from 2,827 wells in the field. It then pumps the gas to 150 collection stations. Pipelines then transport the gas and condensate (the liquid byproduct from gas production, which can be used in oil refineries) from these 150 collection stations to 52 transfer and delivery systems, which are basically small pipeline networks. After collection at the transfer systems, Pemex transports the condensate by pipeline or tanker truck to a storage facility near Reynosa, Tamaulipas. From there, the condensate goes by pipeline to the Burgos gas processing center or tanker truck to a refinery in Cadereyta, Nuevo León.

The Zetas intercept the oil in one of three ways. The major one is to simply tap into the transfer and delivery systems. (To do this, the Zetas needed to build their own pipelines, a pretty impressive accomplishment.) The secondary one is to hold-up the tanker trucks on their way to Reynosa. The final one is to kidnap Pemex officials and force them to divert condensate.

Now, the Zetas can easily fence refined products inside Mexico, but they can’t sell condensate: Pemex operates the only refineries! So they have to move it to the U.S. According to the lawsuit, the stolen condensate was moved by tanker truck (think about that for a moment) to the border. Before crossing, however, the Zetas transferred the stuff to newer trucks that meet U.S. regulations. The drivers then presented forged export documents, sometimes mischaracterizing the condensate as naphtha. They would then sell the stuff to the U.S. defendants.

Big Star and F&M Transportation bought the oil from Ygriega Energy Corporation of Edinburg, Texas, whose owner, Arnaldo Maldonado, has already pled guilty to felony conspiracy to receive and sell stolen goods. F&M transported the condensate, in addition to buying it. Superior Crude also transported stolen condensate, and brokered sales of the stuff. (Pemex fingered Superior because a man named Donald Schroeder coordinated the shipments ... who has also pleaded guilty to felony conspiracy to receive and sell stolen property, specifically Mexican condensate, in his role as president of a company called Trammo Petroleum.) Finally, TransMontaigne operated the storage facilities in Brownsville which the stolen condensate passed through on its way to the final buyers. Finally, Western Refining bought condensate from companies like Continental Fuels, whose president confessed to trafficking in stolen goods.

In other words, according to Pemex, Big Star, Superior Crude and F&M “actively and knowingly participated in a conspiracy to import and market the stolen condensate in the United States.” TransMontaigne, meanwhile, stands accused of negligent participation, since Pemex claims that they should have realized that the goods passing through their hands were illegitimate. Western Refining is accused of no wrongdoing, but Pemex says that it is liable for all its transactions involving Mexican condensate. Recently the company has moved to add subsidiaries of ConocoPhillips and Shell to the lawsuit.

Now here’s the good news: on the U.S. side of the border, several people are going to jail and the rest of the companies involved in buying the stuff are facing a serious civil suit. In short, it is likely that the United States legal system will soon enough shut down the export of stolen Mexican crude and condensate.

But there’s also bad news: there is money to made in stealing refined products and selling them inside Mexico. Lots of money. In fact, as Patrick Corcoran has pointed out, the fact that pipeline-siphoning is shifting to Sinaloa (where the lines carry refined products) is a sign that other groups besides the Zetas are getting into the act. (In this case, likely El Chapo’s people.) The U.S. government can and will help. But it can’t change the fact that Mexico is now a lucrative market for its own petroleum production. Keeping organized crime from taking more of that market is something that Mexico will have to solve on its own.

David Shields got the solution to the problem of internal oil theft right when he wrote:

“It’s very easy to solve this. Total control over the tanker trucks. Total control over every liter of gasoline from the refinery to the gasoline station. That’s the way it was 15 years ago. You move the army in and take control over all the distributors by making sure they have a contract for every single movement of gasoline around the country.”

Where I would disagree with Mr. Shields is that the solution he proposes is far from easy.

Organized crime and oil in Mexico, some numbers

 Organized crime in Mexico is spreading beyond drugs. The cartels have a comparative advantage in transporting and smuggling high-value illicit product. So why not oil? Organized crime can threaten employees, knock over trucks, defend pipeline siphons, and move stolen goods across borders. Pemex is a hard organization to shake down, but a much easier one to steal from.

It turns out to be hard to get an idea of the scale of oil theft. According to Patrick Corcoran, Pemex lost about 3 million barrels of hydrocarbons last year, up 52 percent on 2011. This caused losses of roughly $500 million to the company. That number is large. It is not large relative to Pemex revenues north of $100 billion, but it is large relative to the estimated revenues earned by Mexican Organized Crime Organizations (yes, MOCOs), which is in the $7 billion per year range according to the Rand Corporation.

It is also quite possibly an underestimate. The Excelsior article that broke the story is vague on whether the figures are through Novemeber or from November. If the latter, then total losses could range as high as $3½ billion. Those numbers are possible. Last year the Wall Street Journal, citing Pemex’s CEO, estimated that criminal gangs stood to earn $750 million from oil thefts in 2011. Reuters reported $600 million in losses for the first half of 2011. David Shields estimated (although I am not sure on what basis) losses between $2 billion and $4 billion.

So what do we know? Page 172 of Pemex’s 2009 SEC filing estimated losses of 5.0 million barrels in 2008 and 3.1 million barrels in 2009. The breakdown between refined products and crude was not given. In its 2010 form 20-F, (on page 173 of a report filed in 2011) Pemex gave a little more detail. It estimated losses of 0.9 million barrels of diesel and gasoline in 2009, 1.4 million in 2010, and 1.4 million between January and May of 2011. It also reported losses of crude and condensates of 1.4 million barrels in 2009, 2.3 million barrels in 2010, and 2.0 million barrels between January and May of 2011. (For comparison, the amounts lost in Jan-May 2010 came to 0.3 million and 0.6 million respectively, so the increases are larger than they might seem.)

Using numbers on pages 4 and 5 of Pemex’s 2011 statistical yearbook, it is possible to calculate the gap between Mexico’s domestic supply (production + imports − exports) of refined products and its domestic sales of refined products. (Before 2006 the definitions were different, effectively overstating exports: for that reason, sales were consistently larger than supply.) The excess of supply over sales rose from 4.4 million barrels in 2007 to 9.5 in 2008, 10.6 in 2009, and 31.8 million in 2010. I would assume that most of that is stockpiling, non-theft losses, or refined products used as inputs in petrochemical production, but the trend is ominous.

Again, however, it should be emphasized that the reported losses are not large relative to Pemex production. In 2010, the  company produced 516 million barrels of refined products and 1.1 billion barrels of crude and condensate. That would make theft equal to about 0.3% of domestic production of refined products and 0.2% of crude and condensates. The scary thing is the trend, not the level.

What can be done? As Patrick Corcoran points out, a lot of the stolen oil is destined for the United States. And that raises a possibility for the next post, which involves some of the most entertaining legal documents that I have ever had the pleasure to read.

Monterrey is not an American city

 Alejandro Hope suggests that low population density may be a cause of police troubles in northern Mexico. Hope uses Monterrey as an example. I am here to say that said hypothesis is almost certainly incorrect, simply because Monterrey, Nuevo León, is rather densely populated. Monterrey is underpoliced, but the problem is not the city’s land area.

It is fairly common for both Mexicans and Americans to comment about the Americanness of the city of Monterrey. And in some ways, they’re correct. Until sometime in the 1990s Monterrey was more culturally American than the country’s other major cities. (The rest of the country liberalized, dramatically; Monterrey did not become more conservative.) It was also much more prosperous, and its infrastructure was rather better developed. It also had less violent crime, certainly less than Mexico City. Other than the crime and the culture — Monterrey is today much more violent and much more old-fashioned than Mexico City — these differences still hold, albeit rather less markedly.

That said, Monterrey is not in Texas. The the city sprawls much less than any American equivalent. This might not be immediately obvious to the casual visitor. Public transportation at the airport can be called inconvenient at best, and the suburbs of Apodaca sprawl, with big box stores and parking lots. Nonetheless, it is true. The houses are much smaller. The informal settlements are densely-packed. The freeway network is extremely sparse, and prone to congestion. Car ownership has risen dramatically, but is still low by American standards.  

In short, metropolitan Monterrey has a fairly high population density: 4,334 people per square kilometer, spread out over only 894 square kilometers. The 6,680 square-kilometer number used by Hope is based on county boundaries, not the actual built-up area. The same applies to Mexico City and Guadalajara, both of which are much more densely populated than county boundaries would suggest.

Of course, the same also applies to most American metro areas: by county boundary, Los Angeles stretches all the way to the Nevada border and is mostly empty desert. There is a lot of empty space out there.

When you rework Hope’s numbers, you get the following:

	Population	Area	Density	Police	Police per 1,000	Police per km
Monterrey	3,875,000	894	4,334	8,717	2.2	9.8
Mexico	19,460,000	2,020	9,634	141,261	7.3	69.9
Guadalajara	4,400,000	699	6,295	11,574	2.6	16.6
New York	8,175,133	783	10,441	36,000	4.4	46.0
Chicago	2,853,114	606	4,707	12,244	4.3	20.2
Boston	617,594	232	2,660	2,056	3.3	8.9
Los Angeles	3,792,621	1,302	2,913	9,925	2.6	7.6
San Antonio	1,327,407	1,067	1,244	2,000	1.5	1.9

(Note: the above chart does the same apples-to-oranges as Hope, by comparing Mexican built-up areas with American central cities. Since San Antonio and to-a-lesser-extent Los Angeles have large swathes of empty space within their municipal boundaries, the comparison makes them look less dense than they actually are.)

Monterrey still looks underpoliced compared to New York and Chicago, but not compared to most American cities. It has a per capita coverage somewhere between L.A. and San Antonio, and a geographic coverage in the same range as Boston. If one makes the assumption that what Monterrey needs is as many police per area as New York City, you would need to hire an additional 32,386 officers. That is a big number, but it is quite doable, and much less than the 307,280 implied by the county boundaries.

This all assumes, of course, that one thinks that more police officers is part of the solution to Mexico’s crime problem. I am not convinced, although I doubt that it would hurt ... but that it a much longer discussion.

Organized crime and a research fail in Mexico City

 So I’m in Mexico City at the moment. Why am I here? I’m looking for county-level homicide data back to 1950. Thus far, I haven’t found it. INEGI, the national statistics agency, didn’t have it. The Instituto Nacional de Estudios Penales didn’t have it. The health ministry didn’t have it: that last was a surprise. Thus far, a bust, which has me annoyed because the other bit of data collection — finding the times and places of PGR and Operation Condor actions — has proved less hard.

Bah. It is enough to drive one to purchase and smoke a good Cuban cigar. For $3.87. Which would be, in 1913 prices, 17¢. A bit more than a good five cent cigar, but not too far off. It is annoying. Unless I have some data collection luck, my next big project now looks to be French nuclear power instead of a history of violence in Mexico. Not that there’s anything wrong with either one! One is a form of energy that (absent breakthroughs) needs to be developed around the world in order to avoid catastrophe; the other threatens one of the great countries of the world.

The Revista magazine recently ran an issue about organized crime in Latin America. (Warning: the link will only work until the next issue comes out.) There is a piece by yours truly on the business strategies of Mexican cartels. (I may post a condensed version on this blog.) Morris Panner, a very smart guy, wrote another good piece that illustrates how far organized crime has sunk its tentacles into Mexican life. (The title is a bit misleading, however; the article is not about crime business models.) A third piece gives a nice short view of life in Ciudad Juárez.

For some hope that might be realized in the short-term, read this piece by Gabe Aguilera and Viri Rios about the keys to reducing violence in Mexico: the tactical recommendations are well-worth following. There is also a very nice piece warning Mexico that it might want to think twice about adopting models that worked in Colombia. The reason being that they are, you know, very different countries. (My wife had some very cogent observations about law-and-order in Colombia that I will try to remember to blog about in the near future.) And everyone needs to read more about the Zetas and Guatemala, a country that will (with Honduras) start filling headlines in a newspaper near you, or whatever insane electronic thingcrappy the young people are using.

The rest of the issue is also very good! If you have any interest in the violence spreading south of the border, go read it.

While I am here, I’d like to make a plug for Grits and Tamales, a blog about life in the deep south, published by a compa from Los Angeles. (Deep South meaning the one inside the United States, not Tierra del Fuego.) I know this blog has Canadian readers. I love you all and your country, but trust me, Prince Edward Island to Brooklyn has nothing on East L.A. to Montgomery, Alabama. Recommended. Especially as someone who has spent the past week gorging on tacos al pastor, enchiladas con mole, cochinita pibil, chilaquiles (verdes and rojos!), caldo tlalpeño, cebollitas, and all the other good stuff that is pretty much impossible to get outside of southern California, a few parts of Texas (Tex-Mex is awesome, and eaten by most Mexican-Americans in the state, but it is not Mexican food), and that truly awful taquería on East 117th Street and First Avenue in the old neighborhood down the block from Patsy’s.

(Side note: the miracle of Google tells me that Eric Asimov reviewed la crapola taquería for the Times. Which has gotta say something about the pathetically small number of taquerías in NYC.)

Anyway, regardless of the review, it is a bad taquería. But is bad in the way that lousy taquerías in Mexico City are bad, and thus I highly recommend it should you find yourself in Manhattan jonesing legitimate Mexican street food. Californian and Mexican readers take note. If, however, you should find yourself with the same jones, but be looking for something more upscale, I give this place a conditional recommendation. Why conditional? Well, my dearly-departed ma knew the owners, and we used to eat there all the time, and it was excellent. But ... I have not been there since 1988. So you pays your money and you takes your chances.

Oh, and since I have friends from the Deep South who still harbor suspicions about us effete academic liberal not-quite-white folk from the coasts, lemme give you this post from Grits and Tamales. God bless you Al Pacino, another boy from the old neighborhood.

The Sicilianization of Mexico; this time it’s personal

 With the events in the Middle East and North Africa, let’s not forget about northern Mexico and its problems with organized crime. It is no longer just about drug trafficking. My friend Gancho reports both a study from Cancintra, Mexico’s most important business federation, and a personal experience:

An influential Mexican business group says that 10,000 businesses closed last year because of security problems. This is a pretty good reflection of the pernicious developments in the Mexican underworld over the past five years, even beyond the rise in the murder rates. It's not the spike in killings that made these businesses close, but, the group says, kidnappings and extortion. This is, in that sense, a qualitatively different challenge.

This also doesn't measure the businesses that never opened because of security concerns. I actually had an idea for a street-side food-stand during my last six months in Torreón that would have surely made a killing, and in the process also given me the incredible pleasure of telling my horrid boss that I was quitting due to a more compelling opportunity to sell sandwiches on the side of the road. The plan was taking shape. I talked to other people who'd done similar stuff, started to build a client base through friends and acquaintances, put together the figures giving me a rough idea of what my profit margins would be, designed the portable grill set-up I needed and talked to a guy who could build it for me, and scoped out the space where I was going to set up shop. In short, I was ready to go. This close. Then, the daughter of a successful restaurant-owner a couple blocks from me was kidnapped and murdered by an organized crime group and the Oxxo that was to let me use the parking lot for my cash cow was held up at gunpoint. Suddenly, being out on the street every night with lots of cash seemed less attractive, so I reluctantly deferred the idea to a later date.

For a time, it seemed as though the criminals had a modus vivendi with big business. A few months ago, a principal at a major security firm in Mexico assured me that was true, as did the head of a major business group. But the truth is that Mexico’s economic future lies as much with its small and medium businesses as it does with its major companies. So the costs of extortion are serious, even if they don’t affect large companies. Moreover, it’s only a matter of time before the extortion spreads ... if it hasn’t already.

While I’m here, let me add that the people who told me about corruption in Immigration and Customs Enforcement (ICE) and along the border were recently indicted for running guns into Mexico. The irony? Here’s what they told me (more or less, I paraphrase) when I wondered why corruption wasn’t a problem on the U.S. side: “The difference is that while you get a lot of corruption on the American side, it’s all at the individual level. Once you get two officials conspiring, you’ve got two officials who are going to be caught.”

In a bit of good news for Americans worried that the disorder might cross the border, it looks as though they were right!

Pants on the ground! Pants on the ground!

 It has been a little harder to keep up the blog than I had thought. Work is quite pressing. But every so often, something comes up that the rest of the internets seem to be ignoring. So, in the interest of showing how Boston is changing, I would like to mention that Sunday was the fourth annual “No Pants Subway Ride,” in which people ride the T without any pants.

Of course, as you might expect, the “No Pants Subway Ride” didn’t start in Boston in 2007. It started in New York in 2002, and has since gone international. An example of the influence of the internet! I can hear some of you shouting. Well ... probably not. I mean, I’m sure that this idea in particular spread via the internets, but anyone familiar with the 1960s will find lots of similar events, and let’s not mention the decade after that one. Moreover, the participants physically rally before removing their pants. So please no conclusionamating about the awesome marveliciousness of our new interlinkeded planet. 

It isn’t really a surprise to find that it’s spread to Boston ... Boston has a giant 250,000 person college town laid atop the real city of 1.7 million. While Boston itself is not the sort of place that would smile upon pantless T-riding, the college town appended onto it certainly would. So no surprise there. And it has also spread to such unsurprising places as Philly. After all, the city that celebrates Mummer’s Day is not going to have a problem with pants-removing on the Orange Line. 

I have to admit that it was a bit more unexpected to find that it had spread to the Mexico City. But when you think about it, that reaction makes no sense. The D.F. long ago left behind its cultural conservatism. 

My excuse is that the rapidity of the cultural changes in Mexico between 1990 and today have left me reeling. Still, the United States changed even more between 1960 and 1980. So it is far from unprecendented. And why wouldn’t the chilangos take advantage of the opportunity to ride the subway without any pants?

My worry that it presages the end of Mexico’s unofficial ban on shorts.

Here is a much better photo of the Mexico City event, courtesy of El Pinche Holandés:

 

Invade Mexico?

 I’ve heard second and third-generation Mexican-Americans in Manhattan and El Paso call in frustration for the United States to invade northern Mexico. I did not expect to hear it from the Governor of Texas. (Hat tip: Gancho.) This is the same guy who has called for secession, and in the linked interview he doesn’t, well, come across all that well. “Shermanesque? Help me on that one,” said Governor Perry. When told that it meant that if nominated he wouldn't run, and if elected he wouldn't serve, he came back with, “How about Perryesque?”

 

But Governor Perry’s record of odd statements doesn’t make the idea less worth debunking. First, the U.S. is not menaced by what’s happening across the border. Second, while the U.S. Army is increasingly designed around counterinsurgency, that is not quite the same thing as policing, and it is hard to see what the soldiers would actually do. Conduct investigations? Arrest malefactors? Patrol streets? I’d favor allowing U.S. law enforcement personnel to operate in Mexico, but when Perry says “Any means we can to run these people off our border and to save Americans’ lives, we have to be engaged in,” you get the impression that he means something more expansive. Like a free-fire zone? It isn’t clear. Finally, well, Perry didn’t call for American troops to help reduce violence; he called on them to “defeat” the cartels. What does that mean? The complete disappearance of organized crime in northern Mexico? Well, by that yardstick, organized crime is undefeated in Texas.

In short, a non-threat, fought with unclear tactics, for a vague goal.

The unbearable lightness of Mexican law-and-order spending

 Saturday is the official centennial of the Mexican Revolution. In its honor, Aldo Musacchio and I will be giving a pair of short talks at the Rockefeller Center for Latin American Studies. ¡Viva la Revolución social, compañeros!

 

Of course, a big part of the talk will be dominated by crime. Yesterday, the Calderón administration announced that the judiciary will receive a 10% boost in its budget ... but also 10% less than they had requested. Why is this a problem? Well, the proximate issue is that the country was going to open 71 courts to alleviate the current strain on the judicial system that will now not be opening. That’s a problem. It’s a worse problem in the context of the recent judicial reform, which introduced oran trials (as in the United States) and was designed to speed up the wheels of justice ... but which will now not be fully implemented.

 

It gets worse: Congress cut the budget for the Procuraduría General de la República (PGR) and the Secretaría de Seguridad Pública (SSP). The PGR is the nation’s chief prosecutor, while the SSP runs the federal police and prisons. How was this justified? Listen to Luis Videgaray: “Neither the budget of the PGR nor the SSP was cut. What was done was a cut in running costs, in the government’s bureaucratic expenditure, that had a marginal effect in all agencies. But I can guarantee that the President’s proposed budgets for the PGR and SSP remained intact.”

Uh huh. Look at the above graph. Mexico spends less than a third of the United States (at all levels of government) on courts, police, and prisons. Even if you say that every single bit of Mexican defense spending is in effect spending on law-and-order, Mexico spends less than half of its northern neighbor. It should be spending two or three times as much, maybe more. It is crazy. In fact, when you do finally read about a serious operational plan to reduce violence (courtesy of Gancho, who provides a translation and some wise commentary) it turns about to be an extremely labor-intensive operation ... and one which would benefit from having courts to prosecute the offenders, and reliable prisons to hold them. Moreover, it would benefit from a separate police force dedicated to monitoring the men on the ground, and higher salaries all around. Frex, the vetting process for police is ridiculously incomplete.

But sadly, the low spending is also understandable. Even with the recent tax reform, Mexico collects barely 12% of its non-oil GDP in taxes. At the same time, oil production is declining. U.S. help could fill the gap, but current levels are risible.

Can organized crime be combatted at such low levels of public spending? In the absence of serious tax increases, or massive American aid, the only thing I can say is: “I hope so.”

Juárez’s violence in geographic perspective

 Violence in Ciudad Juárez jumped around 1993, as the Colombian monopoly broke down and the domestic retail market expanded. The city quickly developed a reputation for lawlessness; every time I visited it back in the 1990s or early 2000s, my mood could be charitably described as “edgy.” 

Yet, as Diego Valle points out, its reputation was undeserved. He compared homicide rates in three cities: Juárez, Toluca, and the Mexico City borough of Miguel Hidalgo. Toluca is the capital of Mexico State, about an hour to the west of the national capital, and it was a place where it would never have even occurred to me to be worried about violence. Miguel Hidalgo contains some of the nation’s richest neighborhoods, and is pictured above. Carjackings and muggings were a threat, but it was not someplace where fear of crime was particularly vivid, at least not for me personally. 

 

And what do you know? Until the recent explosion, both were more violent than Juárez. The first implication, as Diego argues, is that what is going on now in the northern cities truly is something new, and not simply the extension of an ongoing trend. The second, well, pace this comment, is that perceptions and reality can greatly diverge, particularly in terms of violence. Other thoughts?

Would legalization reduce violence in Mexico?

 Legalization of marijuana is now on the table in Mexico, even if action seems unlikely. It’s also on the table in California, where the polls are much harder to read. (Respondents seem much more likely to tell a robopoll that they plan to vote for legalization than they are to tell a human pollster. That difference opens up the possibility of a sort of reverse Bradley effect.) I think it’s a long-overdue idea. But would it help the violence?

 
There are some reasons to think not.

(1) If you legalize distribution in California, without legalizing supply, you haven’t done much to cut into the cartels’ profits. You might make things worse.

(2) If you do cut the cartels’ profits, that might cause them to move into other lines of work — extortion, and extortion — which would have the perverse effect of increasing violence and further Sicilianizing northern Mexico. A lot depends on the reason for the Dell effect. If the uptick in violence after a PAN election is fighting over drug routes, then legalization would help. If the uptick in violence is because the gangs move into other things when the PAN makes their life difficult, then legalization would cause violence to jump — unless the other thing is marijuana retailing. To be frank, it seems unlikely that the gangs are fighting over the control of retail marijuana sales.

(3) Finally, nobody is talking about legalizing heroin, cocaine, or methamphetamines.

In short, while I think that full legalization of marijuana is good policy, I am skeptical that it would halt the violence. And I fully agree with Gancho’s take.

Border effects

 From Gancho, more evidence of the Sicilianization of northern Mexico. “In the face of the wave of violence afflicting the nation, bishops from various parts of the country, principally the north, have asked the Catholic hierarchy to avoid public religious ceremonies at night, in order to avoid putting worshippers at risk.” The article quoted one priest: “They [organized crime] use all sorts of ruses to extract money and extort from priests. When extorsion takes place, the bishops don’t admit it. There haven’t been kidnappings, but there is a lot of extortion. Only we don’t have any written documentation, each parish keeps its own records, but they talk about it.” Nuevo León, meanwhile, has created yet another police force to fight organized crime. It has more guns, but as Gancho points out, there is no evidence that they are going to be any more immune from corruption. Finally, in addition to yet another narcobloqueo in Monterrey, we’ve seen the second car bomb in the cartel war, this time in Ciudad Victoria. Nobody seems to have been hurt.

I want to repeat that there is no sign of the violence spreading across the U.S. border. The New York Times publishes articles under the series name, “War Without Borders” ... but when you read the articles, they say the exact opposition of the implicit argument in the series name. Consider this story. A violent Mexican drug fued in San Diego! Oh my God!! Except, well ... the SDPD pretty well wrapped up the oddly-named “Toothpicks,” who only managed to last as long as they did by not going after anyone who wasn’t neck-deep in crime themselves. Or consider this one. Corruption in the ICE! Except, once again, the corruption has a long history with no ill effects. “I do think that the public, for a while at least, needs to be assured that who we have at the border are 100 percent individuals of integrity,” said the judge in the corruption case highlighted in the story. Maybe the public does, but those who work in law enforcement do not.

There is a long economic literature on border effects. National borders seem to matter a lot, even when you might not think so, such as inside the Eurozone. (Catalonia, frex, trades a lot more with the rest of Spain than with France or Italy. The single market and EMU reduced but did not eliminate the effect.) Not only do borders retain their economic significance, even when governments try to open them, they retain an even larger political significance. Strong governments in Syria, Jordan, Saudi Arabia and Kuwait have kept a lid on the absolute chaos in Iraq. The U.S. has a stronger state than any of those countries, and the Mexican crime syndicates have far fewer incentives to extend the violence than did the Iraqi insurgents.

In short, there are many reasons for Americans to worry and worry greatly about the Sicilianization of Mexico. The fear of car bombs and hit squads in American cities is not one of them.

Social science and Mexican organized crime: PAN victories, smuggling routes, and death

 What caused the explosion of violence in northern Mexico? Homicides ticked up in 2007 and jumped in ‘08 and ‘09. One common story is that the Calderón administration provoked the violence by its decision to crack down on organized crime right after its accession to office in December ‘06. The causal mechanism is unclear, but it something you hear cited a lot.

Now Melissa Dell, a brilliant student at MIT, has crunched the numbers to test the hypothesis that the national crackdown may have in fact incited the violence. She took daily county-level data on drug-related homicides (generally called “executions” in the Mexican data). She then tested a simple, but not intuitive, hypothesis. If the government crackdown prompted more violence, then we should expect drug-related violence to jump after a county elects a mayor from the Partido Acción Nacional (PAN). The reason is that Calderón’s party is the PAN. Not only did the federal PAN spearhead the assault on organized crime, but PAN candidates generally campaigned on a “tough on drugs” platform, and one would expect PAN mayors to be better able to coordinate law enforcement with the PAN federal government. 

So what does she find? Well, here’s a picture:

Violence jumps about 15% after the election of a PAN mayor. The dotted lines are confidence intervals, so you can see that effect is statistically significant. The violence does not occur after the election, but rather the inauguration of a PAN mayor. In other words, the expectation that a Panista will take office does nothing, but the actions the new administrations take after gaining office do something. (Editorial note: I decided to capitalize “panista” when writing in English. I also translated “municipio” as “county” rather than “municipality,” since they are akin to American counties in size. Mexico does not have incorporated municipalities in the American sense.) 

Melissa also used data on shootouts between cartel members; they jump after a PAN victory. In addition, reported narcomantas jumped 63% (with a standard error of 32%) in places where PAN just barely won compared to where they just barely lost. Narcomantas are ... well, a photo of one in Torreón is to the left. 

The jump in drug-related killings does not happen if a PRI or PRD mayor wins.  (The PRI is the Partido Revolucionario Institutional, the old ruling party from Mexico’s bad old days of dictatorship. The PRD is the Partido de la Revolución Democrática, the social democratic opposition party.) It might be that PAN mayors are more corrupt that their Priísta or Perredista competitors, but that seems unlikely. In fact, the 2008 county-level data she analyzed showed no difference in mayoral corruption (as reported by federal law enforcement agencies) across counties governed by different parties. Moreover, in theory one would expect corruption and violence to be substitutes, not complements ... although that is really a hypothesis to be tested rather than an assumption upon which to base a model. She has some evidence that extortion threats against county governments jump after a PAN victory, but it is relatively weak. 

Still, her results follow what one would expect. The effect is bigger in border states than elsewhere. It is also bigger in drug-producing states. Better still, it’s bigger in counties along trafficking routes. The cool thing? She derived the routes herself. In her words, slightly paraphrased:

1. Central places are those that are relatively costly to go around when transporting drugs from producing counties to the U.S. border. 
2. For each producing county calculate the least cost path to the nearest U.S. border crossing. This path can pass along any edge in the Mexican road network. Calculate this over all counties for a baseline measure. (Least-cost routes are calculated solely on geographic distance to the border.)
3. Repeat this calculation, but do not allow the paths to pass through the county. Calculate this for each county.
4. The centrality of a county = (2) – (3). The higher the value, the more central the county, and the more executions should jump after a PAN victory.

And lo, she found it holds up as expected! (She controlled for other factors that one might expect to be correlated with centrality.) Executions jump everywhere if the PAN wins, but they jump more in central counties. Now, executions are a politically-derived variable. (How do you know if a homicide was drug related?) The chance of a homicide occurring in a county jumps about 7% per month after a PAN victory (and overall homicides leap 49%) but there is a lot of variation and the result is not quite statistically significant. So it is possible (although upon first reading of the results unlikely) that PAN mayors are simply more likely than opposition mayors to classify homicides in their county as drug-related. 

In short, there is some evidence that the PAN decision to crack down on organized crime triggered the upsurge in violence. Why it would trigger the upsurge is still not clear, and I should point out that her results are preliminary and could change. But it is awesome research, and it is, I think, a great example of how social science techniques can be applied to some of the realest of real world questions.

We would love to hear critiques and suggestions. We would also love to hear what you think the policy implications, if any, might be.

A hypothesis about corruption from a police officer

 Traffic is spiking, but no one wants to comment. That seems appropriate, oddly enough.

If Juárez is so dangerous, why is El Paso so safe? And it really is safe. Statistically, yes, but the place also feels safe. The worst neighborhoods are quiet. Yet it is clear that massive amounts of drugs pass through, and one might expect that the large population of Mexican-born immigrants (24% — and that does not count the American-born minor children of foreign-born parents) would provide fertile ground for extortion rackets. The short answer, of course, is that the police in El Paso function as police. Gangs can’t operate with the same impunity. 

But why doesn’t corruption rapidly sap the effectiveness of the law enforcement agencies? In fact, they are corrupt. According to the FBI, “in fiscal year 2009, there were over 100 arrests and over 130 state and federal cases.” But one cop (from New Mexico, talking about the American ICE) said to me one very interesting thing. “You get a lot of crooked cops. What you don’t get is two crooked cops. Two officials try to collaborate, and the result isn’t two richer officials. It’s two federal prisoners.”

In short, the hypothesis isn’t that individuals in the U.S. show any more rectitude. Nor is the hypothesis that individual enforcement is particularly effective. It’s that individual acts of corruption don’t matter, because they don’t corrupt the efficacy of the organization. Orders still get carried out, information does not get systematically passed to the wrong people, and the state functions. What would matter would be systematic corrupt conspiracies among officials, and that is what the United States is very effective in preventing. (Of course, there are examples of systematically corrupt American agencies: the 77th Precinct in the 1980s, or the Rampart Division, or the NOPD today. According to the hypothesis, however, those episodes are soon smoked out because it is too hard to keep corruption conspiracies secret, and the conspirators have too many incentives to rat each other out.)

I don’t know how to test this. Thoughts?

The intensity of insurgency, but Mexico faces no insurgency

 Mexico does not face an insurgency. Repeat: there is no insurgency. Thinking of the gang violence as such, no matter how intense it gets, is somewhere between counterproductive and stupid.

I can see how a casual observer might miss the thesis of this post. After all, there are soldiers and checkpoints everywhere. The above-pictured soldier was a pretty nice guy, I have to say. We had a good conversation about soccer, baseball, the U.S. presidential election, how basic training sucks, and the fact that the U.S. does not have conscription while his men slowly dismantled and remantled the interior of our car. And he is  facing violence levels akin to war. But Mexico is not in a war, because the gangs do not have any insurgent-like goals ... at least not by any useful definition of “insurgency.”

This point seems to be increasingly lost north of the border. Yesterday I had an interesting conversation with a recent veteran of Gulf War II. (He served as an officer south of Baghdad in 2006-07.) After joking — truthfully! — that I had inadvertently traipsed through a combat zone as intense as the one he faced, he called the violence an “insurgency.” We then had a talk about the big difference between the Mexican cartels and Iraqi insurgents. (See the paragraph after next for that difference.)

Our discussion reminded me of a link that Andrew Reeves sent me to an article in the Small Wars Journal called “The Spiritual Significance of ¿Plata O Plomo?” That article hyperventilated, and you can’t make this stuff up, that “this insurgency has at its basis a spiritual, if not religious, component that threatens the underlying foundations of our modern Western value system.” In this view, not only do the drug gangs want to displace the state, they want to displace the Enlightenment!

Organized crime in Mexico does not want to displace the state. It does, of course, want to end the state’s monopoly on legitimate violence, because you can’t run an extortion racket without that. But it has no desire to replace or destroy the state. The capos certainly would like to subvert the state, and failing that, they’d like it to leave them alone. But that’s it. This is why Ciudad Juárez can experience Baghdad-high levels of violence (and I owe a favor to Anon for pointing out that misplaced decimal point) without experiencing Baghdad-like breakdowns of public service. If you define an “insurgency” as any group with a desire to break the state’s monopoly on violence, then most organized ones become insurgents and the word loses all its usefulness.

The article on the putative religious motivation behind the cartels, meanwhile, is head-scratchingly bizarre. Yes, La Familia uses initiation ceremonies. So do all gangs. Hell, so does the U.S. Army. That’s how you build loyalty. As for the weird-ass tattoos, they show your macho and spook the uninitiated. Ditto the use of increasingly horrible torture to intimidate. This is not deep psychological analysis. The piece is so over the top hysterical that I don’t even know where to start.

 

I recommend the New Yorker piece on organized crime in Michoacán if you want a serious look at how La Familia operates in its state stronghold. As you can see, while violence has ticked up in the state (and the mafia has done crazy things, like toss grenades into an independence day celebration) it remains in the level of merely “high,” barely above Louisiana and below Puerto Rico, far less than nearby southern states which have been traditionally violent places, drug violence or no drug violence. It is even less than the state itself experienced in the tumultuous 1990s, despite all the violence associated with the federal attempt to break the mafia.

Horribly violent this is. Bad for Mexico this is. But an insurgency this is not. Thoughts?

Narcoterrorism

 I’ll admit that I don’t like the term “narcoterrorism,” but as Gancho argues, “terrorism” is a pretty accurate term for the recent mass attacks in Torreón. Here is what he had to say:

The mass killings in Torreón have gone largely unnoticed, but 40 innocents have been killed this year not because of any gang affiliation, but because they chose to have a drink in a certain venue. The targets were the civilians. The goal of the attacks was to kill them by the bunch, and to scare the rest of us away from certain bars. And it’s worked; there are basically no nightclubs open in the town.

The tactic of targeting civilians in Torreón doesn’t seem to be spreading nationally, and Mexico isn’t turning into Colombia. However, we need to call a spade a spade, and react accordingly. Until this week, Torreón hadn’t had a federal security presence since last year, despite terrorist tactics being employed on various occasions going back to January. If Mexico’s worried about the Colombianization of its security situation, pacifying Torreón and punishing the gang behind these killings should have been one of the government’s highest priorities. Instead, it sent the message that you can intentionally kill civilians by the dozen, and as long as you don’t score big-time media attention, you don’t have to worry about the Mexican government.

What we do not know is why the gangs operating in the city want to terrorize the citizenry. My own hypothesis is that they are either setting up a protection racket, or dueling it out for control of one. I suspect the former, for the simple reason that the attacks seem to have scared the population away from everywhere, and not just the places in question. (There is evidence that the Zetas and La Familia are fighting to be the first to set up a citywide racket, but that is just a wrinkle on the basic hypothesis.) It is possible that these are just incredibly clumsy hits, of course.

 
The amazing thing is the incompetence of Mexican law enforcement. In the U.S., attacks like these would immediately prompt hundreds of arrests. Every existing warrant would be executed, every parole threatened. The police would extract plea bargains for information, make more arrests, and find evidence of other crimes among those suspected. (This does, of course, assume that the police care about the victims. As the citizens of many American inner cities can tell you, that is not always the case.) Yet Mexico seems to simply not have anything resembling an investigatory police force, at least not in the north.

Consider the murder of the U.S. consular officials, gunned down in their white SUV returning from a party in Juárez. The U.S. immediately responded with Operation Knock Down, which sent hundreds of federal, state, and local agents into El Paso. It resulted in 54 arrests. The resulting information was passed to authorities in Mexico, enabling the arrest of three gang members, most prominently Jesús Ernesto “El Camello” Chávez Castillo. The rub? The U.S. does not think any of the three were actually involved in the killings.

But they were killers. Why did it take evidence from the U.S. to arrest them? The gangs, of course, threatened to retaliate against U.S. law enforcement. So far, they have been unable to. Which is not surprising: they would be shut down the next day. Unofficial DEA spokesmen have politely expressed frustration that Mexico has not given them access to the information that they would need to solve the crime.

The strange thing, which I will try to talk about later, is that everyone in El Paso believes that law enforcement is corrupt in Texas. They especially believe that federal ICE officials are all on the take. Yet they (which includes law enforcement officers from New Mexico) also believe that the corruption, unlike in Mexico, has no effect on police ability to maintain public order.

Before I explain why they think that, I would like to ask my readers three things. What do you think the killings are about? Why do you think Mexican police forces seem ineffective? And, most importantly, why do you think the violence hasn’t crossed the border? I would really like to hear thoughts on this.

By the way, go read Diego Valle on the topic!

A brief and incomplete history of organized crime in northern Mexico

 The history of organized crime in Mexico goes back before Mr. Carrillo, of course. As far back as 1916, in the middle of the Mexican Revolution, U.S. customs officials in Los Angeles reported that the government of Baja California, one Colonel Esteban Cantú, was selling leases to smuggle opium into the U.S. for a $45,000 down payment and monthly leases around $10,500. (Of course, the dollar isn’t what it used to be: $10,500 in 1916 dollars is worth about $212,000 today.) Cantú didn’t last — he became involved in a bizarro-world attempt to secede, which led to his exile — but the governors who followed him continued their involvement with drugs, even after the federal government of Mexico banned marijuana in 1920 and opium in 1926.

Somewhat amusingly (at least to me) the Baja criminals were under the thumb of a group of Jewish gangsters based in Los Angeles. Harold “Happy” Meltzer, connected to Mickey Cohen, arranged with the Mexican consul in Los Angeles to use Mexican customs agents to smuggle opium across the border.

When Enrique Diarte (their source of supply in Tijuana) tried to go into business for himself, an American named Max Cossman (aka Max Webber) had him killed. Cossman had the support of the state government, but ran afoul of the feds, and wound up in a Mexico City jail in 1949. Mexican jails being what they were (and, sadly, are) his wife had no trouble smuggling heroin into the prison, which Cossman resold. He escaped and continued to operate across the border well into the 1950s, using the moniker “Francisco Mora.”

Smuggling soon spread away from Baja. In 1931, President Pascual Ortiz Rubio (who was actually not the true head of government at the time — that position being occupied by the Jefe Máximo de le Revolución, Plutarco Calles)  expressing worry over “the increase in national and international narcotics trafficking along the rail line joining Mexico City and Ciudad Juárez.” He went on to state that he was sending three “secret agents” who were “currently in Torreón” to combat the traffickers.

 
The head secret agent, Juan Requena, sent back a report stating that Torreón was the “main center for narcotics trafficking in the towns linked by the rail line from Mexico City to Ciudad Juárez and for the international trafficking carried out in this city.” It went on to say the main kingpin was a man of Chinese descent named Antonio Wong Yin, who was in continual contact with the mayor of Torreón (Francisco Ortiz Garza), a close friend of the governor of Coahuila (Nazario Ortiz Garza), and the head of the federal Army in the state, General Jesús  Garza Gutiérrez. (It was good to be a Garza!) He went on report that the traffickers “have a complete espionage service prepared to do anything.”

At that point Requena was transferred to Los Angeles. Sadly, I have no records of what this Mexican secret agent did there.

The next year, General Rodrigo Quevedo became governor. His brother became mayor of Juárez. They shot the head of the smuggling cartel there, who fled to Mexico City, where gunmen killed him in a tiny little park that used to be next to the Casa de Azulejos in 1937. That same year, the head of the federal Department of Public Health, José Siurob, called Juárez “possibly the most dangerous center where traffickers operate who ... defend their trafficking with gunfire.”

By 1947, Harry Anslinger, the head of the Federal Bureau of Narcotics, declared Mexico to be U.S.’s main opium supplier. He also accused state officials in Sinaloa (where it was grown) of being in the drug business, including Governor Pablo Macías Valenzuela. Surprisingly, the Mexican press picked up the accusations. There must have been some sort of infighting between Macías and President Miguel Alemán, because once the President made a trip to Sinaloa, the accusations stopped. Macías finished his term and became head of Military Camp No. 1 in Mexico City. The feds made a show of capturing one of the traffickers Macías was accused of protecting — Miguel Urías Uriarte — but he was soon released.

In short, organized crime was tied up with the political system practically from the very beginning. The result wasn’t good for Mexican governance, but it did mean that the politicians were in control of the gangsters. There were violent outbreaks in the 1960s and then again in the late 1980s, but organized crime simply didn’t exist separately from the political system. There were individual gangsters and criminals, but no independent syndicates and no armies upon which the capos could draw to resist the state or intimidate the citizenry ... at least not without the active cooperation of the politicians.

That went away with the transition to democracy in the late 1990s. But violence didn’t really get out of the control until the last few years. So something else is going on. If that “something” turns out to be Sicilianization, then the end result will be a return to the bad old days of the PRI’s dictatorship, minus the protectionism. In Sicily in 2007, extortion rackets collected about 12% of GDP from businesses on the island — that’s more than the Mexican federal government collects in non-oil revenue.

In fact, it could get far worse. Sicily is part of nation that isn’t (despite the Prime Minister’s best efforts) completely corrupt, and receives large-scale transfers from the rich north and the European Union. In Mexico, though, it’s the richest part of the nation what would be Sicilianizing.

Still, there are two big issues that need explaining. First, why did gang warfare break out in 2008, instead of 1998 or 2000 or 2006? And second, why hasn’t it spilled over the U.S. border?

A history of violence

 Violence in Juárez has reached a level comparable with situations that most would consider civil war, and far outside the range of anything that has happened in major metropolis in the developed world. So far, the rest of northern Mexico has not yet followed Ciudad Juárez into chaos, but death rates are escalating. This picture of me (wearing an entirely inappropriate grin) is dab-smack in one of the most violent neighborhoods of Chihuahua City. No, it doesn’t look it. That’s the point.

 
What is going on?

There is an explanation for the early-1990s jump. Pablo Escobar died in 1993, not coincidentally the year violence began to escalate. With the U.S. government raising the cost of using Florida as an entrypoint for smuggled drugs (law enforcement is not helpless), a mid-level drug dealer named Amado Carrillo Fuentes took the opportunity to shift the traffic to his city. That in and of itself would be expected to cause a temporary jump in violence ... but not a shift to a new, higher equilibrium.

The thing is, wholesaling cocaine across the border wasn’t Carillo’s only business strategy. He also began to sell retail inside Mexico. Juárez is littered with “tienditas,” also called (for heroin) “picaderos,” where you can buy drugs for less than a quarter of the U.S. street price. In theory, the tienditas were under police protection. In practice, the police functioned as just another gang. Carillo’s death in 1997 ended (or so runs the conventional wisdom) any hope of getting the situation back to its pre-1993 equilibrium. Dump the creation of a retail market with three necessary (but not sufficient) factors and you have all you need to explain a homicide rate around 30 per 100,000: a large population of transient young men, an economy that offered few economic opportunities, and continuous running connections with U.S. prison gangs that could not freely operate in El Paso but could easily coordinate their activities south of the border from American redoubts. (Plus weapons from El Norte, but I am not convinced that was determinative.) In short, Juárez went the way of Baltimore. You could probably remake the Wire there without too much trouble.

In short, the early-1990s leap in homicides in Juárez appears to have been driven by the emergence of large-scale retail drug markets within Mexico, in the context of a police force that was not disposed to much anything about it. (Other than skim its take off the top.) The result was not all that different from the parts of America characterized by poverty, weak social bonds, and police forces indisposed to actually carry out investigative or preventative policing.

The recent leap, though, that is different. Rural southern Mexico has always been a lawless and violent place. So have been the Sierra Madres. But this explosion to civil war-levels, this is new.

The Sicilianization of northern Mexico?

 King-Walters asks what effect the Juárez violence is having on the rest of northern Mexico. The direct effect is pretty small. Hundreds of thousands of people have left Juárez, but they have mostly gone to El Paso. Villa Ahumada and Chihuahua City look more prosperous and developed than they did when I was last there in 2004.

 

But the violence is spreading. Yesterday I got the news about the massacre at a party at a hotel in Torreón, Coahuila. At first, I thought it was the same place I stayed in a month ago. It turned out not to be ... but it was a recreation hall in an equally nondescript suburban part of the city. There are some very worrying signs. My friend Michael told me the even was called the “Electro Party Gay,” and Gancho confirms. He also reports that the party was scheduled to be over by the time the gunmen burst in. That latter fact makes it unlikely (but not impossible) that it was a hit. Warning notes of unknown provenance have surfaced.

Rather, it was probably extortion. When I was in Torreón, I was told about (but did not see) the little Z stickers that you find on alcohol sold at certain stores, meaning that the owner has paid the Zetas their take. The Familia, a Michoacán-based mafia that is branching nationally, appeared to have warned people in Torreón not to have anything to do with the Zetas ... and the massacre followed a series of gun battles in the city, including one near the hotel where I stayed.

The violence is spreading. Four states border Chihuahua; homicide has risen in all of them. That said, things need to stay in perspective. Coahuila’s homicide rate would still fit comfortably within the United States, having risen to the level of Maryland. Sonora’s rate has soared past Louisiana and Puerto Rico, but is still around the same as it was in the early 1990s. (A time when bandits hijacked entire trains and chilangos feared to drive to the States through the state.) Sinaloa has always been violent; I saw narcos walk into a barbacoa place, put guns on the table, and scare the hell out of the other patrons (or at least me) back in the 1990s. That said, it is certainly possible that killings in Coahuila and elsewhere will soar in the next few years. The signs are there.

My worry is that it may not be about drugs. Rather, my worry is that it is about everything; that gangs are fighting it out to establish themselves as Mexico’s version of the Cosa Nostra or ‘Ndrangheta. Extortion and racketeering, drugs and vice. The end result would see violence decline ... along with economic growth, political democracy, and Mexico’s prospects. Organized crime is the issue in Mexico right now: you can follow the ins-and-outs at Ganchoblog.

Michoacán (where I have to say I have not been) may provide an example of the future. 

How bad is it in Ciudad Juárez?

 As some of you may remember, I recently completed a trip through northern Mexico. The amount of violence stunned me. I have travelled through the region many times; this was the first time that I felt its effect.

How bad is it? The above video show yesterday’s car bomb attack. It starts with a video of the first explosion; the second bomb explodes nine seconds in. It is the first use of car bombs in the gang warfare plaguing the city.

The above graph attachs some numbers. The violence in Juárez jumps twice. The first is in 1993, when the city leaps from a medium-level homicide rate around six per 100,000 to a hair under thirty. One way to think about those numbers is that the place went from being about as violent as New York City is today to the carnage that prevailed back in the 1980s ... roughly equivalent to the kind of violence that afflicts declining Eastern urban centers today. Is was violent, but normal life continued. (The dotted orange line plots the contemporaneous New York homicide rate.)

Another way to consider the numbers is to consider that the Juárez drug violence of the 1990s and most of this decade was roughly comparable to the peak of the Troubles in Northern Ireland. The dotted yellow line shows the Northern Ireland death rate from 1969 through 1988. It spikes up from next to nothing, stays high for about six years, and then falls again to something around the level of New York or pre-1993 Juárez.

So Juárez was bad between 1993 and 2007, enough to make me nervous when I visited, but nothing outside my own experience. In fact, it was less violent than places I would visit without blinking an eye. It was not a level of violence to worry about; in fact, I usually felt silly about my own edginess. It certainly was not enough to make you worry about Mexico’s future.

And then, it jumps again in 2008 and 2009, to something way outside the norm. (The 2010 numbers are based on the first half of the year.) How far outside the norm? Well, one consolation is that Baghdad still seems a bit more violent than Ciudad Juárez ... more so when you consider that the Baghdad figures (the light blue dots, taken from the Iraq Body Count) don’t include security forces. Whoops! A commentator just pointed out that I misplaced a decimal point. Looks like the violence in Baghdad (according to the Iraq Body Count) was only higher than in Juárez in 2006, at the height of the civil war.

So there you have it. Safer than Baghdad. Still. in 2006. More dangerous than Baghdad today. I feel virtuous, somehow, having gone through that without body armor.

Watching Team USA in Mexico

 This is a little late, but I was in Mexico City for the U.S.-England game, and it was awesome. With the quarterfinals coming up, it’s time to relive the glory. 

 
The bar was the Black Horse, a self-styled English pub in the Condesa, a part of Mexico City that was a run-down formerly-Jewish area when I first moved here and is now more hip than Bo Jackson. I got there an hour early, figuring that there’s a big group of English expats in the D.F. The outside seats were already taken, but the inside was pretty empty. It didn’t stay that way. My friends showed about 15 minutes after I got there. (I managed to claim a slew of bar seats.) With a half-hour  to go, it was SRO ... with U.S. fans. None of whom knew each other.

Which made it awesome. The U.S., see is not a big soccer nation. So we had to make stuff up as we went along. First thing we did was try to launch into “America the Beautiful” over “God Save the Queen.” That didn’t work, because nobody knew the lyrics — this after nine seasons of singing the damn thing at the seventh inning of every Yankee game — so we switched to “This Land is My Land” That got everyone going. 

The drama of the game has been recounted elsewhere. But it was great. We yelled, we screamed, we chanted “U-S-A! U-S-A!” and in the most perfect touch, yelled “The roof! The roof! The roof is on FIRE!” after the U.S. tied. 

We drank out the bar’s entire stock of Sam Adams, some midwestern beer I’d never heard of, and Budweiser. The party then moved outside.

 

I love the world cup!Tomorrow, I hope for the triumphs of Brazil and Uruguay. Go Mercosur!

Do tax systems matter? Evidence from Mexico

 Many politicians like to claim that low taxes are good for growth. it is not at all clear that low taxes do anything for growth. What makes me say that? Well, if they were, Mexico should be a powerhouse. After all, KPMG just declared that it had the best tax system in the world, with an overall burden only 60% of the United States and a third of France! So it should be growing like gangbusters, right?

Some argue, sensibly, that low taxes only work when budget deficits are low. Otherwise the beneficiaries of low taxes act as if they have received a tax postponement rather than a tax cut. Anticipating higher taxes (or inflation) in the future, they work less now. The problem? Mexican budget deficits are very low, as are its overall debt burdens.

 

Obviously, other things are going on. But having slow-growing Mexico get the top score for a business-friendly tax system should make one wonder about the importance of tax systems to actually doing business.

How to speak Mexican in 197 easy lessons

 I swear a lot in Spanish. My wife doesn't like cursing — public swearing is illegal in Trinidad, and her extensive time in Queens did nothing to change her (most excellent!) preferences — but I can't abandon the practice.  But what I can do is change languages.

Now, the groserías that I picked up as a kid came mostly from Spain (at home) or Puerto Rico (hundreds of different people and places). But my Spanish swearing really didn't come into its own until I lived in Mexico City. That town has developed it to a high art.

Now, courtesy of my old friend Tania Martínez, comes an excellent guide to swearing in Mexican, or, more properly, Chilangese.

I have had to insist that my wife not call me “güey” when she's talking to me, even though that's how she refers to her Mexican friends. When you understand why that sounds wrong, then you will be ready to advance to the next level. When you can explain the proper use of “cagado,” then you will be an expert. Until then, enjoy, learn, and feel free to exercise the Nicoll Doctrine of English language expansion.  You will be doing your country a mitzvah.

And it will come very much in handy while watching sporting events in certain parts of North America and most of Europe north of the Pyrenees. If not a Yankees bar in Boston. Trust me, and I speak from highly embarrassed experience, somebody will understand you.

Links from parallel universes

  Or, in fact, not.  The first comes from Alex Harrowell.  It seems as though Margaret Thatcher quite seriously proposed to the Prime Minister of Australia that the two countries buy or lease an island from Indonesia or the Philippines in order to house Vietnamese refugees.  In 1979.  Even more astoundingly, Lee Kwan Yew took the idea seriously enough to strenuously oppose it.  Alex gives links to the primary source documents, if you’re having as much trouble believing it as I did.

Truly, the mind boggles.  Ferdinand Marcos was all kinds of corrupt, but he hid it behind a veneer of nationalism ... it’s impossible to imagine him selling part of the country to the U.K.  Leasing, though ... okay, I can’t imagine this.

The second is a commercial currently popular in Mexico, courtesy of Gancho. If you don’t know who the American is, you need to watch more sports.  Enjoy!

Beer, banks, and revolution

  Doug Muir observes that breweries and banks seem to survive civil wars.  Now, Doug would never tell you, because he’s modest, but it so happens that he has a friend who’s a little bit knowledgeable about the effects of political violence and instability on economic activity.  His friend has even written an entire book about banking and instability. 

So, is Doug correct that banks and breweries tend to make it through political instability?  Short answer:  yes. 

Long answer:  well, let’s examine the data from one of the worst bouts of political instability to afflict any country with a substantial financial sector and developed manufacturing, at least outside the benighted continent of Europe.  Between 1910 and 1929, Mexico suffered a revolution, two insurgencies against the winner of the revolution, a counter-revolution, a counter-counter revolution, a civil war among the winners of the counter-counter-revolution, a military coup, another bout of civil war after an attempted coup by the Secretary of the Treasury, a presidential assasination, three more attempted coups, and a third civil war fought by angry Catholic guerrillas with a penchant for dynamiting passenger trains.  Among all that, what happened to the banks and breweries? 

Let’s start with the breweries.  Mexico’s domestic industry was created almost overnight during the last decade of the 19th century, with local monopolies established in virtually every major city by the 1900.  One of the industry’s leading firms (the Cervecería Cuauhtémoc of Monterrey, Nuevo León) came to control 28 percent of the national market.  It went on to spin off a glass bottle making company (Vidriera Monterrey) that quickly established itself as a domestic glass monopoly.  The other two major breweries were the Cervecería Moctezuma (of Orizaba, Veracruz) and the Compañía Cervecera de Toluca y México near Mexico City.  

During the civil wars, armed factions viewed factories as strategic assets that could be used to generate income for the army.  What typically occurred in occupied areas was that a faction would seize the factories and run them for its own benefit, or it would threaten to do so unless the management made a “loan” to the revolutionaries.  In April 1914 the forces of Pablo González took control of Monterrey.  For most of the year González occupied and ran the Cervecería Cuauhtémoc, where he continued to employ the brewery’s workforce.  By November the company’s stocks of raw materials had been used up. 

At that point, having extracted what he could from the operation, González returned the factory, apparently undamaged, to its owners.   

The upshot is that while production dropped during periods of generalized violence — 1914-19 and to a lesser extent 1922-24 — the breweries themselves pretty much came through intact.  In fact, beer was such a good market that the Cervecería Modelo started up in 1925, while the country was still rather unstable. 

So what about the banks?  Well, the banks didn’t fare that well during the civil wars.  They were where the money was. Governments and revolutionary factions plundered their cash reserves, forced them to make loans, and engaged in the unrestricted printing of currency.  It did not do good things for the banking system, which by 1916 ended up in government receivership — although in many cases the Carranza government wound up with little more than a Mexico City branch office and some papers.  On the other hand, the governments that came to power after 1916, however, regardless of their stated ideologies, all recognized that they needed a source of credit in order to restore political order.  

    

It took a while to put humpty-dumpty back together again.  A private banking system came back to life, but a December 1920 banking panic caused most of them to fail.  In 1921, President Álvaro Obregón announced that twelve banks would be returned to their owners; only five were able to reopen.  The government tried to regain access to foreign capital markets by restarting payments on the foreign debt, but the civil war triggered by Treasury Secretary Adolfo de la Huerta’s revolt put paid to that.  On the same day the revolt began, Banamex (the largest private bank, and one that existed before the Revolution) transferred $13.5 million to the International Bankers Committee.   The government simultaneously borrowed $5 million from the Huasteca Petroleum Company against future oil tax liabilities, with the intention of using the funds to make additional payments on the foreign debt.   Instead, the funds went to fight De la Huerta.  The diversion of funds meant that the government had to borrow from Banamex to pay foreign creditors ... on July 2nd, 1924, the government gave up and defaulted once again, this time for good.

In other words, this was not a healthy banking system.  A snapshot in 1917 would have showed it as pretty much dead ... but no matter how you put it, five banks did survive (including the two largest) and the system schlumped along despite the occasional civil war.  The government needed the bankers too much to kill the system dead.  In fact, it went out of its way to reactivate bank lending in 1925.

So how did they reactivate the banking system in 1925?  That’s another story.  The moral of this story is that Doug is right:  banks and breweries can survive even extreme levels of violence. 

¿Sufragio efectivo?

  Democracy and central banks.  Can they be reconciled?  I argued yes, but it is possible that the Banco de México has a different opinion.

It seems as though somebody at the central bank somehow screwed up quite possibly the most famous saying in Mexican history.  “Sufragio efectivo, no reelección” somehow became “Sufragio electivo y no reelección.”

I am very curious as to what non-elective suffrage would in fact be.

Of course, Porfirio Díaz, who used the slogan in his 1876 campaign, went on to be “re-elected” in 1884, 1888, 1892, 1896, 1900, 1904, and 1910.  Apparently he misplaced the comma the first time around.

Anyway, central banks aren't the only perplexing institution puzzling modern democracies:  the same can be said for investor-state arbitration.  NAFTA has an entire chapter devoted to investor protection, with ultimate enforcement relying on trade sanctions.   Pretty tough stuff!  “Sufragio electivo y no expropriación,” you might say.

Problem is, of course, in defining expropriation.  Mexican tax law currently allows different companies with the same owner to consolidate results.  In other words, losses at one subsidiary can be used to offset profits at a second.  Congress plans to change that, as part of a broader tax hike.  (Yes, Mexico needs to raise taxes.  No, it doesn't need to do so in the middle of a recession.  Don't get me started about Hooverism south of the border.) 

The catch?  Well, the tax hike might be called expropriation under NAFTA.  Now, generally for a case to be made under NAFTA or ICSID rules, creeping expropriation requires both evidence of discrimination and more than one action.  So I doubt that there would be much of a case here. 

Yet ... arbitration law is bizarre.  I must say that the judicialization of investor-state disputes has been a great thing for world peace.  Consider the risks that the Brazilian government has taken in defending its investors abroad!  But it remains confusing and (unlike independent central banks) not-entirely-legitimate in the eyes of the relevant electorates.  At some point, the world will need to find a better way, or the system will collapse under its own weight.

In this case, however, I don't think that a straw will be added to weight bringing down the world's current imperially non-imperial means of dealing with investor-state disputes.  But we shall see.  Any lawyers in the house?

Social progress in Mexico

  Once upon a time, like 15 years ago, other Latin Americans talked about Mexico as though it was a world apart, old-fashioned, stuck in the stone age.  That is no longer true.  Why is unclear. 

Gancho tells us something important about Mexico's current attitudes towards social change.  It is true, it is surprising, and it is something that we do not understand.  Yet I get the feeling that we have seen this pattern before.  Only maybe we haven't.  A fundamentally conservative society deciding that they don't give a damn what people do under the law, while still remaining fundamentally conservative?  Randy?  Curious minds suggest you should hop a plane to Torreón.  Your perspective may tell us more about Mexico and the future than, say, Gancho's or mine.

Secuestro express

  Via Matt Yglesias via the National Review, Graeme Wood wonders why secuestros express aren't more common in the United States.

An “express kidnapping” occurs when a criminal gang mugs you and takes you from ATM to ATM until your cards don't work anymore.  In all the first-hand accounts that I've heard the victim was let go within hours.  (I have reliable second hand accounts of ones that ended rather worse:  one lasted a few days; in the other the victim resisted, got shot with a small caliber handgun, and drove himself to a hospital.)  After nothing that this sort of thing doesn't happen in Cairo, Wood wonders why such a “high-reward and not more than medium-risk [crime] does not happen more in America.”  

Sometimes it seems that half my Canadian in-laws are in the Mounties, and my uncle Brent is a cop in Baltimore.  So I asked him why it doesn't happen.  His answer was fairly obvious:  express kidnappings are not medium-risk in the United States.  They are superlatively high-risk, in terms of being caught.  An express kidnapper needs accomplices, needs to travel with a victim in tow, needs to visit public spaces that are often under electronic surveillance, and leaves a very exact trail showing where they went and when.  If they don't want to commit murder, they also usually leave behind an eyewitness who has spent enough time with them for a positive ID.  You'd have to be nuts to try it anywhere in the United States outside New Orleans.  People do, of course, but they get caught, so it doesn't catch on.  The same applies to other countries with efficient police forces, like Chile or Spain.  There was a brief surge of express kidnappings in Spain in 2006, but the criminals were often caught.

Mexico City does not have an efficient police force.  Not only does it lack anything resembling an investigatory capacity, but response times are extremely slow, and the police are often involved in criminality themselves.  The mystery isn't why express kidnappings are rare in the U.S. and Canada.  It's why they don't happen in Cairo.   

Meanwhile, enjoy Method Man:

UPDATES:  Unexpected shout-out from Graeme Wood!  Also, in comments, a link to this book, which illustrates why secuestros express rarely happen in the United States.  It also looks like a good read. 

The value of hairshirts

  You ever have a thought that you were having trouble formalizing?  I’m there, and not just because I just got through spinning my wife around and yelling, “Jeter!  Jeter!”  Rather, it’s because I’m trying to express an argument that I think is wrong. 

Last week, I tried to understand why the Mexican federal government was busy cutting spending in the middle of a depression.  GDP is down 10 percent -- that’s a horrendous number, in the full depression zone, far worse than 1995.  Why would you cut spending in the middle of such a collapse, especially when the markets don't seem to be worried about the fiscal situation?  It has gone so far to prompt Mexican Ph.D. students at Ivy League universities to start wondering if the Labor Party has a point when it runs ads saying that things would have better under AMLO.   

Some smart observers whom I respect, however, support the government cuts.  Gancho draws attention to a column by Macario Schettino, an economic historian.  Schettino argues that Mexico's fiscal problem isn’t just a short-term problem caused by the Great Recession; rather, it’s a sign of long-term trouble, namely the decline of the country’s oil revenues:

“To respond to that we have only two options. One is to do the same as always, which we know how to do: fake change and place the country in debt. It’s a direct and, unlike on other occasions, short path off the cliff. ... The other path is more complicated. It implies recognizing the secular failure of a political project and making decisions of the same size as the crisis: historic.” 

But why can’t you have it both ways?  Run up the debt now, when doing so will prevent unnecessary suffering, and raise non-oil taxes later.  There isn’t any economic problem with that.  What I think Schettino fears is a political problem:  without economic pain now and a very hard budget constraint, the Mexican political system won’t make the tough decisions until it is too late. 

Of course, there is a slight contradiction in the sense that Mexico’s hard budget constraint is self-imposed.  Right now, Mexico still has oil revenues (albeit slowly declining) and the markets remain willing to lend.  Nothing is forcing (or even incentivizing) the government to refrain from borrowing more.  To use a strained analogy, Schettino seems to view the Mexican political system as a recovering drug addict who just got into a serious accident.  Painkillers would speed recovery and ease suffering, but he fears that their use could provoke a relapse.  The argument is a stronger version of the suggestions some of my colleagues (notably David Moss and Aldo Musacchio) made against Argentina’s debt repudiation back in 2005:  repudiation might make economic sense, but freedom from debt will also give the Argentine government freedom from the discipline imposed by the need to meet repayments.  That could open the door to damaging irresponsibility later.   In the Argentine case, Moss and Musacchio seem to have been more right than I was, as shown by the Argentine government’s subsequent faking of inflation statistics and general mismanagement under President Fernández.  

While the Argentine example is a strong one, I am not sure of the general principle.  Is a self-imposed constraint really a constraint?  Is the Mexican political system really so sclerotic that it needs a crisis now to avoid a crisis later?  And even if it is, why not wait for that hypothetical future crisis to arrive instead of plunging the country into a deeper depression now?  None of this is to say that I think the Schettino argument is specious.  It isn’t ... but I still don’t think it’s a good reason to cut government spending right now.   

But I’ve been wrong before. Does Mexico really need to impose pain on itself in order to reform?  Or is that just a good way to lose elections?  Thoughts welcome.

A George Will moment

  Some time ago, George Will published an odd screed against blue jeans.  Gancho mentioned the column on this blog here, where he pointed out that I was, in fact, wearing blue jeans while travelling in Greece. 

But I have to say that I have my own George Will moment when it comes to male sartorial style in early 21st century America.  Below is a picture of the street outside the Palacio Nacional in Mexico City, where I met with some officials from the country’s Treasury department to ask some questions about the recent petroleum reforms.  What don’t you see in the photo?

That’s right!  Shorts.  Only one guy is wearing shorts, thankfully long ones, and yes, he turned out to be a European.  What about looking in the other direction?

What about out front?

None!  No shorts.  This is true throughout Latin America.  If you’re over the age of 18, standing on a hard surface, and cannot see the ocean, then you don’t wear shorts.  Not in Panama, not in Venezuela, not in Mexico. 

And I agree with that convention.  The only exception is if you are actively engaged in exercise.  Period.  Adult men in shorts look ridiculous.  I have felt this way since I turned 18; my high school graduation was the penultimate time that I broke this rule.  I ultimate time was while I was travelling in Trinidad, and I looked ridiculous.  It won’t happen again.

As for sandals?  Gimme a break.  At least shorts are comfortable.  Sandals and flip-flops don’t even manage that.  I found flip-flops useful in the Army for the prevention of athlete’s foot, and that’s about it.  They are not comfortable.  They flip, see.  And flop.  Sandals, meanwhile, manage to be shoes without the advantage of keeping your toes safe if you drop something on them.  So, WTF?

Ban ‘em.  End.  None of this.  C’mon Americans.  Get some dignity.  No more shorts.  And no more capri pants on men either, which have started to infiltrate the USA from Europe.  So all you shorts-wearing flip-flopping young people?  Get off my damn lawn. 

Una locura económica del gobierno mexicano

  Mexico should be in relatively good shape to fight the Great Recession.  The budget was basically balanced going in and bond traders have treated the country more favorably than the rest of Latin America.  The combination of NAFTA membership, the special relationship with the U.S., and the proven conservatism of the Mexican electorate do, in theory, allow the Mexican government to engage in fiscal pump-priming without confronting the dilemmas of emerging market Keynesianism.  In fact, the country’s sovereign bond spreads have returned to normal.  The government could stand to run a deficit much larger than 3.5 percent of GDP.   

Better still, as regards stimulus, Mexico has a bajillion shovel-ready projects.  The construction of the past five years has done an incredible amount to ease congestion in the D.F., but it still isn’t done.  Frex, while the overpasses built over the last five years are great, Circuito Interior still isn’t a freeway. 

The Metrobús has made my visits to the D.F. much much easier, now that it runs all the way south along Insurgentes, but there are many routes to be added.  Periférico’s second deck is a marvel, but it doesn’t go north of Viaducto.  The metro is awesome, but construction on Line 12 is only now getting underway.  Plus, well, the water supply needs work. 

And that’s just the capital!  There are also port and highway projects in Michoacán and Mexico State, the expansion of the Toluca airport, and umpty-scrump other things all laid out and ready to be built.  Not to mention the fact that one could and I would call improving the training of the Mexican military and national police an investment; ditto the expenditures needed for the nation’s courts and jails. 

Which makes this insane:

Translation:  “Cuts hit infrastructure:  Communications and Transport will take $12 billion in reduction, obliging contract cancellations.”  (Hit tip:  Gancho.) 

It seems crazy.  First, the cuts are only 0.7% of the country’s (shrinking) GDP.  Second, Mexico needs infrastructure, and now is exactly the right time to build it, when costs are low.  Third, there is no evidence that investors are panicking.  Fourth, Mexico is not the United States:  AFAIK, there is no big constituency for Hooverism and hairshirt economics for it’s own sake.  So the politics don’t figure either, at least AFAICT. 

In other words, WTF?  I do not understand what the Calderón Administration is trying to accomplish.  They should be expanding their stimulus program, not cutting it.  If markets panic, then they can retrench, but right now they seem to trying to get out ahead of some sort of investor concern that just isn’t materializing. 

Explanations?  Or have I got it wrong?

El ambiente Azteco

  Gancho asks about the ambience at the U.S.-Mexico qualifier.  Why was I at the U.S.-Mexico qualifer?  Wasn’t I just in the Philippines? 

Well, yes.  But I’ve been a bit busy, and when I haven’t been busy I’ve been jet-lagged, so I haven’t written much.  The proximate reason why I needed to go to Mexico was to research a case on Pemex that I’ll be teaching for the first time on September 15th.  (Agh!  Right before Independence Day, no less.) 

That said, the reason that I picked this week instead of some other week is that this was the week of the big game.  I went to the stadium with mis amigos Gabo y Carlos y prima Silvia. For those of you who’ve never been, Estadio Azteca is impressive.  It feels much larger than similarly-sized stadiums in the United States. We got there on public transit, from which you walk down these concrete elevated walkways filled with hawkers selling Tri-related merchandise, including green-white-and-red Pancho Villa mustaches. 

Everyone wore some version of green-and-white; I’m not sure that I’ve ever been to a game anywhere where so many spectators seemed ready to run onto to the field and substitute just in case Javier Aguirre needed them.  

Of course, I was a ringer, a U.S.-fan wearing El Águila under the leather jacket.  What, you think I was going to drape myself in Old Glory?  Not at this game, sir.  I would have been the only person in America’s colors.  In fact, we couldn’t find the opposition stand.  Carlos was certain there was one, but nothing we could see.

The TV-news later showed scenes of people waving Old Glory in what looked to be a stadium of some sort, but we saw nothing.  I later discovered that there was in fact a U.S. section, but if you go below the fold you’ll be able to see why I don’t have any sympathy for them.

The atmosphere was … raucous.  Not unlike a regular-season professional game in Mexico.  Every time Tim Howard tossed or kicked the ball back towards the Mexican side the stands would come alive in a long shout of “puto!”  It felt like a Molotov concert.  The singing of the traditional “En donde estan en donde estan los pinche gringos que nos iban a ganar” only added to the concert-like atmosphere.  As did the fact that Mexican fans threw paper cups at Davies right after he scored the only U.S. goal. 

In fact, hurtling beer cups was a motif of the game.  Whenever the U.S. tried to set up a corner shot, the fans would pelt the player with cups and bottles.  I have been to many sporting events in the U.S. and Canada and Europe, and I’m not sure I’ve ever fans throw stuff at the players outside of Yankee Stadium, and then only in from the bleachers at the far outfield.   

Now, I have to say, hurtling beer cups is a motif of Mexican soccer matches in general.  But I hadn’t been to one in a while, and so the flying cardboard came as a bit of surprise, as did the fact that most of said flying cardboard still seemed to contain beer.  Every time Mexico scored, we got pelted.  It made for an interesting time in the lower stands.  Below the fold you can see one teenager trying to protect his mother with what appears to be an empty box of Glenfiddich. 

Sotomayor, soccer, and all that

  I’m all for ethnic solidarity and all that, but Senator Jeff Sessions is taking it to a whole ‘nother level at the Sotomayor hearings.

Anyway, interesting as the linked story is, I just wanted to post a picture of me in this shirt, which I wore to the World Baseball Classic games in Mexico City.  (The picture above is at my favorite bistro in the D.F.)  I will not be wearing it to the U.S.-Mexico World Cup qualifier in Azteca Stadium on August 12th.  In fact, while I will be rooting for the U.S. team, I also want to live, and so will dress in green and red. 

Patrick, Mike, Carlos, what think you?  Am I wimping out?

Are there lessons in what didn’t happen in Mexico?

 From the outside, the Mexican federal government, and several local administrations, seem to have handled the flu outbreak fairly well.  Not perfectly:  there is some evidence that the country’s inefficient health system may have contributed to the outbreak in the first place, or at least the relatively high initial death toll.  But fairly well. 

The necessary condition for a solid Mexican response, of course, is that Mexico is not a failed state.  It’s not even a failing state.

My question:  do failed states pose a epidemiological threat?  On the one hand, there won’t be any authority to coordinate a response to an outbreak.  On the other, contacts between failed states and the rest of the world are almost inescapably limited, presumably making any outbreaks less likely to spread.  And if they are an epidemiological threat (a big if) what (if anything, because not all threats are worth countering) should be the international response? 

Unbecoming Canadian sensitivity

  I am an unabashed Canadaphile.  The Canadian constitution is rather better designed than the American one, other than not having a popularly-elected governor-general.  The health care system is not the one I’d design from scratch, but it has ours beat cold.  The federal system makes more sense.  They don’t fetishize local government.  Plus, they play good baseball and make good hip-hop.  And I have in-laws in the Mounties.  How Canadian is that, eh?

 

With that in mind, Canadian defensiveness towards the U.S. perplexes me, and it pops up in the most unexpected places.  Frex, as I didn’t know until I read Randy’s blog, it seems that Janet Napolitano may have accidently confused the Millennium Plot with 9-11 during a press conference.  OK, that’s a little embarrassing.  I’ve been there myself.  But enough to produce this reaction?  Or this one? 

The Globe and Mail column is particularly confusing.  After all, the sensible ripost to any mention of the Millennium Plot is to say, as the column did, that the U.S. blocked the terrorists at the border and the system worked.  Instead it brings up security theater that has nada to do with Canada (shoes in airports) and stuff that’s really aimed at keeping track of Americans, like requiring passports.  And that after a claim that Janet Napolitano is just like Dick Cheney.  Erm?  From whence this excitement?

Now, there are countries where people are understandably worried about perceived slights from the United States.  Like Mexico, where there are umpty-scrump reasons for people to be defensive with respect to their 800-pound neighbor.  Among other things, Mexico lost its war with the United States.  That sensitivity is why the U.S. needs to apply the same border controls to the northern and southern frontier, or at least be publicly seen to be doing that; otherwise key segments of Mexican public opinion would be enflamed, making cooperation unnecessarily harder. 

But similar Canadian sensitivity I don’t get.

Newsflash: Mexico flu

  I'm in Los Angeles, eating breakfast.  As in, that's what I'm doing right now.  And all the people at the table next to me are saying, in Spanish, that the Mexican government just shut down the school systems in the D.F. and Mexico State after 16 people died.  Apparently two people in the their 20s passed away, leading the government to decide that the outbreak was serious enough to close the schools and organize mass vaccinations.  People are urged to go to a hospital immediately if they detect symptoms.

I would like to take the opportunity to repeat that failing states do not react to flu epidemics in this manner. 

¡Viva ... uh ... Texaco?

  A while ago, insecure Americans got themselves all worked into a stupid dither about a Mexican vodka ad.  Now, in a sign of great maturity, Mexicans are refusing to get worked up about a European hamburger ad for something called the “Texican” that Burger King has run in the United Kingdom and the madre patria. 

Burger King is going to pull the ad anyway, just like Absolut pulled its.  You be the judge.

Hat tip:  Ganchoblog.

Keep on trucking

  A while ago, I wrote that I was fairly sanguine about the Buy-USA provisions in the stimulus bill.  I prognosticated that they would probably not be applied to our NAFTA partners, and even if they were, the NAFTA dispute-resolution mechanism would limit the damage.  Now along comes another dispute, this time over trucking, that poses a greater threat to trade ... although I am still confident that it will end well.

What's the story?  In 1994, NAFTA passed the U.S. Congress.  It mandated that all three countries open up their long-distance trucking markets to the others.  The U.S., however, punted when it came to Mexico, claiming that Mexican trucks weren't safe.  In 1998, Mexico took the U.S. to NAFTA arbitration.  On February 6, 2001, the U.S. lost ... partially.  The panel ruled that the U.S. couldn't issue a blanket ban on Mexican trucks, but that it could assess their safety on a case-by-case basis.  The Bush administration pushed Congress to issue enabling legislation that would bring the U.S. into compliance with the ruling, and with the political capital gained from 9-11, finally succeeded in November 2001.  (Not everything the Bush Administration did was wrong, although much was botched ... keep reading.)    Congress authorized the FMCSA to inspect Mexican trucks, and the Bush administration issued the required regulations to implement the law. 

Problem solved!  Not quite.  The Bush regulations had some, well, holes big enough to drive a truck through.  More below the fold.

El Clásico del Beis

  I'm in Mexico, for work, but one of the nice things about my line of business is that I have some flexibility to choose when I travel.  So I chose this trip to coincide with the first round of the World Baseball Classic, being held at the Foro Sol in Mexico City.  You can kind of see the Foro off to the left of the spiky dome thing in the picture below. 

The spiky dome is the Palacio de los Deportes.  In a sign of the amazing rapidity of Mexico's cultural revolution, it just finished hosting the Expo Sexo 2009, which is exactly what you think it is. 

Anyway, we were in the area for el beis.  For the Cuba-Mexico final game, I was with three fellow fans:  an American, a Venezuelan, and a Canadian.  We took Line 9 of the metro, which was much more crowded than I remember it being.  On the way, we met an older fellow in a baseball jacket.  He was a very talkative guy, who knew a lot about the game.  He also happened to be the most foul-mouthed man I've met in a long time, and that's saying a lot.  Every other word was a curse.  I wish I'd had a tape-recorder; the man was artistic in his use of profanity.

So were the fans.  They shouted pretty foul things at the Cuban team.  Nothing that you wouldn't hear among the Bleacher Creatures of the Bronx, of course, but good to hear.  My favorite was “culero” chanted at anyone who seemed to be, well, a culero.  It was raining — hard — and only the hard core were left by the sixth inning.  (It wasn't, I have to say, a very good game, as a game, and neither was the previous day's match against Australia.)

At one point a dude dressed as a stuffed Barney came out and started a dance with some other stuffed animal, to loud boos.  Until Barney ripped off his head to reveal a wrestling mask, and started tossing the other animal around the sidelines.  That was fun. 

The Cuban fans were also a lot of fun.  They sat in their own blue-white-and-red draped sections, with giant flags and ridiculous wigs, and played music.  We didn't a get a chance to talk to any of them, but I have a strong suspiscion that they're mostly Cuban expats, and not people whom the government flew out for the games.  They didn't seem organized enough.

Anyway, despite getting soaked to the bone, and having beer poured on me, and having people confuse my Puerto Rico flag shirt with a Cuban banner, it was a great night.  ¡Viva el beis!

Getting serious about the cartel wars

  Much of Mexico's organized crime problem derives from the United States.  First, obviously but intractably, the U.S. provides most of the demand for illegal narcotics.  Second, and more tractably, the U.S. provides most of the weapons.  This is not to deny that the weakness of Mexican law enforcement and local government is a necessary condition for the current violence.

There are several ways around the problems of Mexican law enforcement.  The simplest one is to use foreign agents.  In fact, that's happened.  In Operación Limpieza, the Mexican government recently busted open a corruption ring inside SIEDO, the agency charged with fighting organized crime.  Except ... the info originally came from an FBI agent operating in Mexico.  (Hat tip:  Patrick Corcoran.)  This will be a diplomatic problem, especially considering how long it took the Americans to pass the information along.

Except it shouldn't be a problem.  In fact, embedding Americans inside the chain-of-command of Mexican law enforcement might be one of the most effective ways of improving its efficacy.  So would spending much more U.S. money on training, or subsidizing Mexican salaries.  This is not to say that Americans are uncorruptible; it is to say that it's much harder to suborn an American agent without discovery.  The incentives are just too different.  The same applies (albeit to a lesser extent) to a better-paid Mexican agent.

A serious American reaction would involve reinstating the assault rifle ban and giving Mexico much more money.  A serious Mexican reaction would involve allowing Americans to bring their investigatory knowledge to Mexico, and use Americans to police Mexican law enforcement. 

Which isn't to say that organized crime is intractable without American help.  It isn't.  It's merely to say that entirely-understandable nationalism on both sides of the border ― “Why should we spend money to help Mexico do things it should be able to do for itself?”  “Why should we allow gringos hipócritas malintencionados to give orders to our own people on our own soil?” ― keeps some of the best tools out of the kit.  And that seems like a shame. 

Pobre México gordo

  An unwanted sign of North American convergence has been the convergence of the Mexican waistline with the American one. 

Today's Financial Times ran a story about obesity in Mexico.  The figures are sobering, and obvious to anyone who rides a pesero in Mexico City, although you could miss it in Polanco or Condesa.  4.1 million 5-to-11 year olds — 26% of the total — are overweight or obese.  Two-thirds of male adults are overweight, as are 71.9% of females. 

We wrote a bit about this in Mexico since 1980, especially in chapter 6.  Diabetes was the number-one killer when we wrote.  What we didn't know was that treating diabetes consumes one-third of the health budget, according to the FT.  Now, I still don't know that we know that, and I don't trust the FT's numbers.  But I believe the trend.

The future in most countries, I think, is going to be Big Government.  Soon what you eat and how you eat it will be taxed and regulated.  I don't particularly like the idea.  I used to be a heavy drinker, by American standards if not by European or Mexican ones, and the only reason I don't smoke a cigar or two every day is that my wife won't let me.  (That's also why I'm no longer a heavy drinker, in fact.)  But the fact is that nobody pays for their own health treatment in later life:  either an insurance company does, or, if you're under insured, the United States will pick up the tab.  So unless some sort of miracle Singularity-related program activity comes along to either make us all capable of pigging out and staying thin, or making it healthy to carry about lots of excess adipose tissue, Big Government is going to get what you eat. 

Or so I think at this particular moment.  As those of you who've known me know, I change my mind a lot.  It may be the only way in which I resemble Andrew Sullivan.  So, in that vein, counterarguments?

Yet another modest proposal, in which I outrage my friends by advocating protectionism but please Canadians and Mexicans by saying it shouldn't be aimed at them

  The new stimulus bill requires that all steel be purchased domestically.  Brad Delong is unhappy:

“If there's little excess capacity in the U.S. steel industry — so that the price of steel is high enough to induce people to look outside for suppliers — then a stimulus won't be much needed. If there's a lot of excess capacity so that a stimulus is needed, then steel customers should be able to bargain prices down to marginal cost — in which case foreign producers will have an extremely difficult time competing on price given that steel is heavy and distances are great.”

Well, maybe.  Marginal cost can vary a lot, and there are two steel-producing nations whose companies enjoy almost as good access to American markets as their American competitors:  Canada and Mexico.  The price of the same product imported from the two countries varies between 14% and 65%.  (December price data below the fold.)  Meanwhile, China has achieved significant import penetration, despite prices which exceed Canadian ones by 40% on average, and by 11% in the chief product category China exports to the United States.  The implication is that American firms are high cost.

Normally, the fact that U.S. firms are high-cost wouldn't change anything.  It would make sense to buy the cheapest steel from wherever.  American consumers would save by going to the lowest cost producer, and Americans as a whole would be better off, even if American steel producers would suffer. 

Under depression conditions, however, I'm not sure the above logic still holds.  Under depression conditions, using public money to buy from domestic high-cost producers has three advantages that don't mean anything in normal times.  First, domestic high-cost producers will spend more of their revenues, not park them as saved profits ... after all, they have high costs!  Second, the workers and suppliers of American steel companies (who make up the chief costs of the domestic producers) are far more likely to spend their wages and earnings on American goods and services than their foreign counterparts, keeping the multiplier higher than it would be otherwise.   Finally, having steel mills shut down in American towns and American workers thrown out of work will have psychological costs for American consumers and businesses.  They could worsen the downturn.  Such costs will be much less if the workers being tossed on the dole are in Ontario or Hebei.   In short, when American resources are unemployed and their unemployment looks set to last, buy-USA provisions can make the country better off as a whole.   

More below the fold.

Department of WTF

  This is bizarre.  And this is really bizarre.  Can anyone explain to me why people would write such nonsense?  Please?  I really want to understand.

Brooklyn is not expanding, and the Mexican state is not failing

  “He’s been depressed.  All of sudden he can’t do anything.”

“Why are you depressed, Albanito?”

“Tell Dr. Parpadeo!  It’s something he read.”

“Something you read, huh?”

“The Mexican state is failing.”

“The Mexican state is failing?”

“Well, the state orders everything, and if the state is failing, then one day it will break apart, and that will be the end of everything.”

“What is that your business!  He stopped doing his homework!”

“What’s the point?”

“What has the state got to do with it!  You’re here in Iztapalapa!  Iztapalapa is not failing!” 

Seriously, people, the Mexican state is not failing.  The Mexican state is weak compared to the United States or Canada.  But it is incredibly strong compared to the places in Africa or Central Asia that are generally called failing states.  Garbage is picked up.  (In more places than Afghanistan, anyway.)  Uniformed children go to school.    Middle-class families take weekend getaways, and do so on motorways better than the ones north of the Río Bravo, with no fear of IED attacks. 

Let's put some numbers on this.  In 1997, the Mexican federation had a murder rate that made it, in per capita terms, about as dangerous as Puerto Rico is today.  Over time, that fell, so that by last year Mexico's homicide rate had fallen within striking distance (or statistical error) of Maryland's.  In 2008, murders appear to have spiked by at least a quarter ... making the country almost-but-not-quite as bad for your health as ... Louisiana.

Crime is the major problem in Mexico; its government's failure to control it is a blight, and Mexican voters should judge their leaders accordingly.  Kidnappings, express or otherwise, should not regularly occur in a country with a halfway professional investigatory service.  In the seven ... practically speaking, eight ... years that I lived in Mexico City both my downstairs neighbor and my best friend suffered carjackings, I lost the entire front end of my 1990 Mercury Cougar when I left it unattended for 15 minutes on a highway access road, and I myself got mugged by cops in Tlalpan. 

That's a lot of crime.  In comparative terms, I managed to traipse around East Harlem, Prospect Heights, Washington Heights, Manhattan Valley, the Lower East Side, and the South Bronx during the 1980s with less experience of mayhem.  (Although I never actually saw any dead bodies in Mexico City, as opposed to three during my youth in Brooklyn and Manhattan.  And no one ever attacked me with a knife on a metro train in el D.F. for no apparent reason.  Nor was my house ever broken into and ransacked.  But the point holds.  Crime is worse in Mexico City than NYC in the bad old days.  I think.)  

In other words, crime is the major problem in Mexico.  And it doesn't help that the cartels have made steps in turning themselves into a Mexican version of the Camorra in states like Sinaloa, or that displaced cartel hitmen have started opportunistically engaging in small-town crime. 

But the Mexican state is not failing.  Mexico is not failing.  Iztapalapa is not failing.  Iztapalapa (and Mexico) has problems, but it is not failing, and little Albano better do his homework.

Senates

  There is a debate going on downblog over the United States Senate. 

Let's take a brief tour of Senates around the hemisphere.  (To which we'll include the Philippines, due to its political history.)  The American example set in 1787 proved very influential, particularly for the larger nations of América.  Did their adoption of an upper house with equal representation for federal subunits make sense?  Did they keep it? 

Argentina:  The Argentine senate gives each province three senators.  That's obviously undemocratic.  Argentina, however, has a historical justification for the practice.  Like the United States, the Argentine Republic began as a federation of independent states.  Unlike the United States, the states that formed the Argentine Republic had very little autonomous political history; most had been created from city councils that simply declared independence in the wake of the political chaos that enveloped South America after 1808.  After a great deal of civil war, including the loss of Bolivia, Paraguay, and Uruguay, provincial forces decisively defeated Buenos Aires in 1852.  A convention that excluded representatives of Buenos Aires hammered out a constitution the next year.  That same constitution has remained in effect since then, at least juridically. 

The convention accepted equal provincial representation in the Senate in order to limit Buenos Aires's dominance.  It also had senators elected for nine-year terms by state legislatures and required them to be able to show a minimum annual income of 2,000 pesos.  (That's approximately US$67,000 today in terms of purchasing power.)  Thankfully, later amendments got rid of those latter features, but equal representation remains.  In short, while there isn't really any good reason to keep the apportionment of the Argentine senate, the institution has deep roots in Argentine political history.  The resemblance to the U.S. case is quite strong.

Brazil:  The senate of the Federal Republic of Brazil gives three senators to each state.  The historical roots of this institution, however, are rather shallower than in Argentina or the United States.  The 19th-century Imperial senate did not provide equal representation for the provinces.  When the empire fell to a military coup in 1889, the new leaders had to find ways to convince provincial elites to support the new government.  One of the ways that they did so was to provide the provincial governments with equal representation in the upper house, in open imitation of the American example.  (In fact, the constitution of 1891 named the country the United States of Brazil.)  Brazil has gone through multiple constitutions since then, but the institution of the Senate has remained.  Unfortunately. 

Mexico:  The constitutions of 1824, 1857, and 1917 all granted equal senate representation to each state.  There was never much historical justification for doing so, other than imitation of the United States.  (Mexican states gained much autonomy during the 19th century, and several declared independence, but that came about after the end of Spanish rule.)  Since the country's governments rarely ruled by the constitution, however, legal stipulations didn't matter.  Under Porfirio Díaz, for example, all legislative votes were unanimous after 1893.  Nor did senators necessarily come from their putative state.  Under those circumstances, the number of senators per state didn't make a difference.  The Revolution didn't change that.  Under President Álvaro Obregón, for example, recalcitrant legislators were often shot.  Then came the creation of the PRI, with its iron-lock over politics, and ‘nuff said.  Constitutional stipulations didn't become more important than party rules until the 1997 midterm election. 

Mexico, however, is now ruled by a democratic government, and the constitutional rules matter a lot.  As part of the transition to democracy, Mexican politicians amended the constitution in 1993 and 1996.  In theory, the reforms granted each state four senators, up from two.  In practice, the reforms created an upper house selected by a weak form of proportional representation.  The winning party in each state receives two seats.  The runner-up receives one.  The remaining 25% of senate seats are then allocated to each party in proportion to their popular vote share.  In effect, the Mexico's current senate keeps the form of equal representation for each state while abandoning much (but not quite all) of the substance. 

The Philippines:  The Philippine Autonomy Act of 1916 created a 24-person senate.  The act grouped the country's 50 provinces into 12 districts, each of which received two senators.  The 1935 constitution of the Philippine Commonwealth dumped that crazy system, but selected something even crazier in its place:   at-large Senate elections.  That is, every voter writes in 12 names.  The top 12 vote-getters then become senators for six years.  The exercise is repeated every three years, making for a total of 24 senators.  The 1987 constitution of the Philippine Republic retains the feature.

The only polity that I can imagine justifiably imitating the United States, Argentine Republic, and Federal Republic of Brazil in the 21st century is the European Union.  Then again, I may suffer from a lack of imagination.