Mexico

I’ve argued in the past that to truly address the security situation, Mexico needs the buy in of its citizens—and particularly of its elites. One way of achieving this is to levy a tax on the wealthy or business owners, those most able to shoulder the costs of this vital public good. There are encouraging precedents elsewhere. In 2002 Colombia’s government and elites agreed to a “democratic security tax” of 1.2 percent on the assets of the country’s top 1 percent. This tax brought in over $800 million a year, providing significant additional resources to combat the cartels. It also helped improve the government’s fiscal management, as part of the bargain was more transparency as to how these new funds would be used. The idea of a wealth tax has yet to take hold in Mexico at the national level. But it has gained ground more locally, and in the areas hardest hit by the violence. In December 2011 the state of Chihuahua levied a 5 percent “surcharge” to the state’s 2 percent payroll tax for security-related projects. This came about through the active efforts of a group of Ciudad Juárez local business owners, determined to rescue and revive their city. To ensure greater transparency, these funds are being placed in an independent public trust. One of the first initiatives supported by these new resources is the Chihuahua Citizen Observatory, an organization designed to measure crime levels throughout the state. While just a start, Chihuahua’s version of the wealth tax is an important step toward a safer city, state, and ultimately nation. It is now up to Chihuahua’s citizens to make sure these funds are spent well, and, by their example, to encourage others throughout Mexico to invest in a safer future.

I recently had the opportunity to talk with Beto O’Rourke, a Democrat running for the 16th District of Texas (El Paso and its environs), and a shoe-in for the seat. Among his many accomplishments, the former city councilman is a published author of the thoughtful if provocative book, Dealing Death and Drugs, which he wrote in 2011 with fellow councilwoman Susie Byrd. In Dealing Death and Drugs, the two El Paso natives outline the drug war’s effects on their city and their sister city, Ciudad Juárez. Beginning with a history of the Juárez-El Paso smuggling corridor, the authors follow the evolution from the mom-and-pop operations of the prohibition era to the horrific cartel warfare of the past few years. They also highlight the tragic consequences of strict enforcement of marijuana laws, not only for the hundreds of thousands of Mexican families caught in the violence but also for American communities (especially minority-dominant ones) torn apart by illegal markets and widespread incarceration. They rightfully challenge two common myths: that marijuana is a gateway drug, and that price increases lower use. Calculating the human and economic costs of drug trafficking and the current policies, they conclude (quite bravely for two public officials) that the “least bad” solution would be the legalization of marijuana. Marijuana would not be freely available, of course, but regulated and taxed. In fact, their suggested policies are quite similar to current tobacco laws—requiring buyers provide proof of age and identification, licensing producers, distributors, and sellers, limiting smoking to non-public spaces, and leading an advertising campaign to inform the public on marijuana’s negative health effects. The authors recognize that legalization is not a silver bullet, able to cure society’s drug-related ills. Other illicit markets (for hard drugs, guns, and human trafficking) would still remain. With marijuana proceeds gone, criminal groups would likely diversify and expand their other illegal activities (a process already under way). The extent to which marijuana legalization would decrease violence (a common argument for critics of current drug policies) is uncertain. Many point to prohibition, and the decline in violence in U.S. cities (especially Chicago) with the re-legalization of alcohol. But one can question whether these trends would repeat in the twenty-first century marketplace, and with a different illegal substance. A more fundamental challenge is forwarded by Emily Owens, a professor at Cornell University. Looking at U.S. statistics from the time, she argues that the prohibition era violence was driven largely by urbanization and immigration trends, not  restrictive alcohol policies. If she is right, then the legalization/violence link is much weaker than most assume. The juxtaposition of the U.S. and Mexican experience also questions the straightforward connection between the drug trade and violence. The United States has much more drug money (being the retail market) and probably more guns than Mexico, but today far lower levels of violence. El Paso and Ciudad Juárez present perhaps the starkest contrast: the Mexican city recorded over three thousand murders in 2010, while El Paso had five. This means that other factors matter, namely Mexico’s weak rule of law. Whatever your take, it is refreshing to see a real debate about drug use and policy by someone who is and will be involved in making these types of policies. I hope it continues when O’Rourke joins the 113th Congress.

Economic ties lead Latin America’s integration efforts. Promising some of the greatest concrete benefits—larger markets, improved livelihoods, and enhanced global economic power—leaders and communities alike have tried to integrate the region through three main means: trade, infrastructure, and investment. In the post-WWII era, governments began creating ambitious trade organizations, such as the 1960 Latin America Free Trade Association, or LAFTA, and its successor, the Latin American Integration Association, or ALADI. Both focused on (and never achieved) an integrated common market. Less ambitious (but more successful) have been the over fifty trade agreements negotiated over the past fifty years between Latin American neighbors, setting the stage for greater economic interchange. A look at the two most prominent economic-based agreements—the Southern Common Market, or Mercosur, and the North American Free Trade Agreement, or NAFTA—highlights the different paths. Created in 1991, Mercosur brought together Brazil, Argentina, Uruguay, and Paraguay, and later granted associate membership (allowing market access with no voting rights) to Chile, Bolivia, Colombia, Ecuador, and Peru (and most recently granted full membership to Venezuela). Its goal was more than just trade, envisioning coordinated macroeconomic policies as well as a functioning regional parliament. Despite the ambitious vision, intra-bloc trade peaked in the mid 1990s. Stymied by the protectionist tendencies of its two largest economies, Brazil and Argentina, regional integration through Mercosur has floundered. This dynamic contrasts with the evolution of U.S., Canadian, and Mexican integration in the wake of the 1994 North American Free Trade Agreement. Though without the breadth of Mercosur (to coordinate government policies and create new political institutions), NAFTA, nearly twenty years on, has spurred deep integration in North America. Trade between the three participants has increased three fold to over a trillion dollars. Even more telling is the integration of regional supply chains. As Robert Pastor, director of the Center for North American Studies explained, “We’re no longer trading products in North America; we’re making products together.” Today 40 percent of U.S. imports from Mexico are produced within the United States—this means that even if it says "Made in Mexico" nearly half of the work was done in the United States. Facilitating the back-and-forth in North America have been networks of roads and train tracks (though with the rise in trade and with age, these are now overwhelmed). The rest of the region is much less physically linked. In South America, roads have traditionally connected communities and production sites to ports rather than neighbors, hampering intra-regional trade. Recent efforts to change this, such as a continental highway connecting Brazil through Bolivia to Peru, have foundered on environmental concerns and protests. Transnational infrastructure has also increasingly extended beyond building roads. There has been a great deal of interest (and some progress) in integrating energy matrixes. The most advanced project is the Central American Electric Interconnection System (SIEPAC), which, when completed, will run an 1800km transmission line from Guatemala to Panama, connecting the region’s electricity systems. Also on the drawing board is the South Gas Pipeline Network, which would link energy production centers in Peru and Bolivia to consumer bases in Chile, Argentina, Brazil, and Uruguay. The United States supports many of these initiatives through the Connecting the Americas 2022 program, which aims to increase electrical interconnections through transnational energy grids. Further along than these state-led efforts is the private sector and foreign direct investment. In 2010 outlays from within the region in their neighbor’s markets hit $43 billion—almost triple China’s $15 billion contribution. And in contrast to other types of investments, money flowing over neighbors borders was more apt to go into financial services, retail, and utilities—value-added activities with more positive trickle down effects for the broader economy. The rapid multilatina growth has also benefited customers. For instance, Chile’s retailer giant, Cencosud, has pushed its stores throughout the region, and now sells products to (and employs) Argentineans, Brazilians, Colombians, and Peruvians. Despite these advancements, regional integration falls short when compared to the rest of the world. The Economist shows that Latin America’s intra-regional trade clocks in at just over 20 percent of all exports, much lower than the EU’s intra-regional exports (70 percent in 2010), or Asia’s and North America’s (50 percent each). This is partly because Latin American countries still continue to trade more with the United States than with each other. But increasingly Latin American nations have also looked inter-regionally for their economic agreements, with Chile and Peru (and soon Mexico), joining the U.S., New Zealand, Singapore, Brunei, Vietnam, Malaysia, Canada, and Australia in negotiations for the Trans Pacific Partnership—which would deepen trade across the pacific countries. If it succeeds, it may signal another turn in Latin America’s economic agreements—Latin American countries integrating with one another while looking abroad together.

Latin American integration efforts have been a continuous fixture throughout much of the last century, but in recent years there has been a flurry of new initiatives, with leaders re-emphasizing regional ties. The increasing number of high-profile presidential and ministerial summits have brought renewed promises and commitments to deepen regional political, economic, social, and developmental cooperation, and have spurred the creation of new political and economic bodies tasked with uniting the region. Though in part due to a global shift toward regionalism, it also reflects the real potential benefits of an integrated Latin America. Economically, the combined markets would give the region substantially more heft on the global stage. Geopolitically, greater unity would enable these nations to garner the United States’ and other world powers’ attention, and better promote their interests in multilateral discussions and negotiations. In general, it could improve the opportunities and wellbeing of the some six hundred million Latin Americans. Latin America’s integration is also bolstered by its widespread support from average citizens. Within the region, polls show that over half of each country’s population (and in some places up to three-quarters) support both economic and political integration. Democratic politicians have played up these visions for electoral gain—most notably, Venezuelan President Hugo Chavez has drummed up support by promoting his integration initiatives (often as the way to foil perceived U.S. regional designs). But Chavez and his contemporaries are not the first leaders to make such promises. South America’s first grand integration efforts began in the early nineteenth century under the leadership of General Simón Bolivar during the wars of independence. He envisioned uniting northern South America into Gran Colombia, and creating a league of American republics with a common military, a mutual defense pact, and a supranational parliamentary assembly. This dream, and Bolivar’s presidency, ended in 1830. After World War II, integrationist efforts reemerged. In 1947 nineteen nations (which later became twenty three) signed the Inter-American Treaty of Reciprocal Assistance (also known as the Rio Treaty), where they vowed to defend each other against outside aggression. The Organization of American States (OAS) followed in 1948 (building on a previous turn-of-the-century institution), promising to promote social and economic development through a four-pronged emphasis on democracy, human rights, security, and development. In the late 1950s the hemisphere came together to form the Inter-American Development Bank (IDB), designed not only to encourage economic development but also to advance regional integration through its internal Institute for the Integration of Latin America and the Caribbean (INTAL). In 1960, Argentina, Brazil, and Mexico led their neighbors in the creation of the Latin American Free Trade Association (ALALC), the first attempt at a regional intergovernmental body. Its goal was to establish free trade throughout the whole region in twelve years (it failed). This effort was renewed in 1980 by the Latin American Integration Association (ALADI), which promoted a more gradual approach to creating a common market (it is still officially in the works). Sub-regionally, Bolivia, Colombia, Ecuador, and Peru came together to create the Andean Community (CAN) to promote Andean integration in 1969. In the late 1980s onetime rivals Argentina and Brazil, began negotiating agreements that evolved into Mercosur (bringing in Uruguay and Paraguay along the way). Bilateral relations have advanced as well, with over fifty trade agreements signed with neighbors in as many years. Yet despite the lofty rhetoric and the proliferation of dozens of agreements, a real question remains—whether there is anything to show for all these integration efforts. Many dismiss the weight of these bodies. Even Secretary of State Hillary Clinton warned that without changes the OAS, one of the longest-standing regional organizations, could soon become irrelevant. The numbers too question the importance of the neighborhood. For instance, the region’s economies still depend more on the United States, the EU, and increasingly Asia than on their neighbors. The next series of blog posts will look at the current state of affairs in different areas of integration: economic (including trade and regulation), political, and social (students, tourists, and migrants). Overall while the dream of regional integration still inspires, it largely remains just that. Nevertheless, there have been significant changes on the ground in the last decade. The development of new political and social organizations, and, as importantly, informal integration through investment, studies, and the workplace has and will continue to have a significant effect on how Latin American countries cultivate closer ties, and, more broadly, the paths future integration efforts may take.

With Mexico’s presidential elections in the past, the focus is now on whether or not President-elect Enrique Peña Nieto will be able to follow through on his many compromisos. My guest post on Michael Levi, Blake Clayton, and Daniel Ahn’s blog, Energy, Security, and Climate, looks at Peña Nieto’s promise to reform his country’s closed energy-sector, and why he may actually be able to achieve what his predecessor could not. The full text is below. Though legal battles are sure to continue, Mexico has chosen its next president. Enrique Peña Nieto will take office on December 1, and his party, the Institutional Revolutionary Party, or PRI, will dominate both houses of Congress. Domestic and international audiences are now looking to the next government to pass the structural reforms needed for Mexico to become more productive, more competitive, and grow faster. This starts with the state-owned energy sector. Enshrined in Mexico’s Constitution, oil reserves are property of the state, and managed by Petróleos Mexicanos, or PEMEX, which retains full, control over exploration, processing, and sales. A modest 2008 energy reform pushed on the margins of this arrangement, allowing Pemex to offer incentive-based service contracts to private firms. These new rules so far have disappointed, with few foreign oil companies substantially upping their foreign direct investment or bringing in the technological know-how needed to unlock potential reserves and boost long term production. Though notoriously a political third rail in Mexico, during the campaign Peña Nieto promised to open up the sector to private investment, à la Brazil’s Petrobras. In a 2011 interview with Financial Times he claimed that Pemex “can achieve more, grow more and do more through alliances with the private sector.” He reaffirmed this position just this week when talking with the press—saying he was convinced that the PRI could reach an agreement on energy through “much negotiation ” between his party and the opposition. Can Enrique Peña Nieto open up the energy sector? Possibly. One consideration is the PRI’s legislative heft. The party gained a plurality, but not majority, in both houses of Congress. Many commentators see this is worrisome for an ambitious reform agenda, predicting a weaker president, and continued gridlock . But energy reform was always going to require a coalition to create the necessary two-thirds constitutional majority. The lack of a majority may make the PRI more willing to come to the bargaining table (and more willing to negotiate in other areas, such as political reform). If they come, they may find a willing partner in the outgoing National Action Party, the PAN. The PRI also has the advantage of counting on the PEMEX union as a political ally rather than an opponent. In fact, the union’s leader, Carlos Romero Deschamps, was just elected to the Senate on the PRI’s proportional representation list, as was the union’s treasurer, Ricardo Aldana. Their presence, rather than stymieing negotiations, may help smooth the process, enabling a Nixon in China moment for Mexico. Another pressure for reform is the reality of Mexican oil exploration and production. Mexico has huge potential, but increasingly recognized limits on PEMEX’s ability to realize these riches. Since 2004 oil output has dropped by roughly a quarter (stabilizing in 2010). Under the status quo many expect further declines, which are worrisome not just for the economy; oil revenues account for a third of the government’s budget. Even if production remains stable Mexico will likely become a net oil importer during Peña Nieto’s tenure. For a party that aspires to remain in power, unleashing additional revenues is vital. In 2008 Mexico passed a more moderate energy reform (many say that behind the scenes Peña Nieto himself blocked a more comprehensive bill). Though disappointing in terms of its reach, it did put energy reform on the table—bringing politicians from across the spectrum, interest groups, and society at large together to debate, discuss, and successfully revise a once sacred cow of Mexican politics. This precedent created the space for contemplating a comprehensive reform today. The path to true change will require serious negotiations both within the PRI and with other parties—most likely with the PAN but perhaps also with members of the Party of the Democratic Revolution, or PRD (some of whom voted for the 2008 reform).  In these few days since the election, both the president and his chief of staff, Luis Videgaray, have repeatedly placed energy reform as top of the agenda. Both know the challenges ahead. But, as the president elect says, “I’m optimistic.”

The integration (once called assimilation) of foreigners into the United States is a long-standing issue. Some fear that today’s immigrants aren’t integrating into U.S. culture and society as past waves did. Mexicans—the largest single group today with some twelve million immigrants—in particular are seen as guilty of maintaining their distance. The late Harvard professor Samuel Huntington summed up these views, writing that Hispanics “threaten to divide the United States into two peoples, two cultures, and two languages,” and generally “lack initiative, self-reliance, and ambition.” Others more sympathetic to Mexican immigrants point to studies that show Mexicans and Mexican-Americans acquire English in similar ways and at similar speeds to previous immigrants. Second and third generations pick up English as fast as—and many faster than—their Italian, German, or Polish predecessors. These supporters also point out that the rules are much stricter than during the great European immigration waves. Still drawn by market forces, their legal limbo keeps them and/or their families in the shadows (making it harder to truly integrate). This camp also denounces the extreme U.S. visa backlog, which can take over a decade (incentivizing illegal entry), and the high number of deportations, which can make Hispanics more fearful of engaging with other sectors of U.S. society. The Mexico Institute at the Woodrow Wilson Center recently released a report by Senior Advisor David R. Ayón entitled, “The Legal Side of Mexican Immigration.” Using data from the Office of Immigration Statistics (part of the Department of Homeland Security), Ayón measures the integration of legal and legalized Mexicans. He looks specifically at permanent residents in the United States, and the over five million Mexicans that either became legal or came to the U.S. legally since 1985. The study finds that Mexicans are less likely to become citizens than other groups in the past, or than their contemporaries (Vietnamese, Indians, Chinese, Cubans, and El Salvadorans all have higher naturalization rates). Instead, many Mexicans remain legal residents for decades. Of the roughly three million that became eligible to apply for citizenship through the 1986 Immigration Reform and Control Act (IRCA), more than half have retained their green Mexican passport. The big question is why. Here Ayón’s analysis of the data points to possible answers. He finds that urban dwellers are more likely to become citizens than those who live in rural areas. This suggests that access to services, information, and greater attention from local politicians motivates legal residents to take the next steps. In other words, and flouting the conventional wisdom, urban ethnic enclaves may increase rather than decrease integration. Other factors that seem to matter—and to increase naturalization rates—are increasing hostility toward migrants, stronger law enforcement, and the prospect of higher application costs. Ayón points out that some of the hurdles for many of the 1986 IRCA beneficiaries are about to go down—English tests are not required for immigrants who have been U.S. permanent residents for more than twenty years, or who are over the age of sixty five. Perhaps the coming years will see a jump in naturalization rates for this cohort. Still, even if a lower percentage than other groups, some 1.5 million Mexicans have become U.S. citizens over the last twenty five years. In 2011 alone 94,000 Mexicans naturalized; more, in sheer number, than any other group, and more than double the next two groups—Indians and Filipinos—combined. Also, whatever their status, they are parents to nine million U.S. natives. These immigrants are and will remain a large and growing part of America’s social fabric. Looking at this data, the challenge is to strengthen, not fray, their connection to the United States.

Twelve years after being voted out of power, Enrique Peña Nieto and the Institutional Revolutionary Party, or PRI, are coming back to Los Pinos, Mexico’s White House. Yesterday Peña Nieto won an estimated 38 percent of the national vote, (roughly 6 percent more than his nearest rival, the PRD’s Andrés Manuel López Obrador) and the PRI looks to become the largest party in Mexico’s Congress. The question now is what the PRI’s return means for Mexico. Systematically, not that much should change. While many fear the return of an opaque and even authoritarian style government, Mexico’s institutions, even with their imperfections, can withstand such an assault—if one should indeed come. In the past decade, Mexico’s Congress has shaped legislation as much as the president; its Supreme Court has shown itself to be independent, often ruling against the government and vested interests; the media has worked to hold those in power accountable; and Mexico’s civil society has also been increasingly vocal in its demands for a transparent and democratic government. These advances provide important checks on abuses of power, and would make it difficult, if not impossible, for the new government to roll the political system back to that of the PRI’s halcyon days. Government policies are where Mexico might see real changes. Enrique Peña Nieto faces many serious challenges. The most pressing is security. To diminish the violence, Mexico needs to build on and expand efforts to professionalize its police, moving beyond the federal to state and local forces. The new president also needs to make judicial reform a reality. In 2008 Mexico passed a series of constitutional and legislative reforms to fundamentally transform Mexico’s justice system, introducing oral trials, better ensuring the presumption of innocence, and improving access to an adequate defense. But the law gave the states until 2016 to implement the changes, and so far efforts have lagged. Mexico’s security and basic public safety depends on Peña Nieto getting behind this reform, as without a strong justice system a democratically based rule of law will remain elusive. Economically, domestic and international audiences alike will be looking to the next government to pass the structural reforms needed for Mexico to become more productive, more competitive, and grow faster. This starts with the state-owned energy sector. Though notoriously a political third rail in Mexico, during the campaign Peña Nieto promised to open up the sector to private investment, à la Brazil’s Petrobras. Also on the business sector’s docket is labor reform to make hiring and firing less rigid; codes that keep many in the informal (and much less productive) sector. And, with tax collection rates some of the lowest in the hemisphere, Mexico needs a fiscal reform, boosting revenue both to replace diminishing oil intakes (now nearly a third of federal government revenue) and to better fund vital public goods—such as infrastructure, social security, and basic safety. Finally, Mexico needs to strengthen its regulatory agencies in order to level the often uneven economic playing field. Enrique Peña Nieto will take office on December 1, 2012. The coming weeks and months will provide hints at how the president-elect will govern as he begins to fill cabinet posts, prioritize issues, and outline policies. What is clear is that the new government needs to make the most of its electoral momentum. If the PRI pessimists are correct, and these opportunities go wasted, Mexico will continue to fall behind its global peers. But if Peña Nieto makes the most of his political capital and pushes through much needed changes, he and the PRI can help Mexico on its way to a better place, both at home and on a global stage.

Earlier today, Rex Tillerson, Exxon Mobil’s CEO, gave a talk here at the Council on Foreign Relations in which he outlined the global oil and energy markets trajectory during the past five years. He focused his prepared remarks on the promise of North America, and its potential to finally bring about “energy security” in the United States. Tillerson emphasized not just the like-minded policies and geographic ties, but the vast resource base—today the combined U.S., Canadian, and Mexican oil output tops fifteen million barrels a day (more than Saudi Arabia or Russia), and could grow in the coming decade to some eighteen million. As the head of one of the largest oil company in the world, Tillerson spent much of his time talking about natural gas—suggesting more than anything else that this is where he and Exxon see the future. This is backed up by Exxon’s recent actions—including a $35 billion investment in XTO, an oil and natural gas company. The purchase (followed up by other smaller ones) has made Exxon the largest gas producer in U.S. In the question and answer period Tillerson also touched on many other issues, ranging from climate change to educational needs. You can read the transcript of the event here or watch the video here.

Mexico’s presidential candidates have promised to shift their country’s security strategy away from drug trafficking to focus on violence reduction. My new op-ed on CNN.com describes what is being discussed and what this could mean for both Mexico and the United States. With just a few weeks before Mexico’s July 1 presidential election, the candidates’ campaigns have been mostly driven by personalities and vague promises. Yet some policy glimpses have emerged, particularly in the security realm. All the candidates have pledged a major shift, making violence reduction a priority over President Felipe Calderón’s war on narcotraffickers, which has been carried out with U.S. cooperation. Front-runner Enrique Peña Nieto told the New York Times recently that he would focus on reducing homicide rates and not on catching cartel leaders. It is not just Peña Nieto endorsing this approach. Calderón’s own National Action Party candidate Josefina Vázquez Mota promises on her website that "results will be measured not by how many criminals are captured, but by how stable and secure the communities are." This shift reflects, in part, the changing realities on the ground. In 2007, when Calderón began his quest, there were a little more than two thousand drug-related homicides in Mexico. By 2011, the number had escalated to more than sixteen thousand drug-related murders. The violence spread from the border and state of Sinaloa to include the once-safe industrial center of Monterrey and major cities such as Acapulco, Durango and Guadalajara. Mexico’s criminal organizations diversified their operations, delving into extortion, kidnapping, robbery, human trafficking and retail drug sales, thus preying more directly on their fellow citizens. In some places, the escalating bloodshed is as much the work of local gangs concerned with rivalries and honor as it is of drug transit. The candidates’ promises of change are also political calculus. Security rivals the economy as the top concern of Mexican voters, and 79 percent of them don’t believe the current strategy is working. Yet some 80 percent of Mexicans say they don’t want the government to capitulate to criminals by making deals with cartels or gangs. In response, the candidates are promising to lessen impunity and strengthen federal, state and local law enforcement. This shift isn’t necessarily bad for Mexico—or the United States. Close U.S.-Mexico security cooperation has already evolved from the priorities of the 2007 Merida Initiative. The approach has moved from a focus on hardware (helicopters, speedboats and armored vehicles) to software (police and prosecutor training, border investment and community development). The candidates’ proposals represent just a further development along these lines to help Mexico create a functioning democratic rule of law. A change in Mexico’s security strategy probably will do little either to stem or encourage the flow of drugs into the United States. With an estimated market size of roughly $70 billion a year, the U.S. represents the largest illegal drug market in the world. Although Americans’ preferred substances have evolved over time, illegal drug use remains widespread. According to the most recent National Survey on Drug Use and Health, sponsored by the U.S. Department of Health and Human Services, nearly one in ten Americans age twelve or older reported using illicit drugs in the past month. Yet despite the significant amounts of drugs and drug money flowing within the fifty states, U.S. streets today are safer than they have been in twenty years. In large part, this is because of the strategic choices by local, state and federal authorities to focus not on drugs but on violence. In cities across the United States, police forces don’t just go after drug trafficking, but work to influence the way the drug business is conducted. The most well-known shift happened in New York City in the 1990s when the police force began rewarding officers for lowering crime rates on their beats rather than for making arrests. If Mexico works to reduce violence while building up professional police forces and clean courts, it could make streets safer there as well. In this, Mexico is, in many ways, following the United States’ own history and example. And even though this represents a shift away from the U.S. focus on curbing the flow of drugs, the United States should support this shift and continue to help Mexico.

Last year foreign direct investment (FDI) in Latin America continued its surge, topping $150 billion, an all time high for the region. According to the Economic Commission for Latin America and the Caribbean’s report “Foreign Direct Investment in Latin America and the Caribbean,” the inflows climbed 31 percent—the most of any region and three times Asia’s growth rate—and now represent just over 10 percent of total global investment (breaking into the double digits for the first time as well). While nearly all countries gained, the largest recipient, unsurprisingly, was Brazil. There, investments rose by 37 percent, and in a change from the past, flowed mostly into the manufacturing and service sectors (the largest single investment coming from the German conglomerate ThyssenKrupp’s construction of a $7 billion steel exporting plant). Inflows to Mexico and Central America were also led by manufacturing and services (including tourism, banking, and the automotive sectors). Only in South America (excluding Brazil), did most of the investment remain in commodities and natural resources. Despite tough times at home, Europe led with some $35 billion in investment. Anecdotes suggest that the profitability of Latin American subsidiaries and operations have helped keep some European companies afloat (for instance the Spanish banks Santander and BBVA). Following in total inflows was the United States, and, if taken in the aggregate, other Latin American states (which invested nearly $23 billion). Interestingly, these countries, Japan, and Canada all outpaced China’s involvement. The report also touches on the quality of FDI flows, and its potential to transform Latin America’s economies for the better through job creation, technology transfers, capacity building, and the like. Here the story is better than in the past, but still cautionary. More investment (now over one-third) went into what can be considered medium-high tech sectors, such as chemicals, autos, and machinery. Most of this uptick occurred in Latin America’s largest economies, Brazil and Mexico. The study also shows that investment in high end technology and research and development remains small (less than 5 percent) and concentrated in Brazil. Foreign direct investment is a useful gauge of investor confidence and, indirectly, potential economic growth. Here Latin America’s decade of macroeconomic stability, natural resource endowments, and expanding domestic markets (due to a growing regional middle class) have drawn increased attention and dollars. The challenge for the region is to funnel the growing investment to benefit its citizens alongside these international companies and investors, creating jobs, enhancing learning, and increasing productivity in ways that will let Latin America compete globally in the long term.

In the economic development world, one of Latin America’s claims to fame are its conditional cash transfer programs (CCTs), which provide direct money transfers to low-income families who send their children to school and/or get basic health care. A few of these programs, such as Bolsa Família in Brazil and Oportunidades in Mexico, reach millions of families (some 20 percent of the two countries’ households). Others are smaller and more targeted toward the extreme poor, such as Chile Solidario in Chile, Familias en Acción in Colombia, and Bono de Desarrollo Humano in Ecuador. Most now boast at least a decade in place, providing a track record to test their reach and effectiveness. One of the CCT programs’ biggest achievements is keeping more kids in school. Studies of Colombia’s, Ecuador’s, and Brazil’s programs all show increases in school enrollment and attendance. The effects on educational achievement (as measured by standardized tests) are more elusive. In fact some reports show students as a whole falling behind, as schools struggle to incorporate the influx of students (some that had dropped out of school and/or that require more concentrated attention to bring them up to grade level). Now with a larger captive audience, the next important, if difficult, step for these governments is to improve the quality of education. Studies also show CCT programs help reduce poverty and inequality. In the last two decades the number of poor declined sharply, from almost 50 percent to roughly 30 percent of the region’s population. Cash transfers mattered, especially for the extreme poor, where inflows make up fairly large shares of their income (up to 25 percent for Mexico’s absolute poorest). One International Poverty Center for Inclusive Growth study calculates that Bolsa Família lowered Brazil’s poverty rate by 8 percent, and reduced the severity of poverty by even more (21 percent). A separate evaluation of Colombia’s Familias en Acción revealed similar results; extreme poverty among participants dropped between 12 and 17 percent. In addition to poverty, these programs reduced inequality. A study by Rafael Guerreiro Osório, Fábio Veras Soares, Marcelo Medieros, and Eduardo Zepeda, revealed that CCT programs were second only to labor income increases in reducing the Gini coefficients in both Mexico and Brazil. The effects on healthcare seem to be more mixed. A 2011 evaluation by the International Food Policy Research Institute found Bolsa Família recipients twelve to fifteen times more likely to immunize their children and pregnant women an average of 1.5 times more likely to visit a doctor than their non-participating peers. In contrast, a 2007 report by Brazil’s Ministry of Social Development saw little impact on vaccinations. The difference may in part reflect the expansion of Bolsa Família into areas with few clinics, but the conflicting results leave questions regarding the program’s effectiveness. What CCT programs don’t seem to do is keep people from working (a somewhat common critique by those who fear that the subsidies reduce the incentives for recipients to get jobs). Studies of Chile and Brazil show the reverse; the programs boosted labor force participation (by 2.6 percent). Another World Bank study shows that Bolsa Família  increased self-employment. Though a few voices argue that CCT programs provide money for conditions that are already being met (the majority of Latin American children from low-income families are already in school), most researchers find that these countries are getting a substantial bang for their buck. Budgets for even the biggest programs in Brazil and Mexico make up far less than 1 percent of GDP. These targeted transfers are not a panacea for the ills facing so many nations, but by most measures they are a strong step forward, providing immediate benefits to the poor, and hopefully (if complemented by other programs) creating a longer term path for them to become better educated, healthier, and more productive citizens.

Here is a piece that I wrote for ForeignAffairs.com on the upcoming Mexican elections and the prospects for the PRI. After voting the Institutional Revolutionary Party (PRI) out of Los Pinos, Mexico’s presidential residence, twelve years ago, the country looks poised to bring it back. The PRI’s candidate, Enrique Peña Nieto, continues to lead the majority of electoral polls by double digits, making it increasingly unlikely that his rivals will catch up by the time polls open on July 1. The same goes for Mexico’s Congress. With every seat up for grabs, the PRI looks to make headway and perhaps gain a majority in both houses. Political rivals and anxious commentators question whether a PRI victory will return Mexico to its less than democratic past. After all, for decades the PRI maintained control by buying votes, co-opting the opposition, and, at times, wielding a heavy repressive hand. Denise Dresser, a prominent Mexican political analyst, has written that the party "continues to be a club of corruption, a preserve of tightly linked political and business interests, a network woven together through the constant exchange of favors and positions, negotiated in the shadows." Meanwhile, an often repeated phrase sums up the view of a significant part of the Mexican population: "They may have been corrupt, but they knew how to govern." For its part, Peña Nieto’s campaign dismisses such concerns by arguing that the PRI today is made up of "a new generation of politicians, one that grew up in this democratic regime." In his stump speech, the candidate has repeatedly assured potential voters that he will not "reinstate the past that we overcame" and positions himself as the face of a new forward-looking political organization. Whether the PRI set to take power is a new version of its old self is less important than the fact that Mexico’s democratic institutions will hem in the next president, regardless of party or personal preferences. Today, the PRI casts a wide ideological umbrella, encompassing just about everyone from market-friendly technocrats to progressive nationalists. It embraces polling gurus and media-savvy political operatives alongside traditional union and campesino bosses. These various groups have coalesced behind Peña Nieto, determined to move past their embarrassing third-place finish in the 2006 elections (due in large part to deep party divisions) and regain power. On the surface, Peña Nieto’s team does look fresh and new. The candidate’s inner circle is full of youthful, foreign-educated advisers—most of whom were just youngsters during the last halcyon days in the 1980s and early 1990s of the PRI’s seventy one year rule. His campaign manager, Luis Videgaray, is a forty three year-old MIT graduate. Other upper-level staffers have degrees from Harvard, Oxford, and the University of Pennsylvania, and they come to politics from academia, multilateral organizations, and even a New York-based hedge fund. But the old guard lingers. Well versed in the backroom power brokering of the past, figures such as former President Carlos Salinas de Gotari, Emilio Gamboa Patrón (whose high-level positions within the PRI span some thirty years), and members of the notorious State of Mexico political machine have all been seen in the company of the glossy new candidate. Their backing Peña Nieto led some Mexican commentators to dub him a "baby dinosaur," essentially a young acolyte to the PRI’s fossilized past. So far, Peña Nieto has maintained his lead by using vague proclamations and personal promises to unite disparate factions. But this cohesion will be much harder to maintain if the PRI begins to govern. If Peña Nieto triumphs, he will have to make cabinet choices and install his main operatives; likewise, he’ll need to set an agenda. In doing so, he will have to choose between the young guns and the old guard. But whatever he decides, Mexican democracy has evolved in ways that make a return to wholesale PRI dominance unlikely. Consider how the role and power of the legislative and judicial branches have changed since the 1990s. During the old PRI’s heyday, Congress was little more than a rubber stamp, with the PRI’s delegates rarely questioning the edicts of their president. Now, Congress is a real fulcrum for negotiations and debates between Mexico’s three main parties. Even if the PRI gains a majority in both houses, the administration will need the support of at least a segment of the opposition to pass the big-ticket items on the agenda—energy, tax, labor, and political reform—some of which would require constitutional changes. Unlike the PRI of the past, whoever wins will need to work with the opposition in order to govern. Likewise, the Supreme Court is more powerful than in decades past. It now provides a check on the president and on vested interests. In the old days, the justices blessed whatever legislation came their way. But in the 1990s, President Ernesto Zedillo reorganized and professionalized the court, creating an independent institution as a hedge against an opposition takeover, which had begun to look increasingly likely. Since then, the court has become an independent and final arbiter on many political issues—it has passed judgment on topics as diverse as the constitutionality of new legislation, the rules governing elections, and the jurisdiction of civilian courts over the military. Underscoring the point, in 2007 the Supreme Court took on two of the most prominent interests in the private sector when it overturned the widely decried "Televisa law," legislation that sought to assure the continued duopoly of the Televisa and TV Azteca networks by automatically renewing their licenses, giving them preferential access to new bandwidth, and limiting competition. Mexican newspapers and analysts heralded the court’s reversal of the law, which flew in the face of old PRI interests, as a step forward. More recently, the court ruled that regulatory edicts become effective immediately (rather than after completing a lengthy appeals process), strengthening the power of regulatory agencies vis-à-vis other powerful business interests. On a broader scale, over the last twelve years, power has been increasingly decentralized, making a return to the PRI’s historical hallmark, the "imperial presidency," virtually impossible. Once upon a time, a leader such as Carlos Salinas—president from 1988 to 1994—could dismiss half of the sitting governors during his term without a hint of blowback. Today states and their elected leaders are autonomous, both politically and increasingly economically, from the federal government. In fact, states wield great power at the national level through their federal senators and representatives (who now often depend on the favor of the governor to stand for office). Peña Nieto knows this—he spent six years as governor of the State of Mexico. Although many scholars argue that this decentralization has not in fact been good for democracy—protecting the last bastions of authoritarianism in less electorally competitive states—it will nevertheless deter a return to the old political model in which Los Pinos could steamroll regional-level executives. Civil society is stronger in Mexico today, too. A few decades ago, if the PRI found itself displeased with news coverage, it could literally stop the presses, as it held a monopoly on newsprint. Now Mexico has developed a vibrant and fiercely independent press, led by El Universal, Reforma, and La Jornada. Mexican voters and society have also gained a stronger voice, using social media and information now publicly available through Mexico’s freedom of information law to shame corrupt bureaucrats and politicians. Mexico’s democracy still struggles with deep-rooted vested interests, and the country has a limited set of tools for ensuring open, accountable, and responsive government. A forward-looking democratic administration could push doors open further by investing in political reforms to encourage elected officials to be more accountable to their constituents, fully implementing the country’s judicial reforms, and ensuring the continuation of a free press and active civil society. All these moves would benefit the country’s economy, politics, and society. A misaligned government could, of course, fight to roll back gains in transparency and openness, and delay efforts to take on systematic corruption. But the fundamentals of democracy in Mexico seem here to stay, whatever the intent of the future resident of Los Pinos.

In 2008 Mexico passed a series of constitutional and legislative reforms that, when implemented, should fundamentally transform its justice system. The reforms are designed to improve public security and the administration of justice, moving Mexico’s courts from a system of written evidence to one of oral trials and bolstering due process rights for the defendant by ensuring the presumption of innocence and better access to an adequate defense. Law enforcement agencies will also see changes, as the reforms give police a larger role in criminal investigations and stronger tools to take on organized crime such as the arraigo, which allows authorities to hold suspects for up to eighty days. The deadline for the reform’s implementation was set for 2016. This week the Network for Oral Trials (composed of over a hundred civil society organizations) is gathering in Mexico City for the fourth forum on judicial reform, entitled “Four Years of Judicial Reform: What Still Needs to be Done.” Founded in 2005, the Network for Oral Trials has brought together lawyers, academics, and other activists to promote changes to Mexico’s justice system. Starting at the state level, the Network galvanized around federal negotiations over judicial changes, culminating in the 2008 reforms. Now four years on, many are worried about Mexico’s judicial future. Though technically halfway through the transition phase, less than half of Mexico’s states have taken steps to change their justice systems, and the policies put in place vary. Pioneers such as Chihuahua (which implemented its own state level shift in 2007, before the federal reform) have backtracked, reviving many elements of the older inquisitorial-style system, such as permitting hearsay (effectively undermining the rights of the defendant). The federal government is also still wrangling over its own role, with legislation to guide the states caught up in Congress. During a speech on Tuesday at the forum, President Calderón chastised Mexico’s legislators for dragging their feet. “It doesn’t matter if they are in recess,” he said, “in any moment they could hold an extraordinary session and resolve it [the legislation].” Moving forward requires not just these federal and state legislative changes. It will also entail investing billions of dollars to create or remodel courtrooms, train Mexico’s roughly forty thousand active lawyers and thousands of judges, and revamp law school courses and materials. This undertaking will require the political resolve and concentrated focus of Mexico’s next administration, especially to overcome those resisting change. The high level attendance at the forum—in addition to Calderón’s appearance, the three presidential candidates will also address the group on Thursday—attests to the influence of these civil society organizations. But Mexico will need more than discussions to meet its deadline.