Organized crime hits the development of the Mexican economy

An element of the Civil Guard, after the arrest of 164 people, alleged members of the Pueblos Unidos group, in Michoacán, on August 14, 2022.
An element of the Civil Guard, after the arrest of 164 people, alleged members of the Pueblos Unidos group, in Michoacán, on August 14, 2022.Juan José Estrada Serafin (Cuartoscuro)

The avocados stayed in the trucks in Michoacán. Factory workers were unable to go to work in Chihuahua. Businesses closed in Baja California. The economic impact of the displays of terror and violence that organized crime displayed at the end of last week in different parts of Mexico has not yet been quantified, but it has the private sector on tenterhooks.

When last Friday, armed groups took over highways in the state of Michoacán, near the agricultural city of Uruapan, the United States Embassy ordered its inspectors to stay in their offices to remain safe, reported Juan Carlos Anaya, director of Grupo Consultor of Agricultural Markets (GCMA). This prevented avocados and other export agricultural products from being sold in the neighboring country.

“This time we don’t see any greater damage, at least not in exports,” says Anaya, “but every day the uncertainty grows in the country in the face of these events that organized crime is surpassing the measures that are being taken in the country”, adds the specialist. In 2020, Mexico exported more than one million tons of avocado to the US, 90% of total imports of the fruit from that country.

“The authority has to take measures seriously so that this type of situation does not affect the economy and the people who are working, who depend on being producing,” says Anaya. On Sunday, once the highways were cleared, inspections resumed and, with them, exports of the fruit to the United States. This is the second incident in the avocado market in less than a year. Last February, the Biden government suspended imports for a week, after an inspector working in Michoacán received threats.

Cities of Jalisco, Guanajuato, Chihuahua and Baja California also suffered situations of violence last week, including the burning of cars and trucks, the paralysis of vehicular traffic by armed groups and even indiscriminate attacks against the population that, in the case of Ciudad Juárez , left 11 dead. In the border city, local media reported that factories, many of them owned by foreign companies, worked with fewer staff during the days of violence, as the companies decided to paralyze the transport that takes employees to their workplaces.

In Tijuana, Baja California, an important center of commerce in the country, the streets were deserted last week due to the wave of violence. Restaurants, businesses and even maquiladoras closed, says Gilberto Leyva, former president of the local chamber of commerce, Canaco. “We don’t have the figures yet, but I can tell you that the impact was quite serious,” says Leyva. “The few businesses that did open did so with great precautions. In my 60 years living in this city I had never seen anything like it. The city looked alone”, he adds.

The mayor of the city, Montserrat Caballero, called on organized crime to only go against those who have not paid “their bills” and not against the general public. Although the mayor tried to qualify her statements later, many have understood that she was referring to the extortion bills, the collection of flats. “It is more worrying when a government representative, such as the municipal president of Tijuana, who says that they should pay, and that may be an additional factor to all the inflationary increases that increase costs,” says Anaya, from GCMA.

It has been estimated that insecurity costs the country the equivalent of 1% of its gross domestic product (GDP), José Medina Mora, president of the Employers’ Confederation of the Mexican Republic (Coparmex), said at a virtual press conference on Monday. “This means a very high cost for the Mexican economy that is reflected in the fact that there are no investments or jobs for the vast majority of Mexicans,” lamented Medina Mora.

The organization also called, in a statement, for an “effective security strategy” by the government. “It is urgent that the violence be stopped, the current situation is unsustainable and the absence of an effective strategy against insecurity added to the indifference of the different levels of government, have resulted in fertile ground so that so far six-year term, more than 130,000 intentional homicides have been perpetrated, 10 murders of women per day and only in the last eight months, the murder of 13 journalists, ”says Coparmex.

The main employer in the country, the Business Coordinating Council (CCE) and the maquiladora association, Index, separately expressed their concern about the situation that has the potential to scare away investment, interrupt production and increase the costs of companies . “National Index calls for the public and patrimonial security of all Mexican families, as well as companies and corporations in Mexico, to be guaranteed, as a priority of the national interest, so that the recent uncertainty does not affect the logistics supply chains. with the United States,” the association said in a statement.

Violence versus development

Just a week ago, a text by the US economics and finance specialist, Noah Smith, went viral among economists, academics and businessmen in Mexico. His essay qualifies the country as a “mystery”, since it has the conditions to be a thriving market with high growth rates, but has lagged behind its peers for decades.

“Reducing violence has the best chance of boosting Mexico’s growth,” writes Smith, a Ph.D. in economics from the University of Michigan. “Countries at war always suffer economically, and the violence in Mexico is so intense that it is often seen as a real war. A secure environment is simply a prerequisite for companies to invest and grow. If I were a Mexican leader, that would be my main focus,” he explains. “Meanwhile, the case of Mexico presents a conundrum and anomaly for common development theories,” says Smith.

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