US Warns Travelers of Mexico Drug Violence Threat

| Apr. 15, 2011 |

Published by Minyanville

With relations between the United States and Mexico already tense, notably after the resignation of US ambassador Carlos Pascual last month, US authorities have issued their first official warning that US employees and citizens could be the target of drug gangs in Tamaulipas, Nuevo León and San Luis Potosi.

The warning was by no means prominent, published in a warden’s message from the US Consulate General in Monterrey. However, it marks a rise in the threat level to US citizens, unseen since the killings began. Around 1 million US citizens are thought to live in Mexico with millions visiting on business and for pleasure every year. Both governments have always assured them that they are not the targets of drug violence.

The killing of a US Immigration and Customs Enforcement officer in February added to the perceived threat. According to the State Department, 107 US citizens were killed in 2010, up from 77 the year before. Thirty-nine people were killed in the border city of Ciudad Juárez this weekend.

The news, while downplayed, will likely shock the already tetchy business and tourist industries. Monterrey has seen a spate of killings already this year, pushing many US companies out of the wealthy region.

Extortion is also rife, illustrated by the Christian Science Monitor this week as it followed a family of farmers, forced to pay $66 to local drug traffickers for every truckload of limes they ship from Michoacán, one of Mexico’s more violent states. All packing companies must pay or face having their businesses closed down. Drug gangs set market prices and restrict harvests to limit supplies, according to farmers.

The lime, a staple of Mexican food and drink, has quadrupled in price to almost $4 per kilogram recently. Prices have now dropped, but the cost of avocados has shot up for similar reasons.

It was to this end that Expo-Seguridad, the largest security fair in Latin America, took place in Mexico City this week. Featuring bullet-proof bests, stab vests and armored vehicles, the fair featured more than 300 exhibitors.

The news has not worried W Hotels (HOT), a luxury chain looking to expand in Mexico, with two new hotels scheduled to open their doors in 2014. The high end hotels will open in Mexico City and on the Yucatan coast, both relatively unaffected by drug violence.

There is more good news for Mexico’s economy with President Felipe Calderón announcing a new growth forecast of 4.3% for 2011, compared to the previous 4% estimate. “On the economic front, our country is doing well,” Calderón told bankers. “Mexico is a nation that is advancing and advancing with confidence in its future.”

The economy dropped 6.1% in 2009 and then rose 5.5% the following year. Calderón put the country’s recovery from the global financial crisis down to its strong banking industry.

Auto production rose 26.3% in March from the same period in 2010, according to the country’s Automobile Industry Association. Production of cars and light trucks rose to 240,080 units. Exports rose to 192,783 units, up 17.8% on the same period last year. These figures mark a record for Mexico’s powerful auto industry.

Domestic sales were up 14.8%. The industry generated $64.9 billion in exports in 2010. Banamex data adds that Mexico takes in $41.7 billion from oil, $21.3 billion from remittances and $11.9 billion from tourism. This year is looking promising with $11 billion exported in January and February alone.

Debt levels in Mexico remain among the lowest in Latin America, around 23% of GDP. This has led to two of Spain's largest banks—Banco Santander (SBP) and Banco Bilbao Vizcaya Argentaria (BBVA)—betting on a rebound of Mexico’s economy as they attempt to offset weak growth at home.

As HSBC (HBC) expands in Mexico, life insurance provider Principal (PFG) has agreed to buy the company’s pension business for $198m, adding around 1.6m customers.

China’s increased demand for polyester and nylon is to thank for Alfa’s (ALFFF) first-quarter profit rise of over 100%, taking in $210m compared to $94m in the same period in 2010. Revenue was up 31% to $3.6 billion.