Mexico's War on Drugs Back in Spotlight Following Casino Massacre

| Sept. 2, 2011 |

Published by Minyanville

Mexico is being once again forced to re-examine its war on drugs, following last week’s attack on a Monterrey casino which left 52 dead. It was the worst attack on civilians in Mexico since President Felipe Calderón’s presidency—and hard-line war on the cartels—began in December 2006. Since then, more than 42,000 are known to have died.

Eight men entered the Casino Royale in the wealthy city of Monterrey—a hub for big US and Mexican business including General Electric (GE) and Cemex (CX)—last Thursday, doused the entire building with gasoline and lit it before making their escape. Within minutes, the two-story complex was ablaze, many of the victims holed up in restrooms.

Five members of the Zeta cartel were arrested earlier this week for involvement in the attack, conveying a message that Calderón has spent his entire presidency pursuing—that he will bring perpetrators to justice. “It’s clear that we are not confronting common criminals, we are confronting true terrorists,” Calderón said.

The president is keen to pass at least some of the blame to the United States, Mexico’s northern neighbor that not only leverages demand on the drugs that fuel the violence but also, allegedly, stokes the fire with the southward flow of guns. Calderón demanded more action from the US. “You are also responsible,” he said curtly.

The attack is thought to be down to extortion by criminal gangs. Many former businesses in the country’s worst affected areas, such as Ciudad Juárez on the border with El Paso, Texas, are burnt out, gutted by criminals as the owners fail to pay the "tax" owed to them. However, in the same Dante-esque city, big business thrives. For example, shopping malls are numerous and untouched.

“It is worth remembering that extortion happens almost exclusively to relatively small businesses with a physical and highly visible presence on the high street,” writes Adam Thomson in the Financial Times. “For the vast majority of foreign companies, extortion has not been an issue.”

It is this that leads investors to believe that foreign investment will not falter in Mexico, despite the huge security risks. Thomson points out that foreign direct investment in Monterrey has grown year-on-year and is likely to hit $20 billion in 2011. “While Thursday’s attack will be of concern to everyone, it is unlikely to detain the rhythm of foreign direct investment,” writes Thomson.

Much of the foreign investment in Mexico goes into factories such as the infamous maquiladoras. Ford (F), General Electric, General Motors (GM), RCA and Chrysler all run maquiladoras in the state of Chihuahua, however, they are often blamed for many of the region’s problems. “Maquiladoras are the cause of all our social ills in Juárez because of the problems they have generated in the family,” said Marisela Ortíz, a former teacher and activist against the killing of hundreds of women in Juárez.

Bloomberg’s editors have taken a shot at assigning blame in Mexico’s war on drugs. “It is … important that Mexicans and their US neighbors take a step back, understand the nature of Mexico’s war against the drug gangs and take appropriate measures to win it,” they write.

However, the United States is exonerated. “Many Mexicans believe that the US is responsible for the rise of the drug cartels. That is … wrong,” continue the editors, suggesting that if it is only easy access to guns that is to blame, then Texas too would be rife with crime. The authors ignore the wider impact of US policy and ultimately the Free Trade Agreement, which many claim has caused such disparity of wealth in Mexico.

US officials have been forced to quit after a botched operation attempting to track gun flow into Mexico. The acting director of the Bureau of Alcohol, Tobacco and Firearms (ATF) Kenneth Melson, as well as Arizona Attorney Dennis Burke resigned after Operation Fast and Furious saw US agents allow thousands of guns into Mexico, hoping to track them. Hundreds went missing and dozens have turned up at crime scenes.

Mexico’s government has been forced to launch its own corruption probe, as a Mexican newspaper printed images of the brother of the mayor of Monterrey appearing to receive wads of money on three occasions at a casino, days before the deadly attack there.

The drug wars, and associated corruption, are a huge headache for Calderón politically. While he is unable to stand in next year’s presidential elections, his National Action Party (PAN) will feel the impact of its failures. Lawmaker Josefina Vazquez Mota is the favorite to represent the party, however, must distance herself from Calderón’s hopeless strategy.