Tag: Mexico

Making Sense of Drug Violence in Mexico with Big Data, New Media, and Technology

Yesterday we hosted a very interesting event with Google Ideas about the use of new media and technology information in Mexico’s war on drugs. You can watch the whole thing in the video below.

Unfortunately, one of the biggest casualties from the bloodshed that besets Mexico is freedom of the press. Drug cartels have targeted traditional media outlets such as TV stations and newspapers for their coverage of the violence. Mexico is now the most dangerous country to be a journalist. However, a blackout of information about the extent of violence has been avoided because of activity on Facebook pages, blogs, Twitter accounts, and YouTube channels.

Our event highlighted the work of two Mexican researchers on this topic. Andrés Monroy-Hernández from Microsoft Research presented the findings of his paper “The New War Correspondents: The Rise of Civic Media Curation in Urban Warfare” which shows how Twitter has replaced traditional media in several Mexican cities as the primary source of information about drug violence. Also, we had Javier Osorio, a Ph.D. candidate from Notre Dame University, who has built original software that tracks the patterns of drug violence in Mexico using computerized textual annotation and geospatial analysis.

Our third panelist was Karla Zabludovsky, a reporter from the New York Times’ Mexico City Bureau, who talked about the increasing dangers faced by journalists in Mexico and the challenges that new media represent in covering the war on drugs in that country.

Even though Enrique Peña Nieto, Mexico’s new president, has focused the narrative of his presidency on economic reform, the war on drugs continues to wreak havoc in Mexico. Just in the first two months of the year over 2,000 people have been killed by organized crime. 

At the Cato Institute we closely keep track of developments in Mexico and we have published plenty of material on the issue, including:

Watch the full event:

And for those who speak the language of Cervantes, here’s a ten minute interview that Karla Zabludovsky and I did on CNN en Español about the Cato event.

Mexico’s Drug War and U.S. Policy: New Cato Video

Since President Felipe Calderon took office six years ago and decided to aggressively fight Mexican drug cartels, Mexico has seen some 60,000 drug-war-related deaths. That’s “more than the number of Americans who died in Vietnam, but in a country with one third the U.S. population,” says former Mexican Foreign Minister Jorge Castañeda.

In a new Cato video released during President-elect Enrique Peña Nieto’s visit to Washington this week, Ted Carpenter explains why the U.S.-backed drug war has been a disaster and urges an end to prohibition. For an in-depth look at the issue, read Ted’s new book, The Fire Next Door: Mexico’s Drug Violence and the Danger to America.

You can read more Cato scholars’ writings on the War on Drugs here.

You Say Tomato and I Say Tomate; Let’s Call this Whole Antidumping Racket Off

Last month, on the day the president was addressing audiences in the auto-parts-factory-rich state of Ohio, the administration filed a formal trade complaint before the World Trade Organization alleging that China is subsidizing exports of automobile parts.

Last week, at the request of domestic tomato producers operating preponderantly in the state of Florida, the Commerce Department agreed to terminate a 4-year-old agreement, which has allowed tomatoes from Mexico to be sold in the United States under certain minimum price conditions.

Of course it would be cynical to believe that these actions have anything to do with an incumbent candidate wielding Executive branch authorities to curry favor with special interests in major swing states before an election. So let’s make this latest episode a teaching moment about the perils of the antidumping status quo.

The long-standing – but vaguely understood – “trade agreement” between the United States and Mexico that was terminated last week was an agreement between Mexican tomato producers and the U.S. Department of Commerce to “suspend” an antidumping investigation that had been initiated at the request of U.S. tomato producers back in 1996. At the time, U.S. producers alleged that they were being materially injured by reason of tomatoes imported from Mexico and sold at “less than fair value.” The U.S. International Trade Commission agreed, preliminarily, on the issue of injury and the Commerce Department had calculated that the Mexicans were, in fact, dumping – selling in the United States at prices below “fair value.” (Here and here are two of many Cato exposés of what passes for objective administration of the antidumping law at the Commerce Department.)

But instead of carrying the investigation through to the final stage which likely would have included the imposition of duties, a “suspension agreement” was reached under which the Commerce Department would suspend the antidumping investigation if the Mexicans agreed to certain terms – most importantly, that they sell their tomatoes above a minimum benchmark price.  Understanding why the parties would agree to suspend an investigation – and why there are only seven suspension agreements among 240 active antidumping measures – is important to understanding one of the most anti-consumer, anti-competitive aspects of the U.S. antidumping law.

In an antidumping investigation, the Commerce Department calculates a dumping “margin,” which is purported to be the average difference between the foreign producer’s home market prices and his U.S. prices of the same or similar merchandise sold contemporaneously, allocated over the average value of the producer’s U.S. sales, which yields an ad valorem antidumping duty rate. That rate is then applied to the value of imports, as they enter Customs, to calculate the amount of duty “deposits” owed by the importer.

So, if a Mexican tomato producer’s rate has been calculated to be 14.6% and the value of a container of tomatoes from that producer is $100,000, then U.S. Customs will require the U.S. importer of those tomatoes to post a deposit of $14,600. Why is it called a deposit? Because the final duty liability to the importer is still unknown at the time of entry. The 14.6% is an estimate of the current rate of dumping based on sales comparisons from the previous year. But the actual rate of dumping for the current period – and, thus, the actual cost of importing tomatoes from Mexico – is unknown until completion of an “administrative review” of the current period’s sales by the Commerce Department, which occurs after the period is over.

In other words, because of the unique retrospective nature of the U.S. antidumping law, importers DO NOT KNOW the amount of antidumping duties they will ultimately have to pay until well after the subject products have been imported and sold in the United States. The final liability might be larger, much larger, smaller, or much smaller than the deposit. If smaller, the importer gets a refund with interest. If larger, the importer owes the difference plus interest.

How many business ventures would be started – or even qualify for a loan – with so much uncertainty about its operating costs? Imagine your local supermarket operating on the same principles. Imagine ringing up your basket-full of groceries, paying $122.45, and then waiting a year to find out whether you get a rebate or have to issue a supplemental check. Gamblers might enjoy the thrill, but this kind of uncertainty is anathema to business. Most grocery shoppers would buy their groceries somewhere else, where the prices are final.  Likewise, importers and other businesses in the supply chain are likely to stop doing business altogether with exporters who are subject to antidumping measures.

Such is the consequence of our ”retrospective” antidumping system. Every other major country that has an antidumping law has a “prospective” system, whereunder the duties assessed upon importation are final.  And this brings us back to Mexican tomatoes.

The suspension agreement terminated last week had been in effect since 2008 and required Mexican producers to sell their tomatoes at prices above $0.17 per pound between July 1 and October 22 and above $0.22 per pound between October 23 and June 30.  (That agreement was actually the third suspension agreement governing the terms of Mexican tomato sales in the United States since 1996.  The previous two were terminated at the request of the Mexican producers, presumably because market conditions had changed, and they were seeking better terms.)

The advantage of a suspension agreement is that it brings a degree of certainty – even if prices are higher.  It would be collusion but for the fact that the deal is struck between foreign producers and the Commerce Department and not between foreign producers and U.S. producers.  Occasionally, domestic producers desire certainty because its always possible that antidumping rates will decline in subsequent years. But foreign producers are more inclined to covet the certainty of a suspension agreement because the uncertainty that would otherwise confront their customers – U.S. importers – is often enough to chase them away entirely. And that helps explain the dearth of suspension agreements.

The retrospective nature of the U.S. law is just another example of how the antidumping regime is punitive and not remedial.

Trade Problems May Not Always Call for Trade Answers

The federal system of government in the United States has the invaluable consequence of enabling policy experimentation.  If a state legislature is considering adopting a particular policy, it can often look at the experiences of other states that have tried that policy before.  A recent study from the Milken Institute in California tries to take advantage of such potential comparisons to offer ways that California could increase its dwindling share of U.S. exports.  It is a valiant effort, but California’s decline is not the consequence of inadequate trade policy and no amount of export promotion is going to fix it.

The study begins by comparing California’s decline in export share to the dramatic rise in cross-border trade originating from Texas, the nation’s leader in goods exports. After using Texas’s success as an example of how California is lagging behind, the study decides not to use Texas as a model for reform and instead focuses on other states that have used export promotion (subsidy) agencies as case studies for how California can improve its bureaucracy to reverse the current trend.

If the success of Texas is what California should seek, then why not look at Texas as a model for reform? The study says that Texas is “unique” because it 1) has no export promotion agency, 2) has a low cost of doing business, and 3) has benefited from increased trade with the growing economy of Mexico by virtue of NAFTA-enabled integration. These differences seem to point to clear policy choices: don’t worry about export promotion (easy), improve your state’s business environment, and be close to Mexico (done!).

If it becomes more business-friendly, your state will have more business, export-oriented business included.  Since we’re looking at Texas as a model, may I suggest improving the business environment by lowering taxes and reducing regulation.

Now, I realize that the Overton Window for politically feasible reform proposals in California may not include lowering the cost of doing business. It makes a lot of sense for the authors of the study to point out the root causes of different outcomes in Texas and California but still seek a different solution more palatable to Californian sensibilities. I think their specific proposals for enhancing the capacity and quality of the export promotion process are insightful and well-supported.

There is a larger lesson in all of this for national economic policy. Increasing exports through the National Export Initiative has been a major goal of the Obama Administration’s economic recovery plan, and subsidizing loans through the Export-Import Bank has been a primary tool in that endeavor. But the people of the United States don’t need more bureaucracy to engage in more trade. They need policies that remove artificial barriers and decrease the cost of doing business—international and otherwise.

Bad Signs from Mexico’s Incoming President

Last week I attended the annual meeting of the Economic Freedom Network organized by the Fraser Institute in Mexico City. But I was also on a mission: to find out what the deal is with Enrique Peña Nieto, the country’s incoming president.

After his election in July, many people asked me what to expect from Peña Nieto.  Is he committed to reforms? How’s he going to tackle drug violence? Is he an old dinosaur from the long-ruling and corrupt Institutional Revolutionary Party (PRI) with a fresh face and a good looking wife? I couldn’t come up with good answers even though I watched the presidential debates, followed the campaign closely, and read several good analyses on Peña Nieto and his team. Fortunately, I realized I wasn’t actually dropping the ball with my work. In Mexico, I could see first hand that nobody really knows what Peña Nieto is all about.

However, we might be getting some hints during this long five-month transition period. And it doesn’t look good. Reforma, a leading newspaper, reported yesterday that Peña Nieto and his team are studying the creation of six new cabinet departments for the following areas: telecommunications, women’s issues, fishing, science, and government affairs. This would be part of the first legislative initiatives that Peña Nieto would submit to Congress. Many people hoped that the new president would prioritize reforms to make Mexico’s economy more competitive. But it looks like swelling the Mexican bureaucracy will be top of the order for the incoming administration.

Perhaps the biggest test to Peña Nieto’s reformist mantle is the labor law reform introduced by outgoing president Felipe Calderón, from the conservative National Action Party (PAN). The reform aimed to loosen the country’s stringent labor laws to make it easier for employers to hire and fire workers. The law also introduced more transparency and accountability to Mexico’s powerful unions (a historic constituency of the PRI). A good analysis from the Economist Intelligence Unit can be found here.

If Peña Nieto were truly committed to reform, he would rally his PRI caucus in Congress to support the bill. Unfortunately, the PRI scrapped the parts of the bill that limited the power of the unions and watered down those that introduced more flexibility to the labor market. The bill, which passed the Chamber of Deputies and now will be discussed in the Senate, is still a step in the right direction, but it could’ve been much better. And the PRI could still make it worse in the upper house.

Mexico badly needs reforms to make its economy more competitive. The country had the second lowest per capita growth rate in Latin America in the previous decade, less than one percent per year. The economy is now picking up, but it’s still far from its potential. Mexico will not be joining the BRICs any time soon.

The main obstacle to Mexico’s economic potential is the lack of competition in key sectors: telecommunications, transportation, cement, energy, among others. According to The Economist, “opening up oil [to foreign investment] and reforming labour markets and competition law could raise the rate of growth by up to 2.5 percentage points.”

Unfortunately, Peña Nieto’s first signs as president don’t look promising. He seems committed not to reform, but to the status quo.

Felipe Calderón’s Arrogant Call for U.S. Gun Control

The blood had barely dried in the tragic Aurora, Colorado, shooting before Mexican President Felipe Calderon put the blame on permissive U.S. gun laws. In a post on his Twitter account, Calderon offered his condolences to the victims, but then added that the incident showed that  “the American Congress must review its mistaken legislation on guns. It’s doing damage to us all.”

It was hardly a new theme from Mexico’s lame-duck president. But his latest statement requires an extraordinary amount of gall. During Calderon’s presidency, more than 50,000 of his people have died in the war on drugs that he chose to escalate. A foreign leader with that awful of a track record daring to lecture the United States on its policies regarding  firearms is not likely to sit well with most Americans.

But Calderon has repeatedly blamed U.S. gun laws rather than his decision to launch a military-led offensive against the drug cartels for the resulting violence in his country. The Mexican government even posted a massive sign on the border with the United States between Ciudad Juarez and El Paso reading “No More Weapons!” The sign was made from recycled guns seized by Mexican security forces.

But the location of that sign undercuts Calderon’s own argument. Juarez has been for the past five years the epicenter of gun violence in Mexico. Yet El Paso has a very low violent crime rate. If “lax” U.S. gun laws were the cause of the carnage in Juarez, wouldn’t El Paso also be awash in blood? Some other factor must account for the extraordinary violence south of the border.

Extensive research on restrictive gun laws in both U.S. and foreign jurisdictions shows no correlation between tough laws and a decline in homicides and other crimes. Mexico’s own experience confirms that point. Following sometimes violent radical leftist challenges to the government in the late 1960s, Mexico enacted some of the strictest gun-control measures in the world. Today, it is nearly impossible for a civilian to legally possess a handgun or rifle in that country. Yet such tough restrictions have done nothing to disarm the drug gangs. In fact, those measures may have made it easier for cartel enforcers to terrorize portions of the country, since they don’t have to worry much about law-abiding civilians being armed and able to defend themselves and their families.

Conversely, the trend over the past decade or so in various jurisdictions throughout the United States toward conceal-carry and other permissive policies regarding firearms has not produced the surge of killings that gun control zealots predicted. To the contrary, the rates of homicides and other violent crimes in most of those jurisdictions have actually gone down.

Calderon should have had the decency not to exploit the Aurora tragedy to push his misguided gun control agenda for the United States. During his remaining months in office, he should instead focus on easing the suffering that his policies have caused in his own country.

Cross-posted from the Skeptics at the National Interest.

Mexicans Deserve Substance Over Style in Presidential Race

Josefina Vázquez Mota won the nomination of the incumbent National Action Party (PAN) for Mexico’s upcoming presidential election. Most of the coverage in the international media today focuses on how she is the first woman to have a real shot at Los Pinos (the official residence of the president of Mexico). However, the real story should be what new ideas (if any) Vázquez Mota brings to the table. Unfortunately, there’s isn’t much to report.

The same can be said of the other two presidential contenders, Enrique Peña Nieto of the Institutional Revolutionary Party (PRI) and Andrés Manuel López Obrador of the Democratic Revolutionary Party.

Perhaps William Booth of the Washington Post sums it up best when he writes about the three choices Mexican voters face in July:

“The popular former mayor of Mexico City with a messianic self-regard [López Obrador]; a telegenic leading man who wrote a book but has been vague about which books he has read [Peña Nieto]; and a perky, gal-next-door type who does a lot of smiling but has been blank on specifics [Vázquez Mota].”

Mexico will face serious challenges in the next six years, not least of which is a crippling war on drugs that kills thousands of Mexicans every year, but also a sluggish economy due largely to the sclerotic effects of public and private monopolies in key industries. This presidential election should be more about substance and less about style.