As previously reported in the February 15, 2006 WAR Report, the Mexican government and general populace continue to live in a tumultuous and deteriorating security environment that grows more deadly by the week. Mexican drug gangs are increasingly becoming the de facto government, security apparatus, and economic regulators of several Mexican states, threatening the stability of the Mexican government. One of the five so-called Wars of Globalization (coined by Mois?s Na?m of Foreign Policy), the growth of the organized narcotics trade, has led to the rise of several drug cartels throughout Mexico that seek new revenues and shipment routes to the lucrative US narcotics industry. The competition between rival cartels over trafficking rights, particularly the Sinaloa and Gulf cartel, has dramatically increased the homicide rates in tourist friendly locales including Acapulco. Once considered a prime tourist destination for Mexican and US citizens, the city has become a battleground in the greater war for control of the Mexican drug economy.
More troublesome and potentially devastating to the Mexican people, however, is the secondary negative repercussions this war will have on the overall state of the Mexican economy if it continues unabated. With an estimated $10 billion earned in international tourism revenues in 2005, violent criminality in tourist destinations could dramatically lower the nation’s Gross Domestic Product (GDP). Although violence has yet to deter travel to the country, particularly among US college spring breakers, the potentiality of such an occurrence is likely in the near-term.
Related to an inevitable decrease in tourist-generated revenue, domestic and foreign investors will likely curtail current levels of investment, which has been feeding the Mexican tourism industry for the last several years. In a scenario reminiscent of the Colombian investment economy during the 1980s and 1990s, investors are likely to become increasingly squeamish of investing in the precarious Mexican security environment. According to statistics released by Mexico’s Tourism Secretariat (Sectur), Mexico’s tourism industry attracted more than US$2.29 billion in new investment in 2004, representing a 38.5 percent increase over the previous year’s figures. A sudden curtailment of current investment levels could result in an eventual collapse of the Mexican tourist industry, thus further depriving the Mexican government of much needed revenue.
Finally, with nearly 70% of the Mexican GDP coming from the service sector, declining tourism will likely have large ripple effects on the overall state of the Mexican economy, perpetuating the rampant migration patterns among Mexican youth to the United States and the long-term devastating impact of a “brain drain” within the country.
Although very little attention has been focused on this “brain drain” that accompanies large migration patterns, continued sustained migration patterns will eventually result in dramatic human capital losses. Such losses are further reinforced and dwindled when considering the enormously high level of the Mexican populace that succumbs to narcotics addiction. Historically, US drug addiction patterns have fed narco-industries throughout South and Central America. However, recent studies indicate that Mexican drug cartels are increasingly looking internally to lay claim to lucrative business enterprises dedicated to serving the addictions of the Mexican youth, further expanding the turf wars along the US-Mexico border.
Escalating criminality and narco-enterprises in Mexico could have far ranging consequences on the Mexican economy and state. As stated previously by TRC, a professional and formidable security apparatus is imperative if the Mexican government has any hope of rolling back the ever-expanding Mexican narcotics industry. However, such skills currently are lacking among the Mexican police and military that is continually attracted in large percentages to the organized and well paying criminal underworld. A sustainable economy cannot flourish in conjunction with such high and escalating levels of criminality.