Abstract: Mexico was recently invited to participate in talks to enter the Trans-Pacific Partnership. With NAFTA, Mexico entered into a similar free trade agreement in the 1990s which generated great growth as envisioned. However, an undesired byproduct was the growth and empowerment of a number of drug trafficking organizations throughout the country as NAFTA affected both legal and illegal markets. This collateral damage plays a significant role in the violence, corruption, and instability plaguing Mexico in the present day. These same groups today enjoy unprecedented power and influence and have expanded into a multitude of illicit markets. Mexico’s admittance into the Trans-Pacific Partnership could well result in a further escalation of criminal activities for the transnational criminal organizations as they expand into new countries and previously untapped markets. A call for caution must be issued by policy makers on both sides of the border, lest history repeat itself.
Recently Mexico was invited to participate in talks which could culminate in its entry into the Trans-Pacific Partnership (TPP). This proposed free trade area in the Asia-Pacific Region currently has nine nations on board (Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States) and aims to “enhance trade and investment among the TPP partner countries, promote innovation, economic growth and development, and support the creation and retention of jobs.”
On the surface these trade talks will be a positive step for Mexico’s business community and has been met with wide acclaim from the Mexican leadership. President Calderon, sitting directly beside President Obama at the meeting, was overheard stating: “This is wonderful news,” adding that their inclusion “implies economic growth and jobs for at least the next two decades.” But below the surface there is a very real cause for alarm. While supporting legitimate businesses in international trade, the Trans-Pacific Partnership runs the risk of also aiding significantly Mexico’s numerous Transnational Criminal Organizations (TCOs), much to the same effect of NAFTA in the 1990s. NAFTA stipulated a variety of demands, namely the removal of most tariffs and restrictions on trade between the three participating nations, the United States, Canada and Mexico. NAFTA implemented a wide range of agreements on everything from agricultural, textile and auto trade to telecommunications, intellectual property and environmental policies. The results of NAFTA were mixed to say the least.
It is important to move beyond the common arguments for or against this multilateral agreement regarding which country benefited the most or how many jobs were created or destroyed. Instead, focus should be heightened on an oft-talked about subject: that of the illicit markets and known criminals that benefited tremendously from this policy. From there we gain insight into possible undesired outcomes of Mexico’s future participation in the TPP, an agreement which according to one Mexican trade expert the country has envisioned as “NAFTA-plus.” After all, if all interested countries are admitted, this proposed economic pact would be about forty percent larger than the entire twenty-seven nation European Union. This is not small change on the table.
The (Side) Effect of NAFTA in the Creation of Mexico’s TCOs
In 1990 Mexico approached the U.S. with the idea of forming a free trade agreement between their countries, an endeavor which would eventually culminate in the creation of NAFTA several years later. The then Mexican President Salinas de Gortari had several motivations in pursuing such a pact with the United States, namely to increase economic growth by attracting foreign direct investment, to boost exports, the creation of industrial jobs and giving the Mexican economy an overall growth stimulus. Overall, the increased foreign direct investment would help create jobs, increase wage rates, and reduce poverty within the country (p. 1).
However, as an unintended consequence, the same policies which were designed to encourage business and the integration of U.S.-Mexican economies aided significantly in the expansion of illicit markets, primarily the illicit drug sector. NAFTA helped create not only the three most prominent drug trafficking organizations in Mexico, but some of the country’s most notorious drug lords, criminals worth billions of dollars.
As the majority of maquiladoras (factories operating in a free trade zone) were located along the U.S.-Mexican border, it is no coincidence that the focus of Mexican drug-traffickers shifted from the Pacific coast to the border states of Baja California, Chihuahua, and Tamaulipas. In time, these three states on the U.S.-Mexican border would become the home of the Tijuana Cartel, Juarez Cartel, and Gulf Cartel respectively. As one author describes the time period, Mexican drug trafficking organizations consolidated their power “amid the gold rush of globalization (p. 75).” According to Eduardo Valle, who resigned as personal advisor to the Mexican attorney general in 1994, the most successful drug capos had become “driving forces, pillars even, of our economic growth (p. 129).”
In response to the doubling of U.S. imports from Mexico between 1993, the year before NAFTA took effect, and 1997, Phil Jordan, the former Director of the DEA’s El Paso Intelligence Center remarked that NAFTA served as a “godsend” to drug trafficking, “the best thing that happened to product distribution since Nike signed up Michael Jordan (p. 3).” Based on this ‘growth stimulus’ of the free trade agreement, it shouldn’t come as a surprise that the leader of the Sinaloa Federation, Joaquín “El Chapo” Guzman currently appears for the fourth consecutive year on Forbes Magazine’s list of top billionaires. Not only was he recently named “The world’s most powerful drug trafficker” by the U.S. Department of the Treasury, he has been named repeatedly as one of Forbes Magazine’s “World’s Most Powerful People” throughout the years. His current location on the list places him just a few spots down from President Bill Clinton and the Dalai Lama. It is unlikely that so much wealth and power could be amassed without the myriad of unintended consequences stemming from NAFTA.
In a study conducted to understand the impact of Mexico’s market reforms on the illicit drug trade, a number of shocking conclusions were drawn, namely that the increased trade flows between Colombia-Mexico-U.S., brought about by trade liberalization, provided the necessary cover for increased drug trafficking. The privatization of companies and services was also utilized by cartels for money laundering and narco-investment. The deregulation of the trucking industry inadvertently aided in the transport of both legal and illegal goods, thus increasing transport of large drug shipments within Mexico and into the U.S. market. It was found that foreign debt repayments also provided the incentives for a government to tolerate a heavy influx of drug revenues. As public sector salaries were lowered, the incentives for officials to accept bribes increased, thus furthering corruption within the state. Financial liberalization also increased money laundering opportunities for drug cartels, and capital markets investment created a ‘narco-sector.’ The volume of legitimate cross-border trade increased significantly, thereby providing a cover for increased illegitimate trade. Even agricultural reform brought about the unintended consequences of families resorting to drug crop cultivation as a household survival strategy. This would in turn increase narco-investment in rural areas of cultivation (p. 137). It is apparent that there was a significant amount of collateral damage created by governmental policies designed to increase the overall wealth of the country and the standard of living of the average Mexican citizen.
There is an average estimate of 210 million illegal drug users throughout the world. This illicit market is currently valued in the hundreds of billions of dollars, a sum which “far exceeds the size of the legitimate economy” of some countries plagued by drug trafficking (p. 8). With the Drug Trafficking Organizations having graduated in recent years to Transnational Criminal Organizations, their portfolio of illicit businesses and practices has grown exponentially. Edgardo Buscaglia, a leading Mexican academic and advisor to several U.S. government agencies, has identified twenty-two illicit markets in which these TCOs operate. These same illicit markets could be inadvertently expanded upon if given the opportunity by the new TPP, much like NAFTA of the 1990s.
If NAFTA did for illicit substance distribution what Michael Jordan did for Nike- perhaps Mexico’s entry into the Trans-Pacific Partnership would be akin to Nike’s humble beginnings as a small shoe company, and its evolution over time into a multi-billion dollar brand easily recognized the world over, dominating not only athletic shoes, but apparel, equipment and their distribution as well. A truly global empire.
An induction of Mexico into the TPP could very well result in an escalation in criminal activities for the TCOs, already an empire and global enterprise in their own right. After all, the powerful illicit economy that they enjoy is one of the primary employers in poor communities and is the number two source of foreign currency behind Mexico’s oil exports (p. 147). A future evolution and growth into other currently untapped markets around the globe would eclipse our old notion of the term ‘transnational criminal organization,’ creating new meaning and an even more empowered Mexican criminal network, the likes of which the world has never seen.
With Mexico’s first excursion into a free trade agreement with the United States, both the Clinton and Bush administrations ignored, despite the evidence, the developing drug trafficking groups just across the border. The priority was always the passage of NAFTA and the economic growth of legitimate markets. Concerns were left off the negotiating table, prompting the Director of the DEA at the time to call it “a hot potato we were not supposed to touch, no question (p. 2).”
We have since witnessed the numerous side-effects of this short-sightedness: the culmination of an unprecedented body count, along with the terror, bombings, beheadings, mutilations, torture, mass graves, and other forms of suffering that have been inflicted upon the Mexican people in recent years. Regarding Mexico’s admittance into the Trans-Pacific Partnership, a call for caution must be issued by policy makers on both sides of the border, lest history repeat itself.
Carlyle, Erin, “Billionaire Druglords: El Chapo Guzman, Pablo Escobar, The Ochoa Brothers,” Forbes, March 13, 2012. <http://www.forbes.com/sites/erincarlyle/2012/03/13/billionaire-druglords-el-chapo-guzman-pablo-escobar-the-ochoa-brothers/>
Forbes, “The World’s Most Powerful People,” November 2, 2011. <http://www.forbes.com/powerful-people/#p_6_s_a0_All%20countries_All%20categories_>
Ford, Andrea, “A Brief History of NAFTA,” TIME U.S., December 30, 2008. <http://www.time.com/time/nation/article/0,8599,1868997,00.html>
Friman, Richard and Andreas, Richard. The Illicit Global Economy and State Power. Rowman and Littlefield Publishers, Inc., MD, 1999.
Gómora, Doris. “Buscaglia: Narco es mafia insurgente,” El Universal, September 10, 2010. <http://www.eluniversal.com.mx/nacion/180367.html>
Grillo, Ioan. El Narco: Inside Mexico’s Criminal Insurgency. Bloomsbury Press, NY, 2011.
Johnson, Tim, “Mexico enters talks on joining Pacific trade pact,” The Miami Herald, June 18, 2012. <http://www.miamiherald.com/2012/06/18/2855951/mexico-enters-talks-on-joining.html>
LaFranchi, Howard, “Drugs Surge From Mexico As US Hunts For Solution,” The Christian Science Monitor, February 29, 1996. <http://www.csmonitor.com/1996/0229/29011.html>
Office of the United States Trade Representative, “Outlines of the Trans-Pacific Partnership Agreement.,” November 2011. <http://www.ustr.gov/about-us/press-office/fact-sheets/2011/november/outlines-trans-pacific-partnership-agreement>
UNODC, “World Drug Report 2011.” United Nations Office on Drugs and Crime, Vienna, 2011. <http://www.unodc.org/documents/data-and-analysis/WDR2011/World_Drug_Report_2011_ebook.pdf>
U.S. Department of the Treasury. “Treasury Sanctions Three Drug Traffickers Tied to Mexican Drug Lord Chapo Guzman.” January 10, 2012. <http://www.treasury.gov/press-center/press-releases/Pages/tg1392.aspx>
Villarreal, M. Angeles, “NAFTA and the Mexican Economy,” Congressional Research Service, June 3, 2010. <http://www.fas.org/sgp/crs/row/RL34733.pdf>
Younglai, Rachelle and Garibian, Pablo, “Canada, Mexico ask to join pan-Pacific trade talks,” Reuters, November 13, 2011. <http://www.reuters.com/article/2011/11/13/us-apec-canada-tpp-idUSTRE7AC12B20111113>