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The Geopolitics of Mexico: A Mountain Fortress

Besieged
Analysis NOVEMBER17,2009|15:30GMT Print TextSize

Stratfor

Analysis
Editor'sNote:Thisisthe11thinaseriesofStratformonographsonthegeopoliticsofcountriesinfluentialin
worldaffairs.
AsthesouthernmostportionofNorthAmerica,Mexicofacesadifficultgeographicsituation.Ithasasmalland
limitedcoreterritorysurroundedbymountains,desertsandjunglesthatareinherentlyhardtocontroland
nearlyimpossibletodefendagainstthreatsfromwithinorwithout.
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IMAGE

Mexico's Geography

Clicktoenlarge

Thecountryisfunnelshaped,itshighplateauanchoredin
themountainsandjunglesofCentralAmericatothesouth.
Thefunnelfansandexpandsnorthwesttowarda3,200
kilometerlong(2,000milelong)desertborderwiththe
UnitedStates.Borderingtheplateautotheeastandwest
areMexico'stwomountainranges,theSierraMadreOriental
andtheSierraMadreOccidental.Withpeaksashighas
5,500meters(18,000feet),thesemountainrangesare
extensiveandformidableindeed,thecountrycanbe
thoughtofasakindofmountainfortressthatmustsecure
outlyingterritoriesthatserveasapproachestoitscore.

OnMexico'swesternflank,theslopesoftheSierraMadre
OccidentaldropprecipitouslytowardthePacificOcean.
Blanketedalternatelywithdensedeciduoustropicalforestsandsocalled"spineforests,"thevegetationof
Mexico'swesternslopesisextremelyinhospitable.ThoughpatchesofsavannainSinaloaandSonorastates
serveasadequategrazinglandforcattleandotherlivestock,westernMexicorequiressignificant
infrastructuretodivertwaterfromtheregion'srelativelysparseriversystemforagriculturaluse.
OntheeasternslopesoftheSierraMadreOriental,thelanddropsawaytowiderflatlandscomparedtothe
narrowlittoralstriponthewesterncoast,flatlandscharacterizedbydensetropicalforests.Despitetherelative
richnessoftheland,withitsfacetotheGulfofMexicoandthevastmajorityoftheworld'sgreatpowerstoits
east,Mexico'seasternshoreshavealsoprovedtobeamilitaryvulnerabilityfortheMexicanheartland.
NolesschallengingtotheMexicanstatearethecountry'sdeserts,whichcharacterizethenorthernborder
andboastsomeofthemostdesolateterritoryinallofNorthAmerica.Thisareaformsanimpressivebuffer
betweenMexicoanditspowerfulnorthernneighbor,butitisalsothehistoricalseatofinsurrectionforany
force(mostoftendomestic)seekingtochallengeMexico'score.

The Heartland
TheMexicanheartlandisroughlytheregionalsoknownasancientMesoamerica,whichliesbetweenthe
TropicofCancerandthe18thparallel.ThisregionisthenativehomeoftheOlmec,Toltec,Aztecandmany
otherNorthAmericantribes.WithinthisregionisthetruecoreofMexico,whichStratforviewsasadouble
core,withtwogeographicallydistinctyetvitalcenters:theregionaroundtheValleyofMexicoandtheregion
ofVeracruz.
SituatedatthecruxofthesierrasintheValleyofMexico,MexicoCityistheunquestionablepoliticalcoreof
Mexico.ThishighplateauwashometotheAztecsandwastheoriginofoneoftheworld'smostimportant
grains:corn.Thoughthisregionliesattropicallatitudes,thehighaltitudeoftheplateaumitigatesthetropical
influence,providingforamild,temperateclimatesuitableforagricultureandsustainingrelativelylarge
populations.Thesheerheightsofthemountainstotheeastandwestofthecityalsoaffordthehighplateaua
certainamountoffortificationfromoutsidethreats.
EstablishedinthemiddleofalakethatfilledtheValleyofMexico,MexicoCitywasoriginallytheAzteccapital
ofTenochtitlan.Hardlythebestlandinthearea,thelocationwasoriginallyselectedforsettlementatatime
whentheAztecswereoneoftheweakesttribesintheregion.TheAztecsbuiltthecityliterallyrightoutofthe
water,usingstoneandlimetoconstructtemplesandgrowingcropsonplatformsinthemiddleofthelake,
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calledchinampas.Inthe16thcentury,theSpaniardsbuiltacanallinkingtheValleyofMexicototheTulariver
system.Theprojecteffectivelydrainedthelakebutleftthecitywithnumerousproblems,includingsevere
foundationalinstabilityandvulnerabilitytoearthquakes(recentyearshaveironicallybeencharacterizedby
severewatershortages).
Despiteitslocation,MexicoCityisacriticalcomponentofnationalcontrol:Whoevercontrolsthecapitalcan
controlthehighlands.Thatsaid,Mexico'sroughterrainmakesitdifficulttosecurecontroloftherestofthe
country,andMexicoCityoftenfindsitselffendingoffthreatsfromallsides.
Thegreatestthreats,historically,havecomefromthecityofVeracruz,whichformsthesecondpoleof
Mexico'sdoublecore,ontheeasternshoreofsouthernMexico.Thislowlandtropicalregionwashometothe
Olmecs,oneofMesoamerica'searliesttribes.ThetropicalclimateinVeracruzhashistoricallypermittedthe
growthofawidevarietyofplantstosustaintheOlmecdiet,includingsquashandbeans.However,thehumid
climatemakesitdifficulttogrowgrains,thusthecoastlineisunsuitableforsustaininglargepopulations.
ThecityofVeracruzhasalsobeenthepointfromwhichforeign(anddomestic)powershavebeenableto
successfullylaunchinvasionsofMexicoCity.AsoneofMexico'smainGulfports,withdirectaccesstoMexico
City,VeracruzisakeyjumpingoffpointfromthecoasttoMexicoCity.Veracruzwasoriginallyestablishedby
SpanishexplorerHernanCortez,whousedhistimetheretoformallianceswithlocaltribesthathadbeen
subjugatedbytheAztecsandwereeagertosupportanewregionalstrongman.Inthecompanyofthousands
ofnativewarriors,CortezsuccessfullylaidsiegetoandcapturedTenochtitlanfromtheAztecsin1521.
Intime,followingthecollapseoftheSpanishempire,thechaosofMexico'swarsofindependencewas
exploitedbyFrance,whichcrownedFerdinandMaximilianJosephHapsburgemperorofMexicoinMexico
Cityin1864.AfterbattlinginlandfromtheirlandingpointinVeracruz,theFrenchoccupiedMexicoCityfor
threeyears.TheysoondiscoveredthatextendingtheirreachthroughMexicoasawholewasfarmore
difficult.TheproblemfortheFrenchwasthesheertimeandmanpowerrequiredtoconquerMexico'sfarflung
deserts,mountainsandplateausandevensolidifyingcontroloverareasasclosetoMexicoCityasthe
stateofOaxaca,whererebelforceswereabletofindsanctuary.TheFrenchwereunabletosolidifytheir
controloverMexico'sterritory,andin1867FrenchEmperorNapoleonIIIwithdrewtroops,leavingMaximilian
tobeexecuted.
ItisofthehighestpriorityforMexicotocontrolthehighlandregionaroundMexicoCityaswellasthelowland
regionontheGulfcoastaroundVeracruzinordertoguaranteetheexistenceofthestate.AstheFrench
exampleshows,however,therearenearbyareasthatmustalsobecontrolled.Werefertotheseregionsas
theoutercore,whichconsistsofthestateswithintheboundariesofancientMesoamericabutoutsidethe
immediatevicinityofMexicoCityorVeracruz.Thesestatesincludethemountainous,ruggedstatesof
Chiapas,Oaxaca,MichoacanandGuerrero.Becauseoftheirmountainousterrain,thesestatescanbe
difficulttocontrolandcanserveaslaunchingpointsforrebelforces.ForMexicoCity,itiscriticaltocontain
andmitigateunrestintheseareasinordertoguaranteethephysicalsecurityofthecore.

Political Boundaries
Mexico'scoreterritoriesarecriticallyimportanttothesurvivalofthestate.Lesscriticalbutstillimportant
areMexico'scurrentpoliticalboundaries,whichencompassamuchlargerterritorythathasrepeatedlydefied
subjugation.

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TheSpanishviceroyaltyestablishedMexico'ssouthernborderswithGuatemalaandBelize(whichwere
solidifiedbytreatyin1882).Uponindependence,therewasnoimpetustopushfarthersouth,primarily
becausethelandinCentralAmericaismountainous,difficulttodefendorcontrolandnotsuitedfor
agriculture.Thenextpatchofusefulterritoryismorethan1,600kilometerssouthinthehighlandsof
Colombiaandeverythinginbetweenisfarmoretroublethanitisworth.ForMexico,therewasnothingto
begainedinchallengingthesouthernborderline(indeed,itmightactuallybenefitMexicotocedemoreofthe
mountainous,halfwildterritoryofChiapastoitssouthernneighbor).
Thenorthernbordersareadifferentsituationaltogether.Twoseminaleventsdefinedthenorthernborder:the
TexasWarforIndependenceandtheU.S.MexicanWar.ThewarwithTexaseffectivelyreleasedthevast
majorityofTexastoindependence,butitalsosetthestageforawarbetweentheUnitedStatesandMexico
byleavingtheactualborderisindisputed.OnceTexasjoinedtheUnitedStates,thisdisputeeruptedintoa
warbetweenthetwoNorthAmericanneighbors.TheconqueringofMexicoCityin1847bytheUnitedStates
endedthewar,withtheUnitedStatestakingabouthalfofMexico'stotaloriginalterritoryallofTexasalong
withthelandthatwouldbecomethemodernU.S.statesofArizona,CaliforniaandNewMexico.Inoneblow,
theUnitedStatessatisfiedcriticalstrategicneeds(namelyanundisputedpathtothePacificOceananda
strategicbufferfortheGreaterMississippiValley)byacquiringsomeofMexico'smostpromisingterritory,
leavingthecountryinastateofturmoil.

IMAGE

Clicktoenlarge

Mexico's Population Density

Simplyput,Mexico'snorthernborderisneitheraproductof
inevitablegeographicdictationnoraborderofMexico's
choosing.StretchingacrossvastexpansesoftheSonora,
ChihuahuaandBajadeserts,theU.S.Mexicoborderbisects
asectionofMexicothatisatmostpointsonlybarely
habitable.Tomakethingsmorecomplicated,themountains
thatstretchnorthintothisregionallowforpocketsofunrest
tosimmer,andeventuallyboilover.Thephysicalisolationof
northernMexicoandthedifficultyMexicoCityhadin
projectingpowerintotheareawasoneofthemostimportant
reasonsitlostTexasandwhatisnowtheAmerican
Southwest,andoneofthekeycausesoftheMexican
Revolutionof19101920.

Themountains,desertsandisolationofnorthernMexico
providefertilegroundforcivildissentandlawlessactivity.Thus,whilenorthernMexicoprovidesasubstantial
strategicbufferbetweenMexicoCityanditsnorthernneighbor,itisalsoaseverevulnerability.Addtothatthe
factthatMexicoCityremainshighlyvulnerableonitseasternflank,andthebenefitsofthebufferzoneseem
negligible.
Inadditiontoitsnorthernexpanse,Mexicohastwootherterritoriesthatfalloutsidethecoreandare
noteworthy.Neitheroftheseterritoriesisparticularlyuseful,butbotharestrategicallyimportanttohold.The
firstistheBajaCaliforniaPeninsula,whichMexicomanagedtoretainaftertheU.S.MexicanWardespitethe
U.S.desiretoholdthemouthoftheColoradoRiver.Bajastretchesnearly1,300kilometersdownthewestern
coastofMexico,andwhileitprovideslittleinthewayofeconomicopportunities(outsideoftourism),ifitwere
inthehandsofaforeigncountry,Mexico'sentirenorthernPacificcoastwouldbevulnerabletoexternal
attack.
ThesecondterritoryinthiscategoryistheYucatanPeninsula.TheYucatanisessentiallyalarge,flat
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limestoneshelfwithveryfewfreshwaterresources.Sowhiletheoutcroppinghasverdantvegetation,ithas
noneofthenecessaryelementsofeconomicallyviableterrain.TheYucatandoes,however,giveMexicoa
strategicpositionintheCaribbean.ItalsoallowsMexicotocontroloneoftheavenuesofapproachintothe
GulfofMexicoandVeracruz.
WhileboththeBajaCaliforniaandYucatanpeninsulasareinhospitableterritory,failingtocontrolthoseareas
wouldexposeMexicotoevengreaterterritorialvulnerabilities,particularlyregardingnavalthreats.Evenwith
therelativeadvantagesofhavingstrategicpossessionsliketheYucatanandBajaCaliforniapeninsulas,the
nationalbordersofMexicodonotmakeforapoliticallycoherentandmanageablestate.Themountainous
coremakesitdifficulttosolidifycontroloverthesouthernhighlands,andthesoutheasterncoastisvulnerable
tooutsideinterference.Addtothatthehardtocontrolnorthernborderzoneafertilebreedinggroundfor
autonomousorrebelliousgroupsandMexicohasageographythatpresentsextremechallengestoany
centralgovernment.

Ideal Boundaries
Takingintoaccountthegeopoliticalnecessitiesofastatethathasprovedsovulnerabletoexternalinfluence,
Mexico'sidealterritorialboundarieswouldallowittoestablishcontroloverthemainroutesofattackonits
territory.Onlyafterthatwillithavethecapabilitytolookfartherafieldforprosperouslands.
ItisnoteasytoinvadeMexicovialandroutes,sincethenorthernMexicanfrontierhistoricallyhasmade
invasionfromthenorthdifficult(thoughdefendingthisterritoryisalsoachallenge),andthehighlandsof
CentralAmericaareabarriertothesouth.ItisfareasiertoinvadeMexicofromthesea.Thismeansthatif
Mexicoistoachieveanysemblanceoftruesecurityitmustbeabletoguardtheseaapproachestoitscore.
NotonlydoesEuropelieacrosstheAtlantic,butthevastmajorityoftheUnitedStates'populatedcoastline
alsoliesjusttothenortheast.Inthefuture,risingBraziliannavalcapacitycouldposeyetanotherpossible
challengetoMexicointheCaribbean.Inordertoprotectthecorefromthesepotentialthreats,Mexicomust
exertinfluenceoverthemouthoftheCaribbean.Andtoeffectivelydothis,MexiconeedsFloridaandCuba.
ThisputsMexicoindirectcompetitionwiththeUnitedStatesforitskeystrategicneeds.
JustastheUnitedStatesneedstocontrolFloridaandatleastneutralizeanythreatposedbyCubainorderto
protectitsexportfacilitiesatthemouthoftheMississippiRiver,Mexiconeedstocontroltransitthroughthe
Gulf.Withouttheabilitytoprojectnavalforceintothemosthistoricallyprovenandgeographicallysoundpath
ofinvasion,Mexicowillneverbeatrulyindependentandsecurenationstate.
Theimplication,ofcourse,isthatthereisonlyroomforonegreatpowerinNorthAmerica,andaslongasthe
UnitedStatesdominatesthenavalapproachestothesouthernportionofthecontinent,Mexicomustmaintain
anonhostilerelationshipwiththeUnitedStatesinordertosecureitsownterritory.
However,ifMexicowereabletocontrolthoseterritoriesitself,itwouldassureitsphysicalsecurity,andthe
nextlikelystrategicgoalwouldbetoregainterritorylosttotheUnitedStates.Assumingithadthemilitary
capacitytosecureandholdthem,havingthefertilevalleysofCaliforniaandtheexpansiverangelandof
TexaswouldbeagreatboontotheincomestrappedMexicangovernment.Butsecuritymustcomefirst,or
Mexicowouldneverbeabletoholdthoseterritories.

Geopolitical Imperatives
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Tosecureitscore:
Mexicomustfirstcontrolandconsolidatewhatcanbe
labeledastheinnercore,whichincludesboththehighlands
ofMexicoCityandtheVeracruzcoastalregion.Ifthesetwo
regionscannotbewieldedasasinglezone,whatwe
currentlythinkofasMexicowillsufferfrominsufficient
agriculturallandandtradeopportunitiesandwilldegenerate
intoanassortmentofsmall,impoverished,subregional
entities.

IMAGE

Mexicomustthencontrolallpocketsofpotentialdissent
withintheoutercoreterritoriesthatdirectlyinteractwiththe
Mexico's Geopolitical Sub-Regions
innercore,includingOaxaca,Chiapas,Guerreroand
Michoacan.Todoso,Mexicohashistoricallyexercisedtwo
options:Economicintegrationandtheruleofstrongmenorasinglestrongparty.
Clicktoenlarge

Mexicomustpushnorthtocontrolthewildnorthernterritoriesfromwhichthreatsmightoriginate.The
exactplacementoftheborderisrelativelyacademic,giventhelackofcleargeographicbarriers.
However,thefartherMexicopushesnorth,thefartheritmustprojectpowerfromitscore,andthewider
andlessusefultheplateaubecomes.
MexicomustcontroltheseaapproachestoitscoreaswellasthechokepointsoftheCaribbeaninorder
toachieveabsolutesecurity.Therearetwophasestothis.Thefirstistheeasiest,whichistocontrol
theBajaCaliforniaandYucatanpeninsulas(modernMexicohasachievedthis).Thesecondismore
difficultandrequiresgainingcommandofCubaandFlorida.Withouttheseterritories,Mexicohasno
choicebuttoengageinasubordinaterelationshipwiththeUnitedStates.
Finally,withphysicalsecurityensured,Mexicocanaffordtoreachpastitsbufferzonestoricher
territoriesandmoreusefulcoastlinesincludingtheU.S.statesofCalifornia,TexasandLouisiana.
Clearly,Mexicohasnotachievedallofitsgeopoliticalimperatives.However,ithasachievedjustaboutallof
theimperativesthatitcanwithoutchallengingtheterritorialintegrityoftheUnitedStates.Therearealso
recurrentchallengestoitseconomicstabilityandphysicalsecurity,andMexicostillstrugglestomaintainthe
statusquoonitssecondandthirdimperatives.

Economic Fundamentals
SustainedeconomicdevelopmenthasbeenarelentlesschallengeforMexico.TherootofMexico'sslow
development(comparedtoitsnorthernneighbor)liesinitsgeographicchallenges.WhereastheUnitedStates
hasamassiveagriculturalheartlanddividedbyahighlynavigableriver,Mexicolacksbothaconcentrated
breadbasketaswellasanavigablerivernetwork.ThegeographicadvantagesoftheUnitedStateshavebeen
rootedintheeaseoftransport.WiththeMississippiRiverbisectingtheU.S.agriculturalheartland,accessto
internationalmarketswasverysimpleandcostonlyasmuchasittooktobuildaboat.Mexico,bycontrast,
mustinvestagreatdealofcapitalforitsroadandrailnetworks.Intheir300yearsofrulingMexico,the
Spanishfailedtodevelopanysubstantialtransportnetworks,leavingthenewlyindependentMexicotostart
fromscratch.
Withinsufficienttransportationinfrastructureinplace,Mexico'sfirstdecadesofdevelopmentweredifficult.
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Thecostoftransportinggoodsfromproducingareastoconsumermarketswasprohibitiveandreducedthe
profitabilityofprivateinvestment.Developingefficienttransportationnetworksrequiresamassiveamountof
capital,whichmeansthatMexicostartedoutitsindependentstatehoodwithnochoicebuttogodeepinto
debt.OnceMexicoisabletosecureaninfluxofcapital,however,ithasgenerallybeenabletospurgrowth
sufficientlytosustainasubstantiallongtermexpansion.Butwithoutitsowndomesticcapitalreserves(or
particularlyeasywaysofdevelopingthem),Mexico'sdevelopmenthasbeencyclicalinnature,withbooms
followedbycrashesasresourcesdeplete.
Sinceindependence,therehavebeentwomajorboomandbustcycles,startingwiththeruleofMexican
PresidentPorfirioDiaz,whotookpowerin1880attheendofthewarsofindependenceandremainedin
poweruntil1911.Inadditiontoseizingpowerandmaintainingstability,Diazwasabletomakesubstantial
improvementstothecountry'stransportationnetwork.Withthehelpofagreatdealofforeigninvestment,
Diazleda30yearmodernizationpush,includingbuildingMexico'srailwaysystem.Thecountry'srailnetwork
notonlycuttransportationcostsdrasticallyandmadeaccesstoexternalmarketseasier,italsofacilitatedthe
extensionofmilitarypowertotheouterreachesofthecountry.
UnfortunatelyforMexico,thisperiodofgrowthand
developmentslowedandwasunabletotranslateforeign
investmentintooverallwelfaregainscapitalcollectedinthe
handsofonlyasmallsegmentofsociety.Political
maneuveringbytheelite,coupledwithrisingpublic
discontent,eventuallyoustedDiazfrompowerinwhat
evolvedintothedecadelongMexicanRevolution.Butthe
railwayinfrastructurelaiddownduringDiaz'srulebecame
thefoundationforpostrevolutionary(andpostGreat
Depression)growthanddevelopment,onceMexicowasable
toaccesscapitalagain.

IMAGE

Clicktoenlarge

InthewakeoftheGreatDepressionandwiththeonsetof
WorldWarII,Mexicoexperienceditssecondmajorinfluxof
foreigncapital.Thegovernment'sincreasedaccessto
foreignlendingwasmadepossiblebytherenegotiationofoutstandingdebt(which,withtheinterventionofthe
UnitedStatesonbehalfofMexico,wasreducedby90percent)andthesettlementofoutstandingdisputes
withoilcompanieswhosepropertyhadbeenseizedintheoilnationalizationprojectof1938.Mexicowasalso
aidedbyaboominglobaldemandforMexicangoods,particularlytextileexports,asitsnorthernneighbor
wenttowar.

Mexico's Transportation Networks

RenewedaccesstointernationalcapitalmarketsandasurgeindemandforexportscatapultedMexicointoa
fiveyearperiodofgrowththataveragedwellover6percentperyear.Whenthewarended,theexportsector
becamelessimportantforgrowth,butthefiveyearboostgaveMexicotheindustrialmomentumitneededto
continuegrowingthroughthe1950sand1960s,albeitataslowerpace.
Withtheoilpricespikeofthe1970s,EuropeanbanksbecameflushwithcashdepositedbyMiddleEastern
countries.Theresultingfallininterestratesencourageddevelopingcountriesaroundtheworld,and
particularlyinLatinAmerica,totakeoutloanstofinanceindustrializationprojects.Mexicowasnoexception,
andthecountrywasquicktotakeondebtinthisperiod.Mexico'sdiscoveryofmajoroildepositsinthelate
1970sledtoasharpuptickinexportsofoilwhichjumpedfromanetworthof$500millionin1976tomore
than$13billionin1980.Thisled,inturn,totheoptimisticbeliefthatcapitalwouldalwaysbecheapandoil
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pricesalwayshigh.AtthispointitlookedlikeMexicowouldhaveachancetocomplementaperiodof
sustainedgrowthwithanewandsubstantialtrancheofcapital.Thiswasnotthecase.
Thecollapseofoilpricesin1981triggeredamajordevaluationoftheMexicanpeso,makingitimpossiblefor
Mexicotomakeitsdebtpaymentsontime.Theresultingdebtcrisisof1982triggeredaperiodofeconomic
turmoilforMexicoandtherestoftheregionthatisknownsimplyas"thelostdecade."TheInternational
MonetaryFund(IMF)cametoMexico'srescuewithfinancing,preventingadebtdefault.However,Mexico
struggledtoregainlostgroundwhileatthesametimemeetingtheIMF'sstructuraladjustmentdemands.
Althoughstabilizationwasachievedforafewyears,thepoliciesenactedwereinsufficient.Asevere
overvaluationofthepesotriggeredasecondfinancialcrisisin1994.
Sincetherevaluationofthepesointhewakeofthecrisis,Mexicohasexperiencedmoderategrowth,
averagingjustbelow3percentbetween1996and2011.Mexico'smodestgrowthrateshavesurprised
observers,particularlygiventhefactthatexportsgrewbyanaverageof11.1percentperyearbetween1993
and2003,whichwasfacilitatedbytheopeningofMexico'seconomytoforeigninvestmentandtrade.This
includedtheadoptionoftheNorthAmericanFreeTradeAgreement,whichcameintoeffectin1994.This
liberalizationprocesstransformedMexico'seconomy,increasingincomefromexportedgoodsbyafactorof
12,andforeigndirectinvestmentbyafactorof10.
ForeignentryintoMexico'seconomyduringthe1990s
contributedtoindustrializationalongtheU.S.Mexicoborder,
wheregoodsweremanufacturedorassembledforexportto
theUnitedStates.Mexicoalsohassignificantindustrial
sectorsclosertothecore,instateslikeQueretaroand
Mexicostate,andthecitiesofGuadalajaraandMonterrey
onthewestandeastcoasts,respectively.

IMAGE

Mexico's Exports

Clicktoenlarge

Despitethedevelopmentofasubstantialcorporatebase
withsignificantmanufacturingtiedintotheUnitedStates,
growthhasremainedatmoderatelevels.Inadditiontothe
geographicchallengesassociatedwithMexico's
development,thesemoderatelevelsofgrowthcaninpartbe
explainedbyrelativelylowpublicspendingadoptedbythe
Mexicangovernmentinthewakeofthe1982and1994

crises.

IMAGE

Challengestogovernmentspendingarebeingexacerbated
bythedeclineoftheenergyindustry.IncomefromMexican
stateownedenergycompanyPetroleosMexicanos(Pemex)
accountsfor30to40percentofthefederalbudgetinany
givenyear.Withprofitsabsorbedbythegovernmentfor
operatingexpenses,Pemexhasverylittlesparecashto
investinitsownindustry,andtheindustryisfacingserious
declinesinproduction.Withprospectiveincomedeclining,
Mexicoisfacingagravefiscalproblemandthequestion
willbewhethertotakethepoliticalriskofraisingtaxesorthe
financialriskofassuminggreateramountsofdebt.These
energywoesarethemostrecentmanifestationofMexico's

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Clicktoenlarge

Foreign Direct Investment in Mexico

boomandbustcycleofcapitalshortage.

Slowgrowthandinstitutionalinertiahavecontributedto
Mexicoremaininganunderdevelopedstatewithhighlevelsofpovertyandhighlyunequalincomedistribution.
ThislackofdevelopmentisthemaindriverbehindtheconstantflowofmigrantsfromMexicototheUnited
States,withMexico'slabormarketfortifyingtheU.S.laborpoolandhelpingtounderwritetheUnitedStates'
lowinflationgrowth.WhileworkersintheUnitedStatessendbackover$20billionworthofremittancesevery
yeartoMexicocontributingtotheoverallgrowthofMexico'sgrossdomesticproductitisdifficultto
determineifthismoneyisbeingreinvestedintoMexicoinawaythatcontributestogrowthinMexican
productivity.
Mexico'sleastconventionaleconomicdriveristhedrugtraffickingtrade.Thoughdifficulttomeasure,thedrug
tradebringstensofbillionsofdollarsannuallyintoMexicoandprovidesthousandsofjobs.Theseprofitsare
launderedandreinvestedthroughouttheeconomy,withsignificantinvolvementinthetourismand
constructionindustries.

Shifting Politics
MexicoisuniqueamongmostcountriesinLatinAmericainthattheseatofnationalpowerhasbeenoccupied
formostofMexico'smodernhistorybyasingleparty:theInstitutionalRevolutionaryParty(PRI),orits
historicalantecedents.Butdespitetheruleofasingleentity,Mexico'smodernhistoryhasbeenrelatively
peaceful,avoiding(withsomeexceptions)thebloodypoliticalconflictsthatcharacterizedmanySouth
Americancountriesinthelatterhalfofthe20thcentury.
ThiswasinpartpossiblebecauseofthepostWWIIprosperitythatbuoyedMexicothroughthemiddleofthe
20thcentury.Inthecontextofsustainedgrowthandsufficientcapital,Mexicanpoliticiansdidnotneedtodo
verymuchinordertokeepthecountrystable.Thekeytomaintainingstabilityinacomplexsystem
characterizedbyaproliferationofinterestsfrombusinesstofarmerstounionswasaverystrongparty
thatusedpoliticalinclusiontoassuageallparticipants.Thismeantthat,forthePRI,itmademoresenseto
enticepoliticalopponentsintocooperationthanitdidtothreatenthemwithforce.TheruleofthePRIwasstill
authoritarian,butitwasgentlecomparedtothebrutaldictatorshipsofthe1960sand1970sinotherLatin
Americancountries.
ThestrengthofthepartyisinlargepartaresultofMexico'ssingletermlimitforpoliticians.Anideathathas
beenarallyingcrysincethe19thcenturyandwascementedbytheMexicanRevolution,theedictthatno
politicianshouldseekreelectionisdesignedtoavoidrulerswhooverstaytheirwelcome.
Thepolicyhashadanumberofconsequences.Ithasmadeitdifficultforindividualstobuilduptheirown
powercenters,orholdontoanysingleofficeforverylong.Thepresidentcanserveforonlyonesixyearterm
andfordecadesfindingasuccessorwasassimpleasselectinganobviousheir.Theoreticallydesignedto
preventdespotism,theonetermlimitalsohasmadeitverydifficulttoachievestandardgoalsofstatehood
likeeconomicorpoliticalreform.TheprimaryproblemisthatMexicanpoliticiansarenotactuallyanswerable
todemocraticprocesses.Thiscreatesanincentivestructurethathasverylittletodowithaccountabilityto
voters,andprovideslittletonoincentiveforpoliticianstoachievecampaignpromises.
Indeed,Mexicanlegislatorsoftenbeginsearchingfortheirnextjobsoonafterenteringoffice.Andwithoutthe
needtomaintainvoterapproval,Mexicanpoliticiansaremuchmorefreetoengageincronyism(whichhelps
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themfindanewjobafterleavingoffice).Indeed,inthepoliticsofinclusion,thisisactuallyquitebeneficial.
Whenthebusinessofgovernanceisdealtwiththroughdealmakingandfavordistribution,havingasystem
thatleavesitslegislatorsfreetomakesuchdealsisconducivetotheparty'sstrategyforpowerconsolidation.
Thisstructureisnot,however,beneficialforsettingapoliticaltrajectory,orenactingpolicyoverthelongterm.
Withoutanycontinuityinpersonnel,thereislittletonoinstitutionalmemoryoflegislativeefforts.Thisallows
Mexicotomoveforwardonlyinshortburstsoflegislativeaction,ifatall.
WhilethesedynamicsandPRIrulehaveshapedthefoundationofmodernMexico'spoliticalsystem,
importantshiftshaveoccurredinthepastdecade.In2000thefirstelectedpresidentfromtheNationalAction
PartyVicenteFoxcameintooffice.ThetransitionofMexicofromaonepartysystemtoamultiparty
systempushedthecountryintorelativelyunchartedterritory.
Thedynamicsofamultipartysystemaredifferent,withpartiesnowabletoopenlyopposethewillofthe
presidentinthelegislatureasawayofpositioningthemselvestoproposecandidatesforthepresidency.
ThoughthesystemunderthePRIwasneverparticularlyunified,allpoliticalmaneuveringhappenedwithinthe
PRIpartymachine,anddissentwasrelativelyeasytocontrol.Nowsuchmaneuveringoccursbeyondthat
machine.Thisdynamicencouragespoliticalpolarizationsinceeachpartyseekstodistinguishitselffromthe
others.ThemultipartysystemhaslikelymadeMexicoamuchmoredifficultcountrytorule,sincethe
presidentnowrepresentsaswathofvotersanddoesnotsimplysitattheapexofapowerbalanceheld
steadybyabroadandinclusiveeffort.
Opportunitiesfordivisivenesshaveflourished,andawillingnesstobreakwithpastpoliticalarrangementshas
becomeclear.Thisisnowheremoreevidentthaninthecurrentadministration'sdecisiontousethemilitaryto
fightthepowerstructuresbuiltandmaintainedforyearsbyMexico'spowerfulcriminalorganizations.
PRIcandidateEnriquePenaNietosvictoryintheJuly1presidentialelectionsetthestageforatemporary
reprievetoyearsofpoliticaldeadlockinMexicoCity.AlthoughthePRIdidnotwinamajorityinthelegislature,
withsixyearsofPRIexecutiveleadershiplooming,thelegislaturewillhaveapoliticalincentivetocooperatein
enactingsomepolicychangesuntilthe2015legislativeelectionsshiftthebalanceoncemore.Asaresult,the
nextthreeyearsofpolicymakinginMexicomaybesignificantlymoredynamicthantheprecedingyearsasthe
PRIaddressesmajorpolicyissues.

Modern Challenges
Drugs
LikemostofMexico'sproblems,thedrugwarsarealsodriveninlargepartbythecountry'sgeography.The
flowofdrugsfollowsanevershiftingriverthatfollowsthepathofleastresistanceonitswayfromproducerto
consumer.WhentheUnitedStatesanditsinternationalpartnersstartedshuttingdowndirectairandsea
trafficfromColombiatotheUnitedStatesinthe1990s,drugsmugglersbegantobringcocainethroughthe
landcorridorofCentralAmericaandMexico.Mexico'sborderwiththeUnitedStatesbecamegroundzerofor
drugsmugglers,andMexicanorganizedcrimefounditselfabletoacquireamuchlargerportionofthedrug
money.
BothMexico'ssouthernandnorthernbordersarerugged,thinlypopulatedandlooselyguarded.Thisisthe
perfectcombinationforrobustsmuggling,particularlyofgoodsthatareingreatdemandintheUnitedStates.
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Sincetheseborderregionshavefeweconomicopportunities(thecostsofdevelopmentaresimplytoohigh
andthestate'sresourcestoofew),thissmugglingismetwiththedefactoparticipation,ifnotoutright
approval,oflocalauthorities.Mexico'sfragmentedgeographyalsoallowedplentyofroomfordifferent
organizationstogainpowerintheirlocalareasbycontrollingparticulartransportcorridorsorcriticalcities
eventothepointofoperatinglikealocalgovernment.Thesegangsfoughtforcontrolofterritoryandthestate
didnotinterfere.
Butinfightingandviolenceamongdrugsmugglersdidnotgounnoticed,andasthepoliticalsystemshifted,so
toodidtherulesofthedruggame.
UnderpreviousPRIgovernments,theneedtokeeplocalgovernmentsandpowerstructuresundertheparty
umbrellameantthatMexicoCityignoredsmuggling.Thatwasthepriceofinclusion.Whenpowerchanged
hands,PANcontrolledgovernmentsbegantochallengetheinstitutionsbothlegalandillegalthatexisted
underthePRI.Foxbeganthedeploymentofmilitarytroopsagainstdrugtraffickingorganizationsinalimited
mannerduringhisadministration.Hissuccessor,MexicanPresidentFelipeCalderon,tookthepracticetoa
higherlevel,launchingafullscalewaronorganizedcrime.Thiswarbetweenthestatesandthesmugglers
hasputMexicoatwarwithitselfatmanylevels.Insomeways,thedrugwarissimplyarepeatofthepatterns
establishedduringtheMexicanRevolutionof19101920.
Theendgameforthecartelwarsisunclear.Astheviolencecontinues,theincominggovernmentwillhaveto
choosebetweencontinuingaconfrontationalstrategyagainstthecartelsorreturningtotheoldsystemof
inclusiveacquiescence,andanydecisiononthemattercouldbeforcedbypublicopinionturningagainstthe
anticarteleffort.Asthemilitaryisexposedtothecartels,ithasbecomeincreasinglyvulnerabletocorruption,
reducingitseffectivenessandembarrassingthegovernment.Thebottomlineisthat,aslongasdrugsare
producedinSouthAmericaandconsumedinNorthAmericaandMexico'sbordersremainsporous(forthe
geographicreasonsdescribedabove,thiswouldbeverydifficulttochange),thedrugchallengewillnotgo
away.ThechallengeforMexicoistodecidewhenfightingthewarondrugsisnolongerconcordantwithits
domesticpoliticalstability.
Energy
Mexico'senergysectorhaslanguishedafterdecadesofunderinvestment.AlthoughMexicohassignificant
potentialoffshorereservesintheGulfofMexico,the1917constitutionalnationalizationofallmineral
resourceshassignificantlyreducedMexico'saccesstoforeigncapitalandtechnologytoinvestinnew
explorationandproduction.Furthermore,thediversionofoilrevenuestofundgovernmentobjectiveshas
limitedtheabilityofPemextoachieveitsownproductiongoals.
Earlypetroleumdevelopmentcostswerebornebyforeigninvestors,butthoseassetswerenationalizedand
theindustrybecameacriticalincomestreamforthestate.Thedemandsofthestatebudgetcombinedwitha
poortaxcollectionsystemhavekeptthestatedependentonoil.Oilwasinmanywaysthekeytokeepingthe
Mexicanpoliticalsystemrunningwithouthavingtomakedifficultreforms.
However,oilproductionreacheditspeakat3.8millionbarrelsperday(bpd)in2004andhasbeenonthe
declinesince,fallingto2.9millionbpdin2011,withonlymarginalnewproductionscheduledtocomeonline.
Exportspeakedat2.1millionbpdin2003,andfellto1.5millionbpdin2011.Mexicorequiresanewwaveof
capitalandtechnologywhichwilllikelyhavetobeforeigninoriginifitistomaintainorincreaseits
energyrevenues.
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ThoughPemexisattemptingtoconductitsownoffshoreexploration,thetechnicalrequirementsinvolvedwill
bedifficultforPemextodeveloponitsownwithoutfirstredirectingsignificantfundstoitsoperatingcostsand
awayfromthegovernmentandoutofthehandsofcorruptemployees.Significantchangeswillneedtobe
madetoMexicanlawthatwillupsetpowerfulentrenchedinterests.TheCalderongovernmentinstitutedsome
reformstoallowforeigncompaniestosignfeebasedcontractswithPemex.Morechangeswillbeunder
considerationwithsubsequentgovernmentsasexportscontinuetofall.

Conclusion
Mexicoisfundamentallychallenged,firstandforemost,byitsphysicalgeography.Withmountainrangesfor
dissidentstohidein,expansivedesertsthataredifficulttocontrolordefendandseriousvulnerabilitiesto
navalincursions,Mexicoisinherentlysusceptibletoserioussecuritychallenges.Throughoutitshistorythese
threatshaverangedfromforeigninvaderstoleftistmilitantstoupperclassrebels.Today'sdrugtrafficking
organizationsareonlythelatestmanifestationofthischallenge.
Thecountry'sruggedterrainlacksnaturalrivertransportnetworks,whichmakesitexceedinglydifficultfor
Mexicotogenerateandaccumulatecapital.Thisleavesthecountrydependentonexternalcapitalandatthe
mercyofinternationalmarketdynamics.Mexicosharesanunderdefended3,200kilometerlongborderwith
theUnitedStates,theworld'slargestconsumermarket.ThismakesMexico'seconomy,whichreliesonthe
UnitedStatestoimportfromMexicoeverythingfromcomputerstodrugsaswellastoexporttoMexicocritical
foodstuffs,highlydependentonthevagariesoftheU.S.market.MexicoisalsomilitarilyreliantontheUnited
StatestodefendMexico'svulnerableeasternflank,andthusishighlyvulnerabletoU.S.politicalinfluence.
Inthefaceofallofthesechallenges,itisnosurprisethatMexicohasremainedembattledand
underdevelopedcompareditsnorthernneighbor.Evenbeforeaddressingissuesarisingatapoliticaland
policylevel,Mexicomustovercomethechallengesofitsphysicalgeography.

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