How has the lack of security in Mexico affected the private sector?

August 19, 2020
4:44 pm
CDMX.

By Tania Rojas, Miranda Media

The assassination attempt of Mexico City’s Chief of Police in one of the safest and most heavily guarded areas of the country’s capital.
The failed operation which ultimately led to releasing the son of one of the world’s most powerful crime bosses.
The massacre of a family from a Mormon community on the US-Chihuahua border.

The security strategies implemented over the last six years have not managed to contain violence in Mexico, the implications of this have caused havoc for the country and directly impacts the well-being of the population, as well as economic growth and development. In this regard, how has the lack of security affected the private sector in Mexico?

Since the so-called “Mexican War on Drugs” was declared by President Felipe Calderón in 2006, Mexico has been in downward spiral of violence that has worsened in subsequent presidencies. The fragmentation of the large cartels has led to an increase in violence and a diversification of their criminal activities.

According to the National Drug Threat Assessment report from the DEA, six highly-impactful transnational criminal organizations currently operate in Mexico: the Sinaloa Cartel, the Jalisco Nueva Generación Cartel (CJNG), the Organización de los Beltrán Leyva, the Juárez Cartel, the Gulf Cartel, and the Los Zetas Cartel.[1] There are also two groups that stand out at the national level, the Santa Rosa de Lima Cartel, concentrated in the state of Guanajuato, and the criminal group La Unión Tepito, operating in Mexico City. Additionally, various criminal groups and cells with a local presence are spread throughout the country.

Although drug trafficking continues to be the most profitable criminal activity, oil theft and extortion have been valuable revenue generators for criminal organizations. It is estimated that crimes committed against individuals, companies, and the government costs the country approximately 1.52 trillion pesos a year ($68.8 billion USD), which represents 6.8% of Gross Domestic Product.[2] According to data from the Executive Ministry of the National Public Security System (SESNSP), so far in 2020, the states with the highest crime rates are Baja California, Colima, Chihuahua, and Guanajuato.

The impunity with which criminal groups operate has caused palpable consequences for companies. In 2018, Coca Cola Femsa had to indefinitely shut down its plant in Ciudad Altamirano, Guerrero. The decision was made after receiving threats, harassment, and attacks on employees by criminal groups to pay a type of extortion which is commonly referred to as a right to pass fee.[3] According to the company, the losses caused by the closure were around 30 million pesos ($1.35 million USD) per month in revenue.[4]

Given the lack of protection from the authorities, companies have found themselves in the dilemma of assuming the additional costs for the fees or closing indefinitely. The impact goes beyond the damage to the company itself, it has also been detrimental to local economies from the effects on jobs and local businesses. Extortion is the third highest type of crime affecting companies in the country and the situation is worsened by the lack of trust in the authorities. It is estimated that an investigation is never even opened for more than 97% of extortion crimes.[5]

That said, over the last decade, Mexican companies have adapted to operating without security and the majority have done so successfully. In some cases, knowing how to navigate these situations can be a competitive advantage. In others, it even provides a barrier to entry. Some companies pass the extra security costs to the final consumer, i.e., it ends up being a tax on all citizens.

Despite the continuous violence, the federal government still does not have a clear and concise security strategy to comprehensively address the problem. If government action to combat criminal groups is the only attempt at a solution, the task will not be easy, it requires active cooperation at all three levels of government, civil society organizations, and the private sector.

In a report on the extortion of businesses published by México Evalúa, recommendations are made for companies and security institutions. For companies, suggestions range from changing the owner’s and manager’s emails and phone numbers every six months, to being much more careful with documentation and confidential information that can could end but being publicly accessible.

For security institutions, the recommendations go even further, they suggest creating prevention and intelligence strategies that address extortion at its roots. They propose making a specialized extortion department, increasing collaboration with the private sector to get more information about the problem, with a special emphasis on strategy from the banking system, improving the fight against corruption in police departments and with authorities within all three levels of government, as well as prevention and social reintegration programs to prevent more people from getting involved or recommitting these crimes.

Addressing this problem can bring great benefits to the country, such as increasing the confidence of national and foreign investors. It is worth mentioning that this year, Mexico fell out of The 2020 Kearney Foreign Investment Confidence Index (FDI).[6] In 2002, Mexico ranked third in this index, which reflected the high expectations for the country.

If security is not guaranteed for established companies in Mexico, valuable investments for the nation’s economy could be lost. An immediate, clear, and comprehensive strategy is needed to address the causes and understand the dynamics of crime in each state. The cooperation between authorities and the private sector, beyond just political allegiances, will be key to combating organized crime and ending the violence that plagues the country.

Sources:

DEA (2020). 2019 National Drug Threat Assessment.

[1] https://www.dea.gov/sites/default/files/2020-01/2019-NDTA-final-01-14-2020_Low_Web-DIR-007-20_2019.pdf

Badillo, D. (2020, April 1). La delincuencia le cuesta al sector empresarial 147,000 mdp al año. Consulta realizada: August 15, 2020.

[2] https://www.revista.imef.org.mx/2020/04/01/la-delinuega-le-cuesta-al-sector-empresarial-147000-mdp-al-ano/#:~:text = The% 20 cost% 20 direct% 20 of% 20la, Internal% 20Bruto% 20 (GDP)% 20national.

Milenio Digital (2018, March 24) Coca-Cola cierra planta en Guerrero por inseguridad.

Accessed on: August 15, 2020.

[3] https://www.milenio.com/estados/coca-cola-cierra-planta-en-guerrero-por-inseguridad

Celis, Fernanda. (2018, abril 16). Coca-Cola Femsa revela la causas del cierre de la planta en Guerrero

Accessed on: August 15, 2020.

[4] https://www.forbes.com.mx/coca-cola-femsa-pierde-30-mdp-al-mes-por-cierre-en-ciudad-de-guerrero/

México Evalúa (2020). La extorsión empresarial en Ciudad Juárez.