The cover story in the December 22, 2008 issue of Forbes titled “The Next Disaster” offers a bleak view of the challenges facing Mexico amid rising social violence in the wake of Calderon’s crackdown on the drug trade and economic recession in the U.S., Mexico’s main trading partner. 

The title of the article, which is probably good for magazine sales, and its subject matter, contrasts sharply to comments in the same Forbes issue by Mexican billionaire Ricardo Salinas Pliego, who recently purchased a majority stake in ailing retailer Circuit City, Mexican Ambassador to the U.S., Arturo Sarukhan, and U.S. Ambassador to Mexico, Tony Garza Jr., all of whom were interviewed in adjacent columns. 

Salinas, having lived and profited through Mexico’s various crises, was not improbably sanguine about Mexico’s prospects, commenting: “I have been through so many crises.  This is just one.  And I’ve seen worse.”  Ambassador Sarukhan emphasized Mexico’s progress in rooting out corruption in government and the high demand for illicit drugs in the U.S.  Ambassador Garza said, “I am actually quite optimistic.  Long term, I think Mexico’s economic prospects are strong.”

The article includes a map illustrating the drug cartels that control various geographic regions of Mexico; cartel control over most of the country’s territory is disputed.  90% of the cocaine that enters the U.S. comes from Mexico, the article said.

Although Mexico’s economy will likely return to growth when the U.S. emerges from recession, until the U.S. can dramatically reduce black market demand (which appears to be inelastic) for illicit drugs, social violence will probably (and sadly) remain a major obstacle for Mexico’s long-term economic development.

The offices of Culiacan, Sinaloa newspaper El Debate were the subject of a midnight gun and grenade attack on Sunday, November 16, 2008, according to a report by Jeremy Schwartz’s Uncovering Mexico blog.  No was injured in the attack, which is believed to have been a reprisal by a drug cartel against the newspaper. 

The report also reflected upon a wave of recent assasinations of individuals involved in the free press, all of which are also believed to have been perpetrated by the cartels. 

• Last week, Armando Rodriguez, a crime reporter for El Diario in Ciudad Juarez was shot and killed in front of his home as he waited to take his daughter to school. 
• In September, radio host Alejandro Fonseca was killed in the southern state of Tabasco as he hung political banners denouncing a wave of kidnappings in his state. 
• In April, two radio reporters were killed in Oaxaca.

Mexican President Felipe Calderon and other high ranking federal, state, and local governmental officials are expected to hold a series of meetings over the next few weeks in an effort to deal with the wave of kidnappings and violence that has plagued the country during past several months, as reported today in La Reforma. 

Mexico’s growing kidnap epidemic, much of which appears to bear the fingerprints of the Mexican police, has become a major focus of the government since the tragic abduction and assasination last month of Fernando Marti, the 14-year-old son of Alejandro Marti, founder of sporting goods chain Grupo Marti, S.A.B. de C.V.  According to a Bloomberg report,

“Marti’s body was discovered in the truck of a car in southern Mexico City on Aug. 1, almost two months after the boy, his driver and bodyguard were stopped at a false police checkpoint.  The boy’s family paid a ransom to the kidnappers before he was found dead.”

The report said that policemen the main perpetrators of the crimes against Marti, his driver (who was tortured and killed) and bodyguard (who was tortured but survived).  Two police officers have been detained in connection with the case and others are under investigation.  The crimes against Marti are most recent in a spate of kidnappings and assasintations targeting medium- and high-profile Mexican citizens and foreigners:

• On August 7, 2008, Cenovio Argaez, a well-known fruit grower in the state of Tabasco, was found garroted with barbed wire in his car on after his family paid US$500,000 in ransom to his kidnappers, as reported by McClatchy.
• On July 30, 2008, six members of a family that had worked for Agricultural Minister Alberto Cardenas were stabbed and shot to death in a home in Jalisco, according to a Reuters report.  The report said that two girls, aged 7 and 8, and a 15-year-old boy were among the dead, all of whom were found shot in the back of the head and shrouded in blankets.
• On July 14, 2008, CNN reported that five South Koreans were kidnapped while driving in Reynosa, Tamaulipas, across the border from McAllen, Texas.  The kidnappers falsely identified themselves as police officers and demanded US$30,000 ransom.  The victims were later released unharmed.
• On October 13, 2007, EFE reported that Spanish businessman Jose Maria Sanchez, was kidnapped from a seaside restaurant in Baja California Sur.  He was found wandering along a highway outside Tijuana with his hands bound and his eyes blindfolded.  It is unknown whether ransom was paid.

This list is not exhaustive.  Mexico has been ranked No. 2 in the world for kidnaps after Colombia.  In 2007, 438 Mexicans were abducted, according to official Mexican government statistics.  However, many kidnaps are unreported by victims and their families in fear of reprisal. Although some kidnaps in Mexico may be drug-related, the kidnap-for-ransom model, and particularly kidnaps of children, appear to be on the rise, as evidenced by the recent crimes against Marti. 

In August 2008, the Mexico City government announced reforms to its police investigative unit, which include the restructuring of corrupt units, the establishment of an anti-kidnapping hotline, and the payment of cash rewards of up to MX$500,000 (approximately US$49,400) for people who provide information to police leading to the capture of kidnappers.  Those reforms are a step in the right direction, but Mexican governmental officials will need to undertake a comprehensive overhaul of federal, state, and local police forces and other public security forces to root out corruption.  The U.S., which has a strong interest in Mexico’s political and economic stability and growth, should offer to assist Mexico in managing these complex issues.

In the meantime, what can businesses with Mexican (and other foreign) operations do to protect their key personnel from kidnapping and crime?

• Obtain kidnap/ransom and extortion insurance policies for key personnel.  Chubb, AIG, Lloyds, and Cigna all provide such policies. 
  • Although sophisticated kidnappers will target victims who are likely to have kidnap/ransom insurance, executives would unlikely be better off without it.  Kidnap/ransom insurance policies usually cover most kidnapping-related expenses, including hostage negotiation fees, lost wages, and ransom, all up to certain agreed amounts. 
  • Good policies also provide country-by-country security risk reports and other important security-related services through third-party security consultants like The Ackerman Group, run by former CIA offical Mike Ackerman (disclosure: I worked for The Ackerman Group for a short period in 2000), Kroll Associates, Control Risks Group, or Pinkerton Burns.
• Provide bodyguards, armed vehicles, and defensive tactics training for key personnel.   
• Establish the locations of plants, offices, and key personnel residences in secure neighborhoods. 
• Arm plants, offices, and residences with adequate and functioning security equipment.
• Brief executives on country security risks and procedures before all travel on the basis of up-to-date risk analysis.
• Tell key personnel to keep a low-profile, be vigilant, use hired drivers when possible (avoid gypsy taxis at all costs), and refrain from walking dangerous streets (in Mexico City, that means most streets) at night.

“Policia” photo by Mike Malazarte.