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ICG Risk Blog - [ Trends point towards Mexico's destabilization ]

Trends point towards Mexico's destabilization


How will you deal with the assassination of Calderon?: A working example of all-source risk analysis was my quickly assembled presentation when asked to step in and address the monthly meeting of the regional NAPM (National Association of Purchasing Managers) chapter this September.

I chose the title purposefully even though I might be accused of "profiting on assassinations and other terrorist acts" as was DARPA's Policy Analysis Market (PAM) futures market which actually was a superb idea designed to trade in, and gather knowledge of, "things that the US and incidentally the target country would be deeply interested in."

As an all-source risk analyst, I know that supply chain analysis must extend beyond mere commercial aspects, that while commercial calculations are an essential first step in risk evaluation, they are necessary but not sufficient to define total chain risk. Intellectual Property (IP), IT, criminal, terrorist, cyberterrorist and environmental issues - and their interactions - must be included.

In a low cost vacuum, solely commercial decisions lead to vulnerabilities, yet multinational firms habitually do not give politics and other factors sufficient attention in their countries of operation.

Looking beyond commercial issues with regards to Mexico shows the clear need for companies to prepare for tunable Just-in-time Disruption at one or more points (some likely simultaneous) in their Mexican supply chains, that they need to have mitigation strategies in place to address disruption. I take absolutely no pleasure in this forecast as I believe the Mexico's commercial capacity coupled with its engineering capability should make more manufacturers refrain from taking certain manufacturing and assembly operations to Asia (see pages 5-6).

By a show of hands to my questions, there was little recognition that Felipe Calderon was president of Mexico and, further, that he had assumed the presidency contested by Andres Manuel Lopez Obrador under conditions than made Bush v. Gore seem tame in comparison. Although "Tunable Just-in-time Disruption" was in boldface as a predicted outcome, it elicited few questions in the Q&A that followed. It remains to be seen how effective I was.

These purchasing audiences are typical of a system that has compressed its middle rank purchasing officers to focus solely on piece part costing and so has robbed them of the time, the inclination and the support to address a wider risk horizon. I personally saw this relentless pressure at one automotive OEM collapse their buyers' world view, robbing them of strategic flexibility. That pressure drove many tier one and tier two suppliers to China with unfortunate results for many US firms.

In an effort to bridge their world and mine, I took pains to demonstrate that we also dealt with the normal commercial aspects (cost, freight, lean, value-add at tier, et al) but that those criteria were, as Deming and Goldratt were fond of saying, "necessary but not insufficient" for all-source analysis, that one needed to get beyond piece part costing to assess total risk.

One listener in the Q&A said that his company had Maquiladora assets, that he was frequently down at their Mexican sites, but had heard nothing related to my comments. I thought privately that there goes a firm who lives at the whim of a stray bullet; publicly I encouraged him to dig deeper.

(For those not needing to dig deeper, Maquila program firms are Mexican companies open to 100% foreign investment participation and management, permitted special customs treatment allowing duty free temporary import, and whose products are exported, directly or indirectly, through sale to another Maquiladora or exporter. Maquiladoras festoon the Mexican side of the US border.)

It was difficult to escape feeling extraterrestrial as I pointed out that a piece part/commercial focus failed to include key Mexican factors such as:

  • Mexico's $30 billion USD black market.
  • $20 billion from drug smuggling. Balance from kidnapping, protection, bank/casino robbery, prostitution, fake merchandise, arms and gems smuggling and human trafficking.
  • Felipe Calderon's massive military crack down on Mexico's drug cartels (also here).
  • Cartel counterattacks.
  • Resurgence of Marxist EPR, Ejercito Popular Revolucionario (Popular Revolutionary Army).
  • Restive Lopez Obrador supporters (also here).
  • Weakness of PEMEX and Mexican oil production.

A piece part focus would not flag the analogous relationship of the ERP and the drug cartels to that of al Qaeda-in-Iraq and related jihadist groups to the larger assembly of Baathists, nationalists and insurgents:

  • Iraq: Iraqi Baathists, nationalists and insurgents vastly outnumber the jidahists. When it no longer serves the larger interests, the smaller will be exterminated.
  • Mexico: ERP, paid or autonomous, is educating the cartels. When it is in the cartels' interest, the ERP can be exterminated or co-opted by a combination of money and force.

The upshot will be that the cartels will continue on with tunable Just-in-Time Disruption activities once they have decimated or co-opted the EPR.

A piece part focus would not address this thumbnail assessment of drug cartel counterattacks, many of which are already underway:

  • Hyperviolence at the low end (also here).
  • Bribery and threats at the high end.
  • Expand control of local state police assets.
  • Cow and co-opt up the judicial chain.
  • Attack the military intelligence community.
  • Attack incorruptible senior judiciary.
  • Co-opt fractious political opponents.
  • Selective state disruption, damaging businesses.
  • Isolate, emasculate Calderon.
  • Failing that, assassinate him.

I will get the full weblog item up on Calderon in due course. There is so much more to say on the threats to Felipe Calderon and the Mexican government.

Consider the analysis of Mexican petroleum woes, the impacts of failing to replace Cantarell, the popular Mexican resistance to any unwinding of the oil's nationalization in the 1930s, the international pressures that can be applied to Mexico and the US by Russian energy policy, the cartels' awareness of those weaknesses and their willingness to exploit them. Then there is the pan-national destabilization of the interlocked narcotics corridor stretching from Brazil to Columbia, the Isthmus and Mexico, the rise of Mexican cartels at the expense of the Columbians. The cartels have militarized and expanded to the point that they have formed Temporary Autonomous Zones outside control of the Mexican state; those autonomous zones effectively control significant stretches of the US-Mexican border. The cartels have both grown strong even as they have lost command & control over critical assassination and enforcement assets. Either singularly or in concert, the cartels and their enforcers have broached plans to assassinate US journalists on US soil that have reported critically on cartel activities. (Deaths among Mexican journalists already put Mexico among the big three (Iraq, Mexico and Columbia).) Marxist and other splinter groups that fitfully operated in poorer regions well south of the DF (Mexico City) now operate with remarkable effectiveness in the wealthier north. Calderon has undertaken not just a war against the cartels but a war on a failing Mexican social infrastructure all the way down to the national sport of tax evasion.

It is daunting to consider the success of a simultaneous attack on so many elements of the Mexican economy and its elites; it is all too easy to envision entrenched patches of privilege in Mexico that would aid the cartels in a short-term fix of its Calderon problem.

Mexican drug gang attacks government intelligence network
The Associated Press
September 17, 2007

Mexico: A Nation-State Dissolves?
Posted by Jeff Vail jeffvail
The Oil Drum
July 12, 2007 - 10:00am

The War in Mexico
Posted by Mike under 4th Generation Warfare
Net Wars
June 26, 2007 at 10:37 pm

Mexico Purges 284 Police Commanders in Antidrug Effort
New York Times
June 26, 2007

Shooting for the Top
Mexico's Drug Gangs Take Aim at Calderon
May 21, 2007

Calderon, Mexico's Drug War Commander in Chief
By Allan Wall
Monday, January 8, 2007

Mexico's New President Sends Thousands of Federal Officers to Fight Drug Cartels
New York Times
January 7, 2007

Plotters Work to Disrupt the Mexican Government
By Barnard R. Thompson
Monday, November 6, 2006

Election Ruling in Mexico Goes to Conservative
New York Times
September 6, 2006

The China Challenge to Manufacturing in Mexico
Ralph Watkins
Program Manager for Foreign Assembly in the Office of Industries
Office of Industries, U.S. International Trade Commission (USITC)
China Challenge
September 2006

Beaten leader plans 'parallel' rule
From correspondents in Mexico City
The Australian
September 09, 2006

Lopez Obrador Supporters Occupy Heart of Mexico City
by Pablo Perez
Agence France Presse
Monday, July 31, 2006

Mexico's Uppermost Threat is Organized Crime
By Sam Logan
International Relations and Security Network (ISN)
Center for Security Studies (CSS) at ETH Zurich (Swiss Federal Institute of Technology Zurich)
Monday, May 1, 2006

The Policy Analysis Market: Why It is a Great Idea.
By khallow in Op-Ed
Aug 14, 2003 at 09:48:59 PM EST

Poindexter Resigns but Defends Programs
Anti-Terrorism, Data Scanning Efforts at Pentagon Called Victims of Ignorance
By Bradley Graham
Washington Post Staff Writer
Wednesday, August 13, 2003; Page A02

Business intelligence worth betting on
By Dan Farber,
Tech Update
July 31, 2003 9:35 AM PT
Scrolled off


Gordon Housworth

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