WHY MEXICO IS THE MISSING BRIC / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( HIGHLY RECOMMENDED READING )

Why Mexico is the missing Bric

By Gideon Rachman

Published: February 15 2010 20:25

How does it feel to be Joaquin “El Chato” (Shorty) Guzman? Last year Forbes magazine listed him as the 701st-richest man in the world. But unlike other billionaires, Mr Guzman cannot enjoy his fortune by spending time on yachts or in fancy restaurants. As Mexico’s leading drugs baron, he has the country’s army on his tail – and so has to hide out in a mountainous region of 60,000 square kilometres.

The fate of Mr Guzman and the other Mexican drugs criminals is more than just a crime story. It has global political ramifications. Countries that were once classified as mere “emerging markets” are now being re-classified as “rising powers”. Brazil, India and China – together with Russia – have been famously tagged as the “Brics”, and are now global political players.

With a population of more than 112m people, a per capita income that is more than double that of China and privileged access to the US market, Mexico should be in this group of rising powers. But the drugs problem is blighting its future.

The figures are horrifying. Last year, the death toll in Mexico’s drugs war was more than 6,500. By comparison, over the same period the conflict in Afghanistan claimed the lives of some 2,400 civilians. Drug-related violence killed 238 Mexicans in the first 10 days of this year alone. In late 2008, a Pentagon study notoriously suggested that Mexico was on its way to becoming a “failed state”. Since then drugs violence has only intensified.

Fortunately, you need only spend five minutes in the country to realise that any comparison between Mexico and a truly failing state, such as Afghanistan, is silly. Mexico City, the capital, is a vast, bustling and fairly wealthy city. The drugs violence is dreadful – but it largely lacks the random quality that truly terrorises a country. About 90 per cent of victims are said to be members of warring drugs cartels. Most violence is confined to three relatively small regions – above all, the benighted border city of Ciudad Juarez, where more than 2,500 people were murdered last year.

But the drugs war is still severely damaging Mexico. Ciudad Juarez is not some dusty, desert outpost – it is a major base for manufacturers, aiming at the US market. Across Mexico, local businessmen worry about extortion and kidnapping – while foreign investors hesitate.

Mexico might be able to cope better with the drugs issue if it were not also suffering from other ailments. But 2009 was an economic disaster for the country. While China and India grew strongly and Brazil barely lost ground, the Mexican economy tanked, shrinking by almost 7 per cent.

Everything seemed to conspire against the country last year. The US, which takes 80 per cent of its exports, was in recession. The oil price slumped. An outbreak of swine flu devastated tourism. All that seemed to be missing was a plague of locusts.

But even when Mexico’s run of bad luck ends it will still face serious economic problems. China’s manufacturing miracle has helped Brazil, which is a major exporter of commodities, but it has been a big headache for Mexico – which has based its economic strategy around manufacturing for the US market.

Economic underperformance has been matched by diplomatic underperformance. As a member of the newly influential G20 group of leading economies, the Mexicans should be well placed. Instead, Brazil has been anointed as the unofficial leader of Latin America. Felipe Calderón, Mexico’s president, is serious and hard-working, but he lacks the charisma and high profile of Brazil’s President Luiz Inácio Lula da Silva. Brazil’s voice matters a lot in world trade talks and in global climate change negotiations, while Mexico’s views barely feature.

What can Mexico do to turn this situation around? The country will host the next United Nations climate summit in December – although that might prove to be something of a poisoned chalice. Some public intellectuals in Mexico are beginning to argue that Mr Calderón should make a quiet accommodation with the drugs gangs, to restore social peace. That would surely be a mistake. A situation in which criminals are permanently ceded control of parts of the country – and can continue to buy influence and power unmolested in the rest of the nation – cannot be a basis for stability. Police reform, social programmes and improved intelligence co-operation with the US are better options.

But as well as battling on in the struggle against the illegal drugs cartels, the Mexican government needs to take on the legal business cartels. Oddly enough, it is not a good sign that the current holder of the unofficial title of the “world’s richest man” is a Mexican – Carlos Slim. Mr Slim is a gifted businessmen who has built up a telecommunications empire across Latin America. But his vast wealth testifies to the uncompetitive nature of the Mexican telecoms market in which he built his initial fortune. It is widely acknowledged in Mexico that the country would make huge gains if it allowed more competition in everything from energy to construction and retailing.

There is, however, one positive side to the inefficiency of the Mexican economy. It means that the country still has huge untapped resources. The year 2010 – which marks the 200th anniversary of Mexican independence and the 100th anniversary of the Mexican revolution – would be a fitting year in which to unleash that potential.

Copyright The Financial Times Limited 2010.