City Journal.
City Journal Autumn 2009.
City Journal Autumn 2009.
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A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.

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Helping Mexico Help Itself
A more prosperous, democratic southern neighbor would reduce crime and illegal immigration.
A victim of one of Mexico's brutal drug gangs
Reuters/Corbis
A victim of one of Mexico’s brutal drug gangs

Two crises have deepened America’s anxieties over immigration since Congress tried to reform the law two years ago: the global recession and an outburst of murder and mayhem in northern Mexico. The recession has aroused antipathy for foreigners who compete for jobs. The violence along the border, which stems from a high-stakes campaign by Mexican president Felipe Calderón to bust apart several large drug cartels, has inflamed fears that our borders aren’t secure.

Americans differ on what to do about illegal immigration, but most agree that the root of the problem is Mexico’s failure to provide adequately for its own people. Mexicans differ on how to create a more prosperous, democratic nation, but most are eager to improve the status of their countrymen living illegally in the United States. These attitudes suggest the contours of a grand bargain that both peoples might be persuaded to accept: immigration reforms that help Mexicans in the United States, conditioned on economic and political reforms that help more Mexicans get ahead and stay back home.

Mexico’s problems have not changed much in 500 years. The country has never managed to organize itself into a liberal democracy founded on the habit of inquiry, an engaged citizenry, and the rule of law. Its people endured centuries of domination as a colony of Spain, decades of war and tyranny after independence, and a decade-long revolution, begun in 1910, that killed 2 million people and replaced one autocracy with another. For the rest of the century, power was concentrated in an immense political corporation—the Institutional Revolutionary Party (PRI)—and in a succession of presidents who ruled like kings. Even the PRI’s defeat in 2000 by Vicente Fox and the conservative National Action Party (PAN) has not brought much democracy: its main effect has been to weaken the presidency and to set off a free-for-all among political parties, state governments, and the big unions, bureaucracies, and businesses that control them. Unchecked by executive power, these institutions are authoritarian, averse to change, and corrupt; Mexicans joke that theirs is the first country in history to move from monarchy backward to feudalism.

Political institutions remain antiquated. The Mexican constitution prohibits elected officials from standing for reelection. It is a chicken-and-egg dilemma: the people don’t trust their elected officials to represent their interests, so they bar them from serving consecutive terms, thereby making them less likely to represent their interests. Two-fifths of the members of the lower house of Congress aren’t elected at all, but appointed by the parties in proportion to their share of the vote.

Citizens’ efforts to challenge the system are stymied by laws that prohibit anyone outside a party from running for office and also make it hard to form new national parties. Political discourse is stifled by laws restricting private funding of campaigns and prohibiting all but the parties from buying campaign ads on radio or television. Rules forbidding campaigns from criticizing one another infantilize the political debate. The people are not happy with the system. A survey last year by the Mexican newspaper Reforma found that just 36 percent of Mexicans were satisfied with their new multiparty democracy and that only 25 percent felt that their congressional delegates represented their interests.

Political weakness has produced economic weakness. The privatization in the 1980s and 1990s of hundreds of state-owned enterprises—everything from banks and mines to airlines and the phone company—strengthened public finances; but, in most cases, the sales were poorly designed and created private monopolies that have impeded productivity growth. NAFTA, sold to Mexicans as their ticket into the First World, has disappointed expectations: trade and foreign investment have created jobs, but because of government restrictions, there hasn’t been enough of either to solidify a consensus against protectionism. Government revenues depend too much on petroleum: nearly 40 percent of the federal budget comes from the sale of oil to the United States. Annual per-capita growth over the last decade has averaged just 1.9 percent, 40 percent of the population lives below the official poverty line, and 60 percent of the nation’s households earn less than 25 percent of the nation’s income.

The lack of consensus on how to achieve healthier growth was vivid in the 2006 presidential election, when PAN candidate Calderón defeated a left-wing coalition’s candidate, former Mexico City mayor Andrés Manuel López Obrador, by fewer than 250,000 votes out of more than 41 million cast. The results set off months of protests and laid bare a long-standing demographic wound. The more prosperous North, blessed by its proximity to the United States, voted by healthy margins for Calderón, the standard-bearer for free markets. The South—more isolated, more Indian, and with four times the poverty rate of the North—voted for López Obrador, who campaigned for social justice for the poor through more government control of the economy.

Ill-conceived laws and regulations impede economic growth. The World Bank Group estimates that it takes nearly two months to open a business in Mexico, compared with five days in the U.S. and three in Canada. Labor laws make it hard to fire workers, land-tenure laws make it hard to transfer farmland, and inadequate property-rights laws make it hard to secure title and get a mortgage. Many Mexicans resort to bribery to skirt these rules. A study by the Private Sector Center for Economic Studies in Mexico City found that one in three businesses made “extra-official” payments, totaling $11.2 billion, to legislators and other public officials in 2004. Tax evasion is widespread, with total tax collection from all levels of government in 2007 estimated at 19.8 percent of GDP, the lowest among 40 countries studied by Eurostat and the Organisation for Economic Co-operation and Development (OECD). Economists estimate the size of the informal economy—businesses not registered with the government—at 40 percent of GDP.

The country remains organized into large corporatist powers, toxic to free enterprise. Another OECD report this year cites telecommunications, electricity, railroads, and the media as “areas where competition is weak.” Nor is there great clamor for change: in a lawless society, it pays to be big. Few Mexicans want the government to sell its giant oil monopoly, PEMEX, even though the state runs it dismally and the people hate the state: the industry was expropriated from foreign companies in 1938, and Mexicans are taught in grade school that though the U.S. stole half their nation’s territory, the oil at least remains theirs.

Schools are another enormous problem in Mexico. Student knowledge of reading, math, and science, as gauged by the Programme for International Student Assessment, is the lowest of the 29 OECD nations. Graduation rates are low, too. Mexico’s 2,400-plus municipalities receive half the federal budget, but they spend it poorly because most municipal presidents have only a seventh-grade education. Reports are common of teachers extorting parents, abusing children, skipping class, teaching subjects they don’t know, drawing salaries for no-show jobs, and shutting down schools for months at a time when they don’t get their way. The head of the National Educational Workers Union—the largest trade union in Latin America, with 1.4 million members, and the single most powerful institution in Mexico—agreed last year to permit some competitive hiring based on independent evaluation of teacher competence; her members, accustomed to selling or bequeathing their posts to offspring and friends, protested with strikes.

But the most notorious challenge to Mexico today is the drug cartels and the related surge in crime. According to the U.S. Drug Enforcement Agency, Mexico produces about eight tonnes of heroin and 10,000 tonnes of marijuana per year, mostly for U.S. consumption. It is also the main source of methamphetamine production and the transshipment point for 90 percent of the cocaine that enters the United States. A report by Barry McCaffrey, former director of the White House Office of National Drug Control Policy, estimates that drug cartels earn over $25 billion a year from U.S. sales and repatriate over $10 billion a year in cash to Mexico. Tens of thousands of Mexicans—from shanty dwellers to state governors—benefit directly from the drug trade.

Drug abuse has increased in Mexico as well, seeded by the cartels, which began dumping and bartering surplus product as U.S. markets shrank several years ago. An estimated 5 percent of the Mexican population consumes illegal drugs, the government says, and chronic use has doubled in the last six years, to half a million addicts.

Murders involving the drug cartels more than doubled last year, as the mafias fought one another and the Calderón government; more than 730 troops and police have been killed since January 2008. In 2008, the U.S. Department of Defense caused a stir when it issued a report noting that Mexico’s government, in a worst-case scenario, might suffer “a rapid and sudden collapse . . . under sustained assault and pressure by criminal gangs and drug cartels.” Cocaine traffickers spend as much as $500 million on bribery in Mexico, more than double the budget of the Mexican attorney general’s office. Credible analysts say that the cartels have a significant presence in 20 of the country’s 32 states and arrangements of various kinds with at least eight governors. The finance ministry estimates that organized crime costs Mexico 1 percent of GDP growth per year.

Mexico’s kidnapping rate, which spiked in the 1990s as drug traffickers diversified or were driven out of business, remains among the highest in the world—more than 500 kidnappings per month, according to a 2008 study by the Citizens’ Institute for Crime Studies. Protection rackets have also grown; the government says that it received 50,000 extortion complaints last year. In the border state of Chihuahua, where fighting against and among the cartels has been fierce, even Wal-Mart was approached to pay protection money.

The country’s prison population has doubled, to 219,000 in the last eight years, but people still don’t feel secure. Four out of five respondents to a national survey last year by the polling firm Ipsos-Bimsa said that they felt very or somewhat unsafe. In a Reforma poll of Mexico City residents this year, 65 percent called security the city’s biggest problem; 20 percent said that they had been the victim of a crime within the prior 12 months—most often, personal assault. When I visited earlier this year, one friend I met witnessed an armed robbery; another had his car stolen at gunpoint; and another, an accountant, was held up on his way to meet me (he hadn’t brought his bodyguard).

Law enforcement is terrible. A study by researchers at Mexico’s National Autonomous University estimates that for every 1,000 crimes committed in Mexico, just 16 get prosecuted. The offenses that are prosecuted are not the most serious ones: 75 percent of state spending on public safety and criminal justice goes to fight minor, nonviolent crimes, the Center of Research for Development reports. A Reforma poll found that 36 percent of Mexicans consider police corruption an urgent national problem, the highest percentage of 65 countries surveyed. Calderón, who has staked his presidency on beating back the cartels and improving public safety, had to deploy the army instead of the state and local police because the military is the only security apparatus in Mexico that works comparatively well.

Millions of Mexicans have fled the country’s woes. Between 1970 and 2008, the percentage of the Mexican-born population living in the U.S. grew from 1.5 percent to 11 percent—from about 760,000 to 11.8 million people, roughly 15 percent of the country’s potential male workforce. About 7 million are here illegally, making up 61 percent of the total illegal immigrant population, the Department of Homeland Security estimates. Most Mexicans have relatives living in the U.S., and as many as one in four households has at least one member here, surveys by Mexican polling firms show. The migration is self-perpetuating because the most likely to emigrate are those with relatives already here. Though the exodus has slowed a bit since the recession, Mexico’s National Population Council projects that it will last another 30 years or longer. The desire for a better life trumps even national pride: polls find that most Mexicans would be willing to join the two countries into one if doing so would raise their standard of living.

The most powerful engine of migration is jobs. The income gap between Mexico and the U.S. is the largest of any two contiguous countries in the world: in 2005, $7,750 per capita in Mexico versus $35,878 per capita in the United States. An American manufacturing job pays four times as much as a Mexican manufacturing job and up to 30 times as much as a Mexican farming job. The gap in per-capita GDP between the two countries has barely narrowed in 20 years.

Americans, of course, can’t decide what to do about immigration. Most business, labor, and nonprofit organizations support pro-immigration policies, such as qualified amnesty for illegal aliens, increases in legal immigration, and new or expanded guest-worker programs. President Barack Obama, who supported the comprehensive reform bill that failed in 2007, has said that he intends to promote a similar plan that would increase the number of legal immigrants and allow undocumented immigrants to stay in the country, “pay a fine, learn English, and go to the back of the line for the opportunity to become citizens.”

Most voters, however, believe that offering amnesty to illegal immigrants would harm American workers and put a strain on the nation’s resources. There is evidence to support their view. A 1997 National Academy of Sciences study found that the typical U.S. household pays between $166 and $226 in extra taxes to cover the cost of schools, health care, and other services used by immigrants. And a 2004 study by Harvard labor economist George Borjas concluded that competition from immigrants depressed wages by 7.4 percent for U.S.-born men without a high school education. If these studies are correct, it’s hard to imagine a policy that protects America’s low-skilled workers, eases the burden of immigrants on public services, and satisfies the demands of large U.S. employers and Hispanic-rights groups.

The grim fact is that Mexico must help solve America’s immigration dilemma by becoming a better country for its people. But the United States has two big cards to play to encourage Mexico to reform: its legal power to resolve the status of 7 million Mexicans living here in limbo, and its more pervasive economic power as Mexico’s dominant trading partner and source of foreign investment.

Polls by the magazine Este País show that the Mexican people would be willing to abandon one of their most cherished convictions and open PEMEX to private investors in exchange for measures that benefit their relatives in the U.S. Privatizing the oil company would require amending Mexico’s constitution. But energy-sector productivity would improve dramatically even if the Mexican Congress simply passed laws to eliminate restrictions on the import, export, and domestic sale of crude, gasoline, basic petrochemicals, electricity, gas, and oil derivatives. If opening the energy sector to foreign competition proved too controversial, lawmakers could begin with other industries that the OECD identifies as sheltered and inefficient, such as telecommunications and the media. In return, the U.S. could offer Mexican immigrants various benefits—higher quotas for work visas or green cards, for example. Like Mexico, it could avoid the more controversial concessions at first, such as guest-worker programs.

Beyond the virtues of any one deal, establishing the principle of linkage—immigration liberalization in the U.S., conditioned on economic liberalization in Mexico—would change the political conversations in both countries. Mexicans in the U.S. have influence back home, and surveys show that they are more likely than the vested interests there to support policies that lead to growth. Americans likewise might be more willing to accept as truly “comprehensive” an immigration reform that took into account the key variable affecting migrant flows into the U.S.: Mexico’s own behavior.

More broadly, the best way to strengthen Mexico and ease the pressure of illegal immigration is to stimulate free trade and investment to promote the continent’s competitiveness. The goal should be to create regional mechanisms like NAFTA that are accountable to each country’s people but that strengthen Mexico’s institutions in a range of areas, including economic regulation, competition, and monetary policy.

America should also continue to help Mexico fight the drug cartels. Calderón has won support from the U.S. Congress, which last year approved $1.4 billion in security aid for Mexico, and from President Obama, who has stepped up efforts to interdict illegal weapons and cash flowing into Mexico from the U.S.

We could increase support, too, for Calderón’s effort to build a competent national police force. The U.S. Agency for International Development, which has given grants that are stimulating judicial reforms in Chihuahua and other states, might fund efforts to improve how states and municipalities screen, train, deploy, monitor, and reward their security forces. We might also consider funding border cities or states to work with their neighbors in the U.S. to prevent smuggling, illegal immigration, and crime.

The U.S. and Mexico grow more intertwined every year. Mexico supplies a third of our imported oil and is our second-largest export market. Half of Mexico’s imports come from the U.S., and more than 80 percent of its exports—20 percent of its GDP—go to the United States. Four of five tourists in Mexico come from the U.S.; 18,000 Mexican companies have U.S. investment. More than 1 million Americans have established Mexican residency, the largest U.S. expatriate group in the world.

Despite these ties, there is no taking Mexico’s stability for granted. The country mistrusts itself. A survey by Reforma found that only one in four Mexicans agreed that most other Mexicans were honest. Every year brings fresh challenges. In 2008, drug violence soared and the global recession slowed growth. This year, the economy contracted 8 percent through June, and the PRI, corrupt as ever, made a strong comeback in July’s congressional elections, hurting prospects for reform. Next year is the bicentennial of Mexico’s independence and the centennial of the Revolution. U.S. policies should give both countries something to celebrate.

Shepard Barbash is former bureau chief in Mexico City for the Houston Chronicle and author of three books about Mexico, including Changing Dreams.

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