1
STRATFOR 700 Lavaca Street, Suite 900 Austin, TX 78701 Tel: 1-512-744-4300 www.stratfor.com
MEXICO:
A Security and Business-Risk Assessment
Executive Summary
Johnson Controls asked STRATFOR to provide a security and business-risk assessment focusing on threats the company is likely to face doing business in Mexico and specifically in the cities of Reynosa, Ciudad Juarez and Monterrey.
The Mexican government is currently facing the most severe security challenge it has experienced in nearly a century. At the heart of this challenge are three basic battles: one between the government and the drug cartels, one among the various cartels themselves and the violence being inflicted by organized-crime groups against the country’s civilian population. The mission that President Felipe Calderon launched against the cartels in December 2006 has steadily escalated over the last four years, and while there is no denying that the government is making progress fracturing the largest and most powerful cartels, one result has been a steadily deteriorating security situation nationwide.
The general crime threat in Mexico also is at a critical level and getting worse. Mexican authorities have their hands full fighting the cartels and have not had the resources to focus on other criminal activity, and this has allowed criminal groups unrelated to the drug trade to thrive. Such an environment presents a range of security implications to Western multinational corporations (MNCs) doing business in Mexico. As organized-crime groups expand their targeting, it seems all but inevitable that MNC personnel and facilities will become part of that growing target set.
The violence in Mexico is actually reaching a saturation point politically and socially. Innocent civilians caught in the crossfire are growing increasingly angry and vocal, and protests have been staged in Monterrey, Juarez and Mexico City that have drawn tens of thousands of people. With the 2012 presidential election approaching, Calderon and his National Action Party are trying to find a way to reduce the level of violence and restore the balance of [governmental and?] cartel power in the country’s most embattled regions. Eventually, over the next two or thee years, companies looking to expand operations in Mexico could find themselves operating in a less volatile security environment.
At present, however, the security situation in Mexico has never been worse, and it is likely to deteriorate even further before the violence begins to subside. This will force all business operations in Mexico, foreign and domestic alike, to continue to invest large portions of their budgets in security measures to protect their personnel and other corporate assets.
Security Situation
Mexico-Wide
The escalating cartel war in Mexico, which has created the most severe security crisis that the country has seen in nearly a century, consists of three fronts: the government’s battle against the drug cartels, the battles among the various cartels themselves and the violence being inflicted by the cartels and other criminal groups against the civilian population. The mission that President Felipe Calderon launched against the cartels in December 2006 has steadily escalated over the last four years, and while there is no denying that the government is making progress in fracturing the largest and most powerful cartels, one result has been a steadily deteriorating security situation nationwide.
One measure of this growing insecurity is Mexico’s homicide rate related to organized crime. In 2009, the number of organized crime-related killings was approximately 8,200, making 2009 the country’s deadliest year yet[you mean, in it’s entire history? that’s what your saying here]. Today, three and a half months into 2010, the death toll has already surpassed 2,900, putting the country on pace to see well over 9,000 organized crime-related deaths for the year, suggesting that the brutal drug violence has yet to reach its peak. Of course, the violence cannot continue to increase indefinitely, but there is little reason to believe that the violence will taper off within the next two or three years.
One reason for this grim outlook involves the ongoing turf battles among rival criminal groups, battles that have only intensified over the past several years. Territorial disputes among drug cartels have long been the norm in Mexico, but Calderon’s offensive against the country’s most powerful cartels has severely disrupted the criminal balance of power, leaving power vacuums that other criminal groups seek to fill. This conflict is especially visible in border cities such as Ciudad Juarez, Tijuana and Nuevo Laredo, which the cartels use as drug-smuggling corridors into the United States. But the conflict also affects other parts of Mexico that fall along the drug supply chain, such as ports in southern Mexico and areas along the Guatemalan border.
This cartel power struggle is far from over, and until a lasting balance of power has been solidified, the bloody warfare will continue and perhaps even intensify. It is this situation that confronts foreign businesses, which are forced to conduct daily operations in an increasingly volatile environment. This threatens not only the personal safety of their employees but also the profitability of their business operations. The threat of violence has forced some companies to close their doors and others, including several maquiladoras in Reynosa, to develop exit strategies should the violence become too intense.
Another reason the violence is escalating is the increasing friction between the Mexican government and the cartels. One indication of how badly Mexican government policies have disrupted drug-trafficking operations is the violent response that the cartels have directed at law enforcement and other high-ranking government officials. Several have been assassinated in retaliation for government
counternarcotics operations, including Edgar Millan Gomez, the acting chief of the Federal Police, who was killed in May 2008. Charged with leading federal law enforcement counternarcotics operations, Millan had been involved in a high-speed pursuit after[during?] a Federal Police operation to capture former Beltran-Leyva Organziation (BLO) kingpin Arturo “El Jefe De Jefes” Beltran Leyva.[was beltgran captured?] Later that same evening[what evening? the evening of the pursuit?], as Millan returned home, he was ambushed by a group of assassins hired by the BLO, who shot Millan multiple times before he died. More recently, several high-ranking local and regional law enforcement and elected officials have been executed throughout the country, apparently an effort by the cartels to show that no government official is immune from cartel violence. In February, the mayor of Guadalupe y Cavo, in Chihuahua state, was executed by unknown gunmen in Chihuahua city, and in March the local police chief of Zacapu, Michoacan, was gunned down by armed men in ski masks.
Reynosa
The border between Texas and Tamaulipas state handles the largest volume of legitimate trade between the United States and Mexico, which is the United States’ third largest trading partner. This particular border region, which provides easy access to the U.S. Interstate 35 and Interstate 10 smuggling corridors, is also the point of entry for the largest amount of drugs going into the United States, making it extremely valuable territory that is highly sought after by enterprising criminal organizations.
Reynosa, the Tamaulipas border city just across the Rio Grande River from McAllen, Texas, is certainly no stranger to violence. The Reynosa area was previously under the control of the Gulf cartel and its enforcement arm, Los Zetas. Between 2004 and 2007, the Sinaloa cartel attempted to take control of the Tamaulipas border region, including Reynosa. The ensuing conflict brought running gun battles to the streets of Reynosa and the surrounding areas before the Gulf cartel and Los Zetas were able to push the Sinaloa cartel back.
Today, the Tamaulipas border region is the front line of a conflict between the New Federation, a newly formed alliance of the Gulf, Sinaloa and La Familia Michoacana cartels, and Los Zetas, the Gulf cartel’s former partners. Reynosa is caught right in the middle. The U.S. State Department went so far as to restrict the travel of U.S. diplomatic personnel to the Reynosa area for three days in March, due to the rapid degradation of the security environment in the area caused by the feuding criminal groups. In addition to the running gun battles, skirmishes between the Mexican military and the cartels have paralyzed the city for hours at a time. The competing criminal groups have been known to deploy their own checkpoints in the area in an effort to catch rival cartel members. Another tactic seen more recently has been setting up roadblocks to impede the response of Mexican soldiers and police to cartel activities. On March 30, members of the New Federation hijacked tractor trailers, taxis and other vehicles and disabled them along a busy street in Reynosa while the group conducted operations against Los Zetas and the Mexican military.
Ciudad Juarez
Farther up river, just across the border from El Paso, Texas, the Juarez Valley in the state of Chihuahua is a strategic point of entry for both legitimate commerce and illicit goods, and Ciudad Juarez is the only major Mexican metropolitan area on the border with quick access to the U.S. interstate system within several hundred miles in either direction, making this area also extremely valuable to Mexican cartels. U.S. Interstate 10 runs directly through El Paso, where it also intersects with U.S. Interstate 25. This makes it easy to traffic drugs and other illicit goods east, west and north from Juarez. Because of the significance of Juarez as a port of entry, the Juarez Valley is now considered the most violent region in the world[this is true? ranked by whom? best to give some attribution here], with the highest concentration of murders per 100,000 inhabitants due to a raging territorial conflict between the Sinaloa and Juarez cartels. This region also happens to be where the Mexican government is most active in employing its new counter-cartel strategies and where it has deployed the largest concentration of security forces in the country.
The conflict in Juarez has evolved into three different layers of violence: The first is the street-level violence between local Juarez-based street and prison gangs backed by both the Juarez and Sinaloa cartels; the second layer is the more traditional conflict between the enforcement wings of the Sinaloa and Juarez cartels, Nueva Gente and La Linea, respectively; and the third layer is the Mexican security forces battling gangs and cartel enforcers. The first two layers are the primary reasons for the high levels of violence in the Juarez area. Members of La Linea have burned down several night clubs and bars that refused to pay their extortion demands, while members of Nueva Gente have used their superior tactical skills[why do they have superior skills?] to target members of the Juarez cartel-aligned street gang Los Aztecas. These three layers of violence often overlap, and combined they have produced unprecedented levels of violence throughout the region. Recently, however, according to a U.S. intelligence report, the Sinaloa cartel has gained control of the majority of the Juarez Valley. This may help stabilize the region eventually, but the remnants of the VCF[Vicente Carrillo Fuentes organization? Is this our first mention of these guys? shouldn’t we introduce them in this narrative?] are not expected to quietly fade away and the violence will likely continue for some time.
On April 9, the Mexican Federal Police officially took over[assumed?] all law enforcement and security operations in the city of Juarez [from the Mexican military?], which will take up positions outside of the Juarez metropolitan area, in the more rural areas of the region, where military skills are better suited. This changing of the guard does not mean much in terms of immediate security improvements in the city. The main difference is that the Federal Police are legally allowed to investigate civilian crimes (which include all cartel-related activities), whereas the military is constitutionally prohibited from conducting such investigations. The Federal Police are empowered to detain serious cartel and drug offenders in the city, but their conviction and incarceration will depend on the evidence gathered and skill demonstrated by the prosecutor’s office (arrested suspects are often released without punishment due to discrepancies in evidence collection and detainee handling). The effects of the Federal Police takeover have yet to play themselves out, but the move will likely have little effect on the security environment in Juarez.
Monterrey
The greater Monterrey metropolitan area, in Nuevo Leon state, is the third largest population center in Mexico and the country’s industrial and manufacturing hub. In addition to being a commercial powerhouse, Monterrey is a well-known stronghold for the Los Zetas organization. Strategically situated about 150 miles south of the Texas-Nuevo Leon border, the Monterrey metro area is a key transshipment point for legitimate commerce and illicit goods headed to the northern Mexico and South Texas, largely because of the highway infrastructure that connects it to the important Reynosa and Nuevo Laredo border crossings. The current conflict between Los Zetas and the New Federation has spread westward into the Monterrey area, which is also seeing running gun battles in the streets, though the level of violence has not been nearly as intense as the conflict to the east along the Texas-Mexico border[in the Reynosa area and to the northwest in Juarez?]. On April 18, Los Zetas engaged members of the New Federation in a running firefight that lasted some 20 minutes in the streets of Monterrey, and Mexican marines arrested four alleged members of Los Zetas after they reportedly ambushed the marine patrol on the outskirts of Monterrey on March 7.
In Monterrey, Los Zetas have employed tactics similar to those seen in Reynosa. The groups will hijack and disable large tractor trailers and other vehicles to block major thoroughfares throughout the city, stalling traffic for hours. Los Zetas typically use this tactic while conducting operations against rivals or moving large quantities of drugs through a particular part of town in order to hinder a response by Mexican security forces.
While there has not been a major deployment of Mexican military troops or Federal Police agents to Monterrey [in recent months?], there are significant numbers already in place due to the economic importance and size of the city. These forces are deployed throughout the Monterrey area where they man checkpoints and form quick-reaction forces to thwart possible cartel activities or operations. Should anyone associated with Johnson Controls encounter a military or law enforcement checkpoint, the person should stop and follow the directions of security personnel. Failure to do so could result in security forces firing upon the vehicle. Several innocent civilians have lost their lives when they have tried to avoid these checkpoints or disobeyed directions.