The Geopolitics of Mexico_ a Mountain Fortress Besieged _ Stratfor

6/18/2015 TheGeopoliticsofMexico:AMountainFortressBesieged|Stratfor

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The Geopolitics of Mexico: A Mountain FortressBesiegedAnalysis NOVEMBER17,2009|15:30GMT Print TextSize

AnalysisEditor'sNote:Thisisthe11thinaseriesofStratformonographsonthegeopoliticsofcountriesinfluentialinworldaffairs.

AsthesouthernmostportionofNorthAmerica,Mexicofacesadifficultgeographicsituation.Ithasasmallandlimitedcoreterritorysurroundedbymountains,desertsandjunglesthatareinherentlyhardtocontrolandnearlyimpossibletodefendagainstthreatsfromwithinorwithout.

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Thecountryisfunnelshaped,itshighplateauanchoredinthemountainsandjunglesofCentralAmericatothesouth.Thefunnelfansandexpandsnorthwesttowarda3,200kilometerlong(2,000milelong)desertborderwiththeUnitedStates.BorderingtheplateautotheeastandwestareMexico'stwomountainranges,theSierraMadreOrientalandtheSierraMadreOccidental.Withpeaksashighas5,500meters(18,000feet),thesemountainrangesareextensiveandformidableindeed,thecountrycanbethoughtofasakindofmountainfortressthatmustsecureoutlyingterritoriesthatserveasapproachestoitscore.

OnMexico'swesternflank,theslopesoftheSierraMadreOccidentaldropprecipitouslytowardthePacificOcean.

Blanketedalternatelywithdensedeciduoustropicalforestsandsocalled"spineforests,"thevegetationofMexico'swesternslopesisextremelyinhospitable.ThoughpatchesofsavannainSinaloaandSonorastatesserveasadequategrazinglandforcattleandotherlivestock,westernMexicorequiressignificantinfrastructuretodivertwaterfromtheregion'srelativelysparseriversystemforagriculturaluse.

OntheeasternslopesoftheSierraMadreOriental,thelanddropsawaytowiderflatlandscomparedtothenarrowlittoralstriponthewesterncoast,flatlandscharacterizedbydensetropicalforests.Despitetherelativerichnessoftheland,withitsfacetotheGulfofMexicoandthevastmajorityoftheworld'sgreatpowerstoitseast,Mexico'seasternshoreshavealsoprovedtobeamilitaryvulnerabilityfortheMexicanheartland.

NolesschallengingtotheMexicanstatearethecountry'sdeserts,whichcharacterizethenorthernborderandboastsomeofthemostdesolateterritoryinallofNorthAmerica.ThisareaformsanimpressivebufferbetweenMexicoanditspowerfulnorthernneighbor,butitisalsothehistoricalseatofinsurrectionforanyforce(mostoftendomestic)seekingtochallengeMexico'score.

The Heartland

TheMexicanheartlandisroughlytheregionalsoknownasancientMesoamerica,whichliesbetweentheTropicofCancerandthe18thparallel.ThisregionisthenativehomeoftheOlmec,Toltec,AztecandmanyotherNorthAmericantribes.WithinthisregionisthetruecoreofMexico,whichStratforviewsasadoublecore,withtwogeographicallydistinctyetvitalcenters:theregionaroundtheValleyofMexicoandtheregionofVeracruz.

SituatedatthecruxofthesierrasintheValleyofMexico,MexicoCityistheunquestionablepoliticalcoreofMexico.ThishighplateauwashometotheAztecsandwastheoriginofoneoftheworld'smostimportantgrains:corn.Thoughthisregionliesattropicallatitudes,thehighaltitudeoftheplateaumitigatesthetropicalinfluence,providingforamild,temperateclimatesuitableforagricultureandsustainingrelativelylargepopulations.Thesheerheightsofthemountainstotheeastandwestofthecityalsoaffordthehighplateauacertainamountoffortificationfromoutsidethreats.

EstablishedinthemiddleofalakethatfilledtheValleyofMexico,MexicoCitywasoriginallytheAzteccapitalofTenochtitlan.Hardlythebestlandinthearea,thelocationwasoriginallyselectedforsettlementatatimewhentheAztecswereoneoftheweakesttribesintheregion.TheAztecsbuiltthecityliterallyrightoutofthewater,usingstoneandlimetoconstructtemplesandgrowingcropsonplatformsinthemiddleofthelake,

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calledchinampas.Inthe16thcentury,theSpaniardsbuiltacanallinkingtheValleyofMexicototheTulariversystem.Theprojecteffectivelydrainedthelakebutleftthecitywithnumerousproblems,includingseverefoundationalinstabilityandvulnerabilitytoearthquakes(recentyearshaveironicallybeencharacterizedbyseverewatershortages).

Despiteitslocation,MexicoCityisacriticalcomponentofnationalcontrol:Whoevercontrolsthecapitalcancontrolthehighlands.Thatsaid,Mexico'sroughterrainmakesitdifficulttosecurecontroloftherestofthecountry,andMexicoCityoftenfindsitselffendingoffthreatsfromallsides.

Thegreatestthreats,historically,havecomefromthecityofVeracruz,whichformsthesecondpoleofMexico'sdoublecore,ontheeasternshoreofsouthernMexico.ThislowlandtropicalregionwashometotheOlmecs,oneofMesoamerica'searliesttribes.ThetropicalclimateinVeracruzhashistoricallypermittedthegrowthofawidevarietyofplantstosustaintheOlmecdiet,includingsquashandbeans.However,thehumidclimatemakesitdifficulttogrowgrains,thusthecoastlineisunsuitableforsustaininglargepopulations.

ThecityofVeracruzhasalsobeenthepointfromwhichforeign(anddomestic)powershavebeenabletosuccessfullylaunchinvasionsofMexicoCity.AsoneofMexico'smainGulfports,withdirectaccesstoMexicoCity,VeracruzisakeyjumpingoffpointfromthecoasttoMexicoCity.VeracruzwasoriginallyestablishedbySpanishexplorerHernanCortez,whousedhistimetheretoformallianceswithlocaltribesthathadbeensubjugatedbytheAztecsandwereeagertosupportanewregionalstrongman.Inthecompanyofthousandsofnativewarriors,CortezsuccessfullylaidsiegetoandcapturedTenochtitlanfromtheAztecsin1521.

Intime,followingthecollapseoftheSpanishempire,thechaosofMexico'swarsofindependencewasexploitedbyFrance,whichcrownedFerdinandMaximilianJosephHapsburgemperorofMexicoinMexicoCityin1864.AfterbattlinginlandfromtheirlandingpointinVeracruz,theFrenchoccupiedMexicoCityforthreeyears.TheysoondiscoveredthatextendingtheirreachthroughMexicoasawholewasfarmoredifficult.TheproblemfortheFrenchwasthesheertimeandmanpowerrequiredtoconquerMexico'sfarflungdeserts,mountainsandplateausandevensolidifyingcontroloverareasasclosetoMexicoCityasthestateofOaxaca,whererebelforceswereabletofindsanctuary.TheFrenchwereunabletosolidifytheircontroloverMexico'sterritory,andin1867FrenchEmperorNapoleonIIIwithdrewtroops,leavingMaximiliantobeexecuted.

ItisofthehighestpriorityforMexicotocontrolthehighlandregionaroundMexicoCityaswellasthelowlandregionontheGulfcoastaroundVeracruzinordertoguaranteetheexistenceofthestate.AstheFrenchexampleshows,however,therearenearbyareasthatmustalsobecontrolled.Werefertotheseregionsastheoutercore,whichconsistsofthestateswithintheboundariesofancientMesoamericabutoutsidetheimmediatevicinityofMexicoCityorVeracruz.Thesestatesincludethemountainous,ruggedstatesofChiapas,Oaxaca,MichoacanandGuerrero.Becauseoftheirmountainousterrain,thesestatescanbedifficulttocontrolandcanserveaslaunchingpointsforrebelforces.ForMexicoCity,itiscriticaltocontainandmitigateunrestintheseareasinordertoguaranteethephysicalsecurityofthecore.

Political Boundaries

Mexico'scoreterritoriesarecriticallyimportanttothesurvivalofthestate.LesscriticalbutstillimportantareMexico'scurrentpoliticalboundaries,whichencompassamuchlargerterritorythathasrepeatedlydefiedsubjugation.



TheSpanishviceroyaltyestablishedMexico'ssouthernborderswithGuatemalaandBelize(whichweresolidifiedbytreatyin1882).Uponindependence,therewasnoimpetustopushfarthersouth,primarilybecausethelandinCentralAmericaismountainous,difficulttodefendorcontrolandnotsuitedforagriculture.Thenextpatchofusefulterritoryismorethan1,600kilometerssouthinthehighlandsofColombiaandeverythinginbetweenisfarmoretroublethanitisworth.ForMexico,therewasnothingtobegainedinchallengingthesouthernborderline(indeed,itmightactuallybenefitMexicotocedemoreofthemountainous,halfwildterritoryofChiapastoitssouthernneighbor).

Thenorthernbordersareadifferentsituationaltogether.Twoseminaleventsdefinedthenorthernborder:theTexasWarforIndependenceandtheU.S.MexicanWar.ThewarwithTexaseffectivelyreleasedthevastmajorityofTexastoindependence,butitalsosetthestageforawarbetweentheUnitedStatesandMexicobyleavingtheactualborderisindisputed.OnceTexasjoinedtheUnitedStates,thisdisputeeruptedintoawarbetweenthetwoNorthAmericanneighbors.TheconqueringofMexicoCityin1847bytheUnitedStatesendedthewar,withtheUnitedStatestakingabouthalfofMexico'stotaloriginalterritoryallofTexasalongwiththelandthatwouldbecomethemodernU.S.statesofArizona,CaliforniaandNewMexico.Inoneblow,theUnitedStatessatisfiedcriticalstrategicneeds(namelyanundisputedpathtothePacificOceanandastrategicbufferfortheGreaterMississippiValley)byacquiringsomeofMexico'smostpromisingterritory,leavingthecountryinastateofturmoil.

Simplyput,Mexico'snorthernborderisneitheraproductofinevitablegeographicdictationnoraborderofMexico'schoosing.StretchingacrossvastexpansesoftheSonora,ChihuahuaandBajadeserts,theU.S.MexicoborderbisectsasectionofMexicothatisatmostpointsonlybarelyhabitable.Tomakethingsmorecomplicated,themountainsthatstretchnorthintothisregionallowforpocketsofunresttosimmer,andeventuallyboilover.ThephysicalisolationofnorthernMexicoandthedifficultyMexicoCityhadinprojectingpowerintotheareawasoneofthemostimportantreasonsitlostTexasandwhatisnowtheAmericanSouthwest,andoneofthekeycausesoftheMexicanRevolutionof19101920.

Themountains,desertsandisolationofnorthernMexicoprovidefertilegroundforcivildissentandlawlessactivity.Thus,whilenorthernMexicoprovidesasubstantialstrategicbufferbetweenMexicoCityanditsnorthernneighbor,itisalsoaseverevulnerability.AddtothatthefactthatMexicoCityremainshighlyvulnerableonitseasternflank,andthebenefitsofthebufferzoneseemnegligible.

Inadditiontoitsnorthernexpanse,Mexicohastwootherterritoriesthatfalloutsidethecoreandarenoteworthy.Neitheroftheseterritoriesisparticularlyuseful,butbotharestrategicallyimportanttohold.ThefirstistheBajaCaliforniaPeninsula,whichMexicomanagedtoretainaftertheU.S.MexicanWardespitetheU.S.desiretoholdthemouthoftheColoradoRiver.Bajastretchesnearly1,300kilometersdownthewesterncoastofMexico,andwhileitprovideslittleinthewayofeconomicopportunities(outsideoftourism),ifitwereinthehandsofaforeigncountry,Mexico'sentirenorthernPacificcoastwouldbevulnerabletoexternalattack.

ThesecondterritoryinthiscategoryistheYucatanPeninsula.TheYucatanisessentiallyalarge,flat

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limestoneshelfwithveryfewfreshwaterresources.Sowhiletheoutcroppinghasverdantvegetation,ithasnoneofthenecessaryelementsofeconomicallyviableterrain.TheYucatandoes,however,giveMexicoastrategicpositionintheCaribbean.ItalsoallowsMexicotocontroloneoftheavenuesofapproachintotheGulfofMexicoandVeracruz.

WhileboththeBajaCaliforniaandYucatanpeninsulasareinhospitableterritory,failingtocontrolthoseareaswouldexposeMexicotoevengreaterterritorialvulnerabilities,particularlyregardingnavalthreats.EvenwiththerelativeadvantagesofhavingstrategicpossessionsliketheYucatanandBajaCaliforniapeninsulas,thenationalbordersofMexicodonotmakeforapoliticallycoherentandmanageablestate.Themountainouscoremakesitdifficulttosolidifycontroloverthesouthernhighlands,andthesoutheasterncoastisvulnerabletooutsideinterference.AddtothatthehardtocontrolnorthernborderzoneafertilebreedinggroundforautonomousorrebelliousgroupsandMexicohasageographythatpresentsextremechallengestoanycentralgovernment.

Ideal Boundaries

Takingintoaccountthegeopoliticalnecessitiesofastatethathasprovedsovulnerabletoexternalinfluence,Mexico'sidealterritorialboundarieswouldallowittoestablishcontroloverthemainroutesofattackonitsterritory.Onlyafterthatwillithavethecapabilitytolookfartherafieldforprosperouslands.

ItisnoteasytoinvadeMexicovialandroutes,sincethenorthernMexicanfrontierhistoricallyhasmadeinvasionfromthenorthdifficult(thoughdefendingthisterritoryisalsoachallenge),andthehighlandsofCentralAmericaareabarriertothesouth.ItisfareasiertoinvadeMexicofromthesea.ThismeansthatifMexicoistoachieveanysemblanceoftruesecurityitmustbeabletoguardtheseaapproachestoitscore.NotonlydoesEuropelieacrosstheAtlantic,butthevastmajorityoftheUnitedStates'populatedcoastlinealsoliesjusttothenortheast.Inthefuture,risingBraziliannavalcapacitycouldposeyetanotherpossiblechallengetoMexicointheCaribbean.Inordertoprotectthecorefromthesepotentialthreats,MexicomustexertinfluenceoverthemouthoftheCaribbean.Andtoeffectivelydothis,MexiconeedsFloridaandCuba.ThisputsMexicoindirectcompetitionwiththeUnitedStatesforitskeystrategicneeds.

JustastheUnitedStatesneedstocontrolFloridaandatleastneutralizeanythreatposedbyCubainordertoprotectitsexportfacilitiesatthemouthoftheMississippiRiver,MexiconeedstocontroltransitthroughtheGulf.Withouttheabilitytoprojectnavalforceintothemosthistoricallyprovenandgeographicallysoundpathofinvasion,Mexicowillneverbeatrulyindependentandsecurenationstate.

Theimplication,ofcourse,isthatthereisonlyroomforonegreatpowerinNorthAmerica,andaslongastheUnitedStatesdominatesthenavalapproachestothesouthernportionofthecontinent,MexicomustmaintainanonhostilerelationshipwiththeUnitedStatesinordertosecureitsownterritory.

However,ifMexicowereabletocontrolthoseterritoriesitself,itwouldassureitsphysicalsecurity,andthenextlikelystrategicgoalwouldbetoregainterritorylosttotheUnitedStates.Assumingithadthemilitarycapacitytosecureandholdthem,havingthefertilevalleysofCaliforniaandtheexpansiverangelandofTexaswouldbeagreatboontotheincomestrappedMexicangovernment.Butsecuritymustcomefirst,orMexicowouldneverbeabletoholdthoseterritories.

Geopolitical Imperatives



Tosecureitscore:

Mexicomustfirstcontrolandconsolidatewhatcanbelabeledastheinnercore,whichincludesboththehighlandsofMexicoCityandtheVeracruzcoastalregion.Ifthesetworegionscannotbewieldedasasinglezone,whatwecurrentlythinkofasMexicowillsufferfrominsufficientagriculturallandandtradeopportunitiesandwilldegenerateintoanassortmentofsmall,impoverished,subregionalentities.

Mexicomustthencontrolallpocketsofpotentialdissentwithintheoutercoreterritoriesthatdirectlyinteractwiththeinnercore,includingOaxaca,Chiapas,GuerreroandMichoacan.Todoso,Mexicohashistoricallyexercisedtwo

options:Economicintegrationandtheruleofstrongmenorasinglestrongparty.

Mexicomustpushnorthtocontrolthewildnorthernterritoriesfromwhichthreatsmightoriginate.Theexactplacementoftheborderisrelativelyacademic,giventhelackofcleargeographicbarriers.However,thefartherMexicopushesnorth,thefartheritmustprojectpowerfromitscore,andthewiderandlessusefultheplateaubecomes.

MexicomustcontroltheseaapproachestoitscoreaswellasthechokepointsoftheCaribbeaninordertoachieveabsolutesecurity.Therearetwophasestothis.Thefirstistheeasiest,whichistocontroltheBajaCaliforniaandYucatanpeninsulas(modernMexicohasachievedthis).ThesecondismoredifficultandrequiresgainingcommandofCubaandFlorida.Withouttheseterritories,MexicohasnochoicebuttoengageinasubordinaterelationshipwiththeUnitedStates.

Finally,withphysicalsecurityensured,MexicocanaffordtoreachpastitsbufferzonestoricherterritoriesandmoreusefulcoastlinesincludingtheU.S.statesofCalifornia,TexasandLouisiana.

Clearly,Mexicohasnotachievedallofitsgeopoliticalimperatives.However,ithasachievedjustaboutalloftheimperativesthatitcanwithoutchallengingtheterritorialintegrityoftheUnitedStates.Therearealsorecurrentchallengestoitseconomicstabilityandphysicalsecurity,andMexicostillstrugglestomaintainthestatusquoonitssecondandthirdimperatives.

Economic Fundamentals

SustainedeconomicdevelopmenthasbeenarelentlesschallengeforMexico.TherootofMexico'sslowdevelopment(comparedtoitsnorthernneighbor)liesinitsgeographicchallenges.WhereastheUnitedStateshasamassiveagriculturalheartlanddividedbyahighlynavigableriver,Mexicolacksbothaconcentratedbreadbasketaswellasanavigablerivernetwork.ThegeographicadvantagesoftheUnitedStateshavebeenrootedintheeaseoftransport.WiththeMississippiRiverbisectingtheU.S.agriculturalheartland,accesstointernationalmarketswasverysimpleandcostonlyasmuchasittooktobuildaboat.Mexico,bycontrast,mustinvestagreatdealofcapitalforitsroadandrailnetworks.Intheir300yearsofrulingMexico,theSpanishfailedtodevelopanysubstantialtransportnetworks,leavingthenewlyindependentMexicotostartfromscratch.

Withinsufficienttransportationinfrastructureinplace,Mexico'sfirstdecadesofdevelopmentweredifficult.

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Thecostoftransportinggoodsfromproducingareastoconsumermarketswasprohibitiveandreducedtheprofitabilityofprivateinvestment.Developingefficienttransportationnetworksrequiresamassiveamountofcapital,whichmeansthatMexicostartedoutitsindependentstatehoodwithnochoicebuttogodeepintodebt.OnceMexicoisabletosecureaninfluxofcapital,however,ithasgenerallybeenabletospurgrowthsufficientlytosustainasubstantiallongtermexpansion.Butwithoutitsowndomesticcapitalreserves(orparticularlyeasywaysofdevelopingthem),Mexico'sdevelopmenthasbeencyclicalinnature,withboomsfollowedbycrashesasresourcesdeplete.

Sinceindependence,therehavebeentwomajorboomandbustcycles,startingwiththeruleofMexicanPresidentPorfirioDiaz,whotookpowerin1880attheendofthewarsofindependenceandremainedinpoweruntil1911.Inadditiontoseizingpowerandmaintainingstability,Diazwasabletomakesubstantialimprovementstothecountry'stransportationnetwork.Withthehelpofagreatdealofforeigninvestment,Diazleda30yearmodernizationpush,includingbuildingMexico'srailwaysystem.Thecountry'srailnetworknotonlycuttransportationcostsdrasticallyandmadeaccesstoexternalmarketseasier,italsofacilitatedtheextensionofmilitarypowertotheouterreachesofthecountry.

UnfortunatelyforMexico,thisperiodofgrowthanddevelopmentslowedandwasunabletotranslateforeigninvestmentintooverallwelfaregainscapitalcollectedinthehandsofonlyasmallsegmentofsociety.Politicalmaneuveringbytheelite,coupledwithrisingpublicdiscontent,eventuallyoustedDiazfrompowerinwhatevolvedintothedecadelongMexicanRevolution.ButtherailwayinfrastructurelaiddownduringDiaz'srulebecamethefoundationforpostrevolutionary(andpostGreatDepression)growthanddevelopment,onceMexicowasabletoaccesscapitalagain.

InthewakeoftheGreatDepressionandwiththeonsetofWorldWarII,Mexicoexperienceditssecondmajorinfluxofforeigncapital.Thegovernment'sincreasedaccessto

foreignlendingwasmadepossiblebytherenegotiationofoutstandingdebt(which,withtheinterventionoftheUnitedStatesonbehalfofMexico,wasreducedby90percent)andthesettlementofoutstandingdisputeswithoilcompanieswhosepropertyhadbeenseizedintheoilnationalizationprojectof1938.MexicowasalsoaidedbyaboominglobaldemandforMexicangoods,particularlytextileexports,asitsnorthernneighborwenttowar.

RenewedaccesstointernationalcapitalmarketsandasurgeindemandforexportscatapultedMexicointoafiveyearperiodofgrowththataveragedwellover6percentperyear.Whenthewarended,theexportsectorbecamelessimportantforgrowth,butthefiveyearboostgaveMexicotheindustrialmomentumitneededtocontinuegrowingthroughthe1950sand1960s,albeitataslowerpace.

Withtheoilpricespikeofthe1970s,EuropeanbanksbecameflushwithcashdepositedbyMiddleEasterncountries.Theresultingfallininterestratesencourageddevelopingcountriesaroundtheworld,andparticularlyinLatinAmerica,totakeoutloanstofinanceindustrializationprojects.Mexicowasnoexception,andthecountrywasquicktotakeondebtinthisperiod.Mexico'sdiscoveryofmajoroildepositsinthelate1970sledtoasharpuptickinexportsofoilwhichjumpedfromanetworthof$500millionin1976tomorethan$13billionin1980.Thisled,inturn,totheoptimisticbeliefthatcapitalwouldalwaysbecheapandoil

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pricesalwayshigh.AtthispointitlookedlikeMexicowouldhaveachancetocomplementaperiodofsustainedgrowthwithanewandsubstantialtrancheofcapital.Thiswasnotthecase.

Thecollapseofoilpricesin1981triggeredamajordevaluationoftheMexicanpeso,makingitimpossibleforMexicotomakeitsdebtpaymentsontime.Theresultingdebtcrisisof1982triggeredaperiodofeconomicturmoilforMexicoandtherestoftheregionthatisknownsimplyas"thelostdecade."TheInternationalMonetaryFund(IMF)cametoMexico'srescuewithfinancing,preventingadebtdefault.However,MexicostruggledtoregainlostgroundwhileatthesametimemeetingtheIMF'sstructuraladjustmentdemands.Althoughstabilizationwasachievedforafewyears,thepoliciesenactedwereinsufficient.Asevereovervaluationofthepesotriggeredasecondfinancialcrisisin1994.

Sincetherevaluationofthepesointhewakeofthecrisis,Mexicohasexperiencedmoderategrowth,averagingjustbelow3percentbetween1996and2011.Mexico'smodestgrowthrateshavesurprisedobservers,particularlygiventhefactthatexportsgrewbyanaverageof11.1percentperyearbetween1993and2003,whichwasfacilitatedbytheopeningofMexico'seconomytoforeigninvestmentandtrade.ThisincludedtheadoptionoftheNorthAmericanFreeTradeAgreement,whichcameintoeffectin1994.ThisliberalizationprocesstransformedMexico'seconomy,increasingincomefromexportedgoodsbyafactorof12,andforeigndirectinvestmentbyafactorof10.

ForeignentryintoMexico'seconomyduringthe1990scontributedtoindustrializationalongtheU.S.Mexicoborder,wheregoodsweremanufacturedorassembledforexporttotheUnitedStates.Mexicoalsohassignificantindustrialsectorsclosertothecore,instateslikeQueretaroandMexicostate,andthecitiesofGuadalajaraandMonterreyonthewestandeastcoasts,respectively.

DespitethedevelopmentofasubstantialcorporatebasewithsignificantmanufacturingtiedintotheUnitedStates,growthhasremainedatmoderatelevels.InadditiontothegeographicchallengesassociatedwithMexico'sdevelopment,thesemoderatelevelsofgrowthcaninpartbeexplainedbyrelativelylowpublicspendingadoptedbytheMexicangovernmentinthewakeofthe1982and1994

crises.

Challengestogovernmentspendingarebeingexacerbatedbythedeclineoftheenergyindustry.IncomefromMexicanstateownedenergycompanyPetroleosMexicanos(Pemex)accountsfor30to40percentofthefederalbudgetinanygivenyear.Withprofitsabsorbedbythegovernmentforoperatingexpenses,Pemexhasverylittlesparecashtoinvestinitsownindustry,andtheindustryisfacingseriousdeclinesinproduction.Withprospectiveincomedeclining,Mexicoisfacingagravefiscalproblemandthequestionwillbewhethertotakethepoliticalriskofraisingtaxesorthefinancialriskofassuminggreateramountsofdebt.TheseenergywoesarethemostrecentmanifestationofMexico's

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boomandbustcycleofcapitalshortage.

SlowgrowthandinstitutionalinertiahavecontributedtoMexicoremaininganunderdevelopedstatewithhighlevelsofpovertyandhighlyunequalincomedistribution.ThislackofdevelopmentisthemaindriverbehindtheconstantflowofmigrantsfromMexicototheUnitedStates,withMexico'slabormarketfortifyingtheU.S.laborpoolandhelpingtounderwritetheUnitedStates'lowinflationgrowth.WhileworkersintheUnitedStatessendbackover$20billionworthofremittanceseveryyeartoMexicocontributingtotheoverallgrowthofMexico'sgrossdomesticproductitisdifficulttodetermineifthismoneyisbeingreinvestedintoMexicoinawaythatcontributestogrowthinMexicanproductivity.

Mexico'sleastconventionaleconomicdriveristhedrugtraffickingtrade.Thoughdifficulttomeasure,thedrugtradebringstensofbillionsofdollarsannuallyintoMexicoandprovidesthousandsofjobs.Theseprofitsarelaunderedandreinvestedthroughouttheeconomy,withsignificantinvolvementinthetourismandconstructionindustries.

Shifting Politics

MexicoisuniqueamongmostcountriesinLatinAmericainthattheseatofnationalpowerhasbeenoccupiedformostofMexico'smodernhistorybyasingleparty:theInstitutionalRevolutionaryParty(PRI),oritshistoricalantecedents.Butdespitetheruleofasingleentity,Mexico'smodernhistoryhasbeenrelativelypeaceful,avoiding(withsomeexceptions)thebloodypoliticalconflictsthatcharacterizedmanySouthAmericancountriesinthelatterhalfofthe20thcentury.

ThiswasinpartpossiblebecauseofthepostWWIIprosperitythatbuoyedMexicothroughthemiddleofthe20thcentury.Inthecontextofsustainedgrowthandsufficientcapital,Mexicanpoliticiansdidnotneedtodoverymuchinordertokeepthecountrystable.Thekeytomaintainingstabilityinacomplexsystemcharacterizedbyaproliferationofinterestsfrombusinesstofarmerstounionswasaverystrongpartythatusedpoliticalinclusiontoassuageallparticipants.Thismeantthat,forthePRI,itmademoresensetoenticepoliticalopponentsintocooperationthanitdidtothreatenthemwithforce.TheruleofthePRIwasstillauthoritarian,butitwasgentlecomparedtothebrutaldictatorshipsofthe1960sand1970sinotherLatinAmericancountries.

ThestrengthofthepartyisinlargepartaresultofMexico'ssingletermlimitforpoliticians.Anideathathasbeenarallyingcrysincethe19thcenturyandwascementedbytheMexicanRevolution,theedictthatnopoliticianshouldseekreelectionisdesignedtoavoidrulerswhooverstaytheirwelcome.

Thepolicyhashadanumberofconsequences.Ithasmadeitdifficultforindividualstobuilduptheirownpowercenters,orholdontoanysingleofficeforverylong.Thepresidentcanserveforonlyonesixyeartermandfordecadesfindingasuccessorwasassimpleasselectinganobviousheir.Theoreticallydesignedtopreventdespotism,theonetermlimitalsohasmadeitverydifficulttoachievestandardgoalsofstatehoodlikeeconomicorpoliticalreform.TheprimaryproblemisthatMexicanpoliticiansarenotactuallyanswerabletodemocraticprocesses.Thiscreatesanincentivestructurethathasverylittletodowithaccountabilitytovoters,andprovideslittletonoincentiveforpoliticianstoachievecampaignpromises.

Indeed,Mexicanlegislatorsoftenbeginsearchingfortheirnextjobsoonafterenteringoffice.Andwithouttheneedtomaintainvoterapproval,Mexicanpoliticiansaremuchmorefreetoengageincronyism(whichhelps

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themfindanewjobafterleavingoffice).Indeed,inthepoliticsofinclusion,thisisactuallyquitebeneficial.Whenthebusinessofgovernanceisdealtwiththroughdealmakingandfavordistribution,havingasystemthatleavesitslegislatorsfreetomakesuchdealsisconducivetotheparty'sstrategyforpowerconsolidation.

Thisstructureisnot,however,beneficialforsettingapoliticaltrajectory,orenactingpolicyoverthelongterm.Withoutanycontinuityinpersonnel,thereislittletonoinstitutionalmemoryoflegislativeefforts.ThisallowsMexicotomoveforwardonlyinshortburstsoflegislativeaction,ifatall.

WhilethesedynamicsandPRIrulehaveshapedthefoundationofmodernMexico'spoliticalsystem,importantshiftshaveoccurredinthepastdecade.In2000thefirstelectedpresidentfromtheNationalActionPartyVicenteFoxcameintooffice.ThetransitionofMexicofromaonepartysystemtoamultipartysystempushedthecountryintorelativelyunchartedterritory.

Thedynamicsofamultipartysystemaredifferent,withpartiesnowabletoopenlyopposethewillofthepresidentinthelegislatureasawayofpositioningthemselvestoproposecandidatesforthepresidency.ThoughthesystemunderthePRIwasneverparticularlyunified,allpoliticalmaneuveringhappenedwithinthePRIpartymachine,anddissentwasrelativelyeasytocontrol.Nowsuchmaneuveringoccursbeyondthatmachine.Thisdynamicencouragespoliticalpolarizationsinceeachpartyseekstodistinguishitselffromtheothers.ThemultipartysystemhaslikelymadeMexicoamuchmoredifficultcountrytorule,sincethepresidentnowrepresentsaswathofvotersanddoesnotsimplysitattheapexofapowerbalanceheldsteadybyabroadandinclusiveeffort.

Opportunitiesfordivisivenesshaveflourished,andawillingnesstobreakwithpastpoliticalarrangementshasbecomeclear.Thisisnowheremoreevidentthaninthecurrentadministration'sdecisiontousethemilitarytofightthepowerstructuresbuiltandmaintainedforyearsbyMexico'spowerfulcriminalorganizations.

PRIcandidateEnriquePenaNietosvictoryintheJuly1presidentialelectionsetthestageforatemporaryreprievetoyearsofpoliticaldeadlockinMexicoCity.AlthoughthePRIdidnotwinamajorityinthelegislature,withsixyearsofPRIexecutiveleadershiplooming,thelegislaturewillhaveapoliticalincentivetocooperateinenactingsomepolicychangesuntilthe2015legislativeelectionsshiftthebalanceoncemore.Asaresult,thenextthreeyearsofpolicymakinginMexicomaybesignificantlymoredynamicthantheprecedingyearsasthePRIaddressesmajorpolicyissues.

Modern Challenges

Drugs

LikemostofMexico'sproblems,thedrugwarsarealsodriveninlargepartbythecountry'sgeography.Theflowofdrugsfollowsanevershiftingriverthatfollowsthepathofleastresistanceonitswayfromproducertoconsumer.WhentheUnitedStatesanditsinternationalpartnersstartedshuttingdowndirectairandseatrafficfromColombiatotheUnitedStatesinthe1990s,drugsmugglersbegantobringcocainethroughthelandcorridorofCentralAmericaandMexico.Mexico'sborderwiththeUnitedStatesbecamegroundzerofordrugsmugglers,andMexicanorganizedcrimefounditselfabletoacquireamuchlargerportionofthedrugmoney.

BothMexico'ssouthernandnorthernbordersarerugged,thinlypopulatedandlooselyguarded.Thisistheperfectcombinationforrobustsmuggling,particularlyofgoodsthatareingreatdemandintheUnitedStates.



Sincetheseborderregionshavefeweconomicopportunities(thecostsofdevelopmentaresimplytoohighandthestate'sresourcestoofew),thissmugglingismetwiththedefactoparticipation,ifnotoutrightapproval,oflocalauthorities.Mexico'sfragmentedgeographyalsoallowedplentyofroomfordifferentorganizationstogainpowerintheirlocalareasbycontrollingparticulartransportcorridorsorcriticalcitieseventothepointofoperatinglikealocalgovernment.Thesegangsfoughtforcontrolofterritoryandthestatedidnotinterfere.

Butinfightingandviolenceamongdrugsmugglersdidnotgounnoticed,andasthepoliticalsystemshifted,sotoodidtherulesofthedruggame.

UnderpreviousPRIgovernments,theneedtokeeplocalgovernmentsandpowerstructuresunderthepartyumbrellameantthatMexicoCityignoredsmuggling.Thatwasthepriceofinclusion.Whenpowerchangedhands,PANcontrolledgovernmentsbegantochallengetheinstitutionsbothlegalandillegalthatexistedunderthePRI.Foxbeganthedeploymentofmilitarytroopsagainstdrugtraffickingorganizationsinalimitedmannerduringhisadministration.Hissuccessor,MexicanPresidentFelipeCalderon,tookthepracticetoahigherlevel,launchingafullscalewaronorganizedcrime.ThiswarbetweenthestatesandthesmugglershasputMexicoatwarwithitselfatmanylevels.Insomeways,thedrugwarissimplyarepeatofthepatternsestablishedduringtheMexicanRevolutionof19101920.

Theendgameforthecartelwarsisunclear.Astheviolencecontinues,theincominggovernmentwillhavetochoosebetweencontinuingaconfrontationalstrategyagainstthecartelsorreturningtotheoldsystemofinclusiveacquiescence,andanydecisiononthemattercouldbeforcedbypublicopinionturningagainsttheanticarteleffort.Asthemilitaryisexposedtothecartels,ithasbecomeincreasinglyvulnerabletocorruption,reducingitseffectivenessandembarrassingthegovernment.Thebottomlineisthat,aslongasdrugsareproducedinSouthAmericaandconsumedinNorthAmericaandMexico'sbordersremainsporous(forthegeographicreasonsdescribedabove,thiswouldbeverydifficulttochange),thedrugchallengewillnotgoaway.ThechallengeforMexicoistodecidewhenfightingthewarondrugsisnolongerconcordantwithitsdomesticpoliticalstability.

Energy

Mexico'senergysectorhaslanguishedafterdecadesofunderinvestment.AlthoughMexicohassignificantpotentialoffshorereservesintheGulfofMexico,the1917constitutionalnationalizationofallmineralresourceshassignificantlyreducedMexico'saccesstoforeigncapitalandtechnologytoinvestinnewexplorationandproduction.Furthermore,thediversionofoilrevenuestofundgovernmentobjectiveshaslimitedtheabilityofPemextoachieveitsownproductiongoals.

Earlypetroleumdevelopmentcostswerebornebyforeigninvestors,butthoseassetswerenationalizedandtheindustrybecameacriticalincomestreamforthestate.Thedemandsofthestatebudgetcombinedwithapoortaxcollectionsystemhavekeptthestatedependentonoil.OilwasinmanywaysthekeytokeepingtheMexicanpoliticalsystemrunningwithouthavingtomakedifficultreforms.

However,oilproductionreacheditspeakat3.8millionbarrelsperday(bpd)in2004andhasbeenonthedeclinesince,fallingto2.9millionbpdin2011,withonlymarginalnewproductionscheduledtocomeonline.Exportspeakedat2.1millionbpdin2003,andfellto1.5millionbpdin2011.Mexicorequiresanewwaveofcapitalandtechnologywhichwilllikelyhavetobeforeigninoriginifitistomaintainorincreaseitsenergyrevenues.



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ThoughPemexisattemptingtoconductitsownoffshoreexploration,thetechnicalrequirementsinvolvedwillbedifficultforPemextodeveloponitsownwithoutfirstredirectingsignificantfundstoitsoperatingcostsandawayfromthegovernmentandoutofthehandsofcorruptemployees.SignificantchangeswillneedtobemadetoMexicanlawthatwillupsetpowerfulentrenchedinterests.TheCalderongovernmentinstitutedsomereformstoallowforeigncompaniestosignfeebasedcontractswithPemex.Morechangeswillbeunderconsiderationwithsubsequentgovernmentsasexportscontinuetofall.

Conclusion

Mexicoisfundamentallychallenged,firstandforemost,byitsphysicalgeography.Withmountainrangesfordissidentstohidein,expansivedesertsthataredifficulttocontrolordefendandseriousvulnerabilitiestonavalincursions,Mexicoisinherentlysusceptibletoserioussecuritychallenges.Throughoutitshistorythesethreatshaverangedfromforeigninvaderstoleftistmilitantstoupperclassrebels.Today'sdrugtraffickingorganizationsareonlythelatestmanifestationofthischallenge.

Thecountry'sruggedterrainlacksnaturalrivertransportnetworks,whichmakesitexceedinglydifficultforMexicotogenerateandaccumulatecapital.Thisleavesthecountrydependentonexternalcapitalandatthemercyofinternationalmarketdynamics.Mexicosharesanunderdefended3,200kilometerlongborderwiththeUnitedStates,theworld'slargestconsumermarket.ThismakesMexico'seconomy,whichreliesontheUnitedStatestoimportfromMexicoeverythingfromcomputerstodrugsaswellastoexporttoMexicocriticalfoodstuffs,highlydependentonthevagariesoftheU.S.market.MexicoisalsomilitarilyreliantontheUnitedStatestodefendMexico'svulnerableeasternflank,andthusishighlyvulnerabletoU.S.politicalinfluence.

Inthefaceofallofthesechallenges,itisnosurprisethatMexicohasremainedembattledandunderdevelopedcompareditsnorthernneighbor.Evenbeforeaddressingissuesarisingatapoliticalandpolicylevel,Mexicomustovercomethechallengesofitsphysicalgeography.

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