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Mexico: Managing Your Travel and Operational Risks
June 23, 2010
Presented by: International SOS
Copyright 2010 by International SOS and Control Risks
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Agenda
1. The Deployment of Approximately 50,000 Troops
2. Mexico’s Recovery from Global Recession
3. The US – Mexico Relationship in 2010
4. Ryder’s Best Practices
5. Question & Answer Session
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Business Implications of Troop Deployment
• Violence exacerbated in key business regions
• Map – deaths since 2006 and industry coincidence
6,000 +
10,000 +
5,000 +
2,000 +
20,000 +
= baseline number of troops deployed since 2006
INDUSTRY
• Export-oriented manufacturing (Maquiladoras)
• Oil refining
• Petrochemicals
• Tourism
• Agriculture
• Mining
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Operational Risks Resulting from Troop Deployment
Corruption • Local authorities are often unreliable and
corrupt
• Transparency International index ranks Mexico as 2nd worst in the world in regards to bribery
Insecure operating environment• 75% of gun-related deaths occur during
shootouts between the military and the cartels
• Factories have had to amend workers’ schedules due to volatile security situation
• Transportation of goods often disrupted 5 5.5 6 6.5 7
Russia
China
Mexico
India
Bar 1
Paying Bribes index, 2009
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Travel Risks in Current Security Environment
• Likelihood of business travelers being caught in the cross-fire between cartels and troops is still low especially outside northern border areas. But power dynamics between cartels are changing and rise in clashes with security forces raise indirect risks to personnel.
Examples:• Rise of shootouts in destinations frequented by travelers including tourism sites like
Cuernavaca and Cancun and business hubs like Monterrey– December 2009 Killing of Beltran Leyva Cartel leader
• Operation takes place in Cuernavaca (Mexico City weekend retreat) inside upscale residential area. Two bystanders killed in attempt to capture cartel leader.
– 18 June 2010 12 bodies found near Cancun • Popular ‘Spring Break’ destination also a transshipment point and consumer market
for illicit drugs. Violent incidents tarnish the resort’s image, raise concerns for travelers
– 9 June 2010 ‘Los Zetas’ leader arrest in Monterrey triggers illegal road closures • Is the safest city in Mexico as safe as it used to be?
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Business Implications of Recession
Recession • Mexico’s GDP contracted by 6.5% in 2009 (worst performance since 1995)
– causes: low oil prices; overly trade-reliant on the US• Main regions to suffer from recession – maquiladora regions (northern border)
Recovery • Oil price recovered, US consumption rates rebounded• 2010 domestic pressures on President Calderon: beat the cartels, reform PEMEX • 2011 security-spending will be on troop-deployments, intelligence, and capturing key
cartel leaders
How does it affect the business environment? • Spending priority does not include (explicitly) protecting industrial areas or key trade
routes for foreign business • No planned reform of state or municipal police for longer-term gain• No planned reform of judiciary – impunity for corrupt officials, unstable investment
landscape
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Operational Risks Following Recession
Extortion • Extortion demands rapidly increasing • Areas prone to narcotics related crime have seen a dramatic increase in ancillary crime
as well
Kidnap for ransom against Mexican-national businessmen and women
• Over 98% kidnappings victims are local nationals
Mitigation Measures • Many extortion and fraud cases have ‘insider’ component• Adequate screening of employees is vital• Reliable and trusted local management is imperative for all Mexican plants, factories,
and offices
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Travel Risks Following Recession
Poverty and unemployment remains the greatest cause of crime against business travelers
Petty and some violent crime
Extortion of employees
Express kidnapping
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Business Implications of US-Mexico Relations
What is the Merida initiative? $1.6 billion over three years to Mexico and Central America$ 400 million to Mexico in intelligence, technology, training, and surveillance
How will it help US business?
• Reduce capabilities of cartels to threaten employees, kidnap and extort
• Improve rapid-response of law enforcement agencies
• Bolster surveillance capacity of Mexican authorities enabling early-warning systems for business
• Strengthen the institutions of justice – key to improving business environment in the long term
How does it fail US business?
• The $400 million spent has not improved the security situation so far
• Nothing explicit about helping US businesses or investment
• Border security issues, and maintaining trade flows are not mentioned
• Fails to address flow of arms into Mexico’s northern border region
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Operational Risks Resulting from US-Mexican Relations
Arms • Illicit trade flows southward – proliferation of arms • DEA estimates that over 90% arms in Mexico originate in US • Businesses shipping goods face road-block, vehicle search, and contamination risks
Money • Money flows south: Mexican drug trafficking organizations launder between $8 billion and
$25 billion every year • US businesses risk inadvertent involvement with illicit funds through partners, buyers,
contractors etc. • How can US companies detect laundered, or criminally tainted money?
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Travel Risks Related to US-Mexico Relations
• Current levels of violence to rise as the US-Mexico efforts continue to engage cartel command structure
• Threats to personnel will continue to rise primarily in the border areas
Road blocks Car-jackings Muggings Stop and search
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Key policy change since 2006
Business implications
Operational risks Travel risks
In 2006, President Calderon chooses to militarize the solution to the drugs’ problem
Violence is exacerbated in key states where US businesses have interests
Insecure operating environment is created
Increased levels of corruption in state and municipal police forces
Top cartels are targeted, creating a power vacuum allowing smaller groups to contest major areas. Business travelers at risk of being in the wrong place at the wrong time.
In 2010, Mexico’s recovery from the global recession exposes US businesses to more insecurity
Government’s spending priorities do not explicitly include protecting US business operations or trade routes
Unemployment produces crime against business operations: extortion, kidnap of nationals
Poverty is a major cause of crime – including petty crime and express kidnapping committed against business travelers
US- Mexico relationship becomes increasingly co-dependent
US businesses cannot expect assistance in managing Mexican operations from the US government
Two-way illicit trade flow: drugs move northward, arms and money move southward
Continued inadvertent threats to personnel traveling in contested areas
Key Take-Aways
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Risk mitigation
• Realize / discuss your risks with interested parties
• Understand your exposure
• Ground-proof your projects
• Conduct security gap analysis
• Inform students, faculty and family
• Define / fine-tune a travel /living abroad policy
• Create a crisis management plan
• Track project and individuals
• Provide security awareness training
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