Drug Violence Derails Mexico's Economic Recovery

Not surprisingly, Mexico's economy shrank during the global recession. But, as the Economist pointed out recently, it's not rebounding as strongly as it should.

Violent crime is a likely culprit. Crime has become endemic in Mexico: the drug cartels murder, kidnap, and extort with impunity. They have killed over 23,000 people since President Calderon cracked down on their operations in 2006, reports the Washington Post. In one of the worst days, 85 people were killed.

Most disturbing is the unfeeling brutality with which traffickers eliminate enemies and innocents alike. The cartel's murderous exploits include 
"rolling [severed] heads onto crowded dance floors, strapping skinned faces
 onto soccer balls, and leaving clear signs of torture on corpses," describes Stanford University's online journal.

So far the ruthless reach of the cartels knows no boundaries. Drug lords have targeted federal troops — killing 12 in the state of Michoacán — and also assassinated U.S. diplomats. Even more unnerving is the cartels' ambivalence about killing innocent civilians. Just a few weeks ago they massacred innocent partygoers celebrating the birthday of a local teen.

Economists worry that this violence will scare away tourists and businesspeople. Tourism and foreign investment each bring in a substantial sum: approximately $12 billion and $20 billion a year, respectively. Losing this revenue, even in part, would be a blow to the still-fragile economy.

Violence is even making local businesspeople nervous, according to the Christian Science Monitor:

One restaurant owner, who wished not to be named out of fear, says that thugs called his local restaurant for months demanding monthly “protection” money. He ignored them, cutting off his phone line instead. But in December they came to the door of his locale with a gun and three options: pay, die, or the establishment will burn.

A survey of businesspeople conducted by the American Chamber of Commerce of Mexico — and cited in the Economist — shows that 16 percent had suffered extortion and 13 percent kidnappings.

So far, the damage has been minimal. The Economist reports that "visitors are staying away," but foreign investment has held steady. Foreign investment for all of Mexico hasn't fluctuated much in the last two years, according to the CIA Factbook.

Still, the prognosis doesn’t look rosy: The Economist's own forecasting group projects that the Mexican economy will grow by 4.3 percent this year but dip to 2.7 percent growth in 2011. Looks like recovery, like the war on drugs, might be a long haul.