Economic Effects of Violence In Mexico

Source: nyt.com/images/2011/10/16/world/calderon

Latin America has long been the capital of the world for illegal substances. Obviously, many of the countries in the region don’t really like to be known for that so they attempt to combat this. Many of these countries, backed by the US, play a profound role in the war on drugs. Colombia has had a lot of success against the cartels and has managed to bring the status of their country from that of a “narco-state” to that of a legitimate country. Although Colombia still has some problems with FARC they have managed to put FARC on the run. However, this is not to say that the war on drugs has had no economic consequences. The biggest of example of this would be present day Mexico- a country ravaged with drug cartels producing and trafficking drugs. Here in the US we may know Mexico as a popular tourist destination but that's not exactly the case. The tourism industry is one of country's main industries left as the drug cartels have destroyed much of the economy in the country. But can we attribute the lack of economic success in the country to the cartels?

The international drug trade is big business. In fact it’s a $322 billion industry. That’s greater than “88% of the world’s country’s GDPs.” With numbers like that, it’s no wonder these cartels are so powerful. Money is power.

Earlier this year Stanford released a study on the economic consequences of drug trafficking violence, and as you’d expect, found that violence is not good for business. Now, of course that was to be expected because well, unless you’re really in the defense or oil industry, war is never good for business. What makes that interesting however is that cartels are essentially businesses; albeit sketchy ones. But the Stanford study found that cartels don’t do too well with violence and business. The study uses Cartel de Tijuana as an example as they “underwent an internal split” earlier this year. One of the factions led by El Teo, favored kidnappings and extortion while the other half of the split led by El Ingeniero wanted to “focus more on drug trafficking and demanded less kidnappings.” What the study found was that El Ingeniero was a lot more successful than El Teo. This is due to the fact that he focused more on business rather than violence which attracts attention to them from the government. Furthermore, the study also found that were fewer problems with local business when El Ingeniero was the “big player” in the area. We can conclude from this information that the economic effect in the area is due to the violence.

Throughout Mexico the drug related violence is too high as many would agree. Although a drug cartel is merely an illegal business on paper, in reality, it’s a violent organization with effects on the local economies. Cartels would have greater success if they cut down on the violence but unfortunately that isn’t likely to happen as there are only a limited number of ports, border crossings, etc. that are key to a cartels success. So when one cartel wants one point of access and another wants it too, violence is bound to erupt thus disrupting not only the cartel, but also the local businesses. With real life examples, we can clearly see that without violence, both cartels and local businesses have more success which I believe is in the best interest of them both.  

FUTURE RESEARCH: ????