STRATFOR-Mexican-drug-cartels-mapThe economy of Mexico is the 13th largest in the world in nominal terms and the 11th by purchasing power parity, according to the World Bank. With a population of more than 107 million people, it is indeed one of the world’s most important countries in terms of economic activity. Its GDP in 2010 was more than 1 trillion dollars. There is great economic activity going on in the country which is bordered by the United States on the North and often considered gateway to Latin America on the south. It is also home to one of the world’s richest men Carlos Slim Helu.

Additionally, agriculture plays a very important role in Mexican economy. Mexican farmers grow crops such as potato, avocado, corn, lemons, beans, oranges, papaya, mango, and many others. Mexico is also one of the world’s top tourist destinations.

Today, Mexico is one of the world’s largest manufacturers of television and smart phones.  The World Bank reported that the production of high-technology goods represents about 22% of Mexico’s GDP in 2000. The growth is steady.  This trend is very important for the people, where 40% still live below poverty line.

The geographic location of Mexico is also important for mining. Today, Mexico is of the largest oil producer in the world. The government provided research services, and exploration of oil supplies.

A country as diverse as Mexico, it is estimated that the drug money coming into Mexico every year is very huge. Reports estimate it from $30 billion to $50 billion every year. There is huge profit for selling drugs in Mexico and perhaps this explains why drug cartels and powerful syndicates continue to operate. If for example, the whole syndicates produce $50 billion amount of illegal drug products each year, and say, 10 percent is profit, that is already billion dollars a year! But in reality, the profit margin for illegal drugs is still very much higher than that. Some estimates are at 80 percent. If that is the case, then it’s a profit of 40 billion dollars!

Of course it is very difficult to fully estimate the effect of money coming from selling of illegal drugs in Mexico. There are so many factors. But the main important thing is that drugs are not a conventional product. Meaning, there is no proper auditing and no records. Only pure estimates. Therefore, drug trade in Mexico is causing so much effect on the lives and productivity of the people. Additionally, many people are killed every year due to this activity. And perhaps, drug activity is ruining the economy because investors will feel afraid to do business in Mexico anymore.

But one thing here is very clear. Mexico is a direct beneficiary of illegal drug trade. If for example, such money is being used to do legitimate business, many poor people would have benefited from it. If, for example, the money is used to invest overseas, there could have been visible expansion in Mexican economy.

I think it is hard to finally determine where the drug money among the syndicates is being used or where it is going. Illegal money seems very hard to keep track. But it is also certain that such money were laundered in countries or areas where it can not be traced. In this idea, it is very clear that the money flows quickly out of Mexico and there seems a great influence of the syndicates to the Mexican government officials who may have benefited from the enterprise as well. This is a great loss of opportunity for the Mexican people to do legal business.

But once the drug money have already been laundered out of Mexico or invested inside Mexico, the money is surely used to invest in legitimate business and enterprises. There is very little way for the government officials to trace the origin of the money. This means, drug money enters the legal economy using legal enterprises such as banks and companies.

Perhaps, if the Mexican government finds options to solve the problem, it will be the best place in Latin America again.

Reference:

Gereffi, G; Martínez, M (September 30, 2004). “Mexico’s Economic Transformation under NAFTA”. In Crandall, R; Paz, G; Roett, R. Mexico’s Democracy at Work: Political and Economic Dynamics. Lynne Reiner Publishers. ISBN 1588263002

Mexico Investment Summit 2012″. Terrapinn.com. Retrieved 2011-04-16.

http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-10

http://borderviolenceanalysis.typepad.com/mexicos_drug_war/government-and-politics/page/2/

http://www.globalenvision.org/2008/09/08/mexicos-war-drugs-war-economy#comment-3230

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