MEXICO : Why Zedillo Is Slow to Curb the Drug Lords

Mexican President Ernesto Zedillo faces a difficult decision: What to do about the growing power of the country’s drug cartels. When he took office last December, he seemed to be preparing for all-out war on the drug lords and their allies in the bureaucracy, judiciary and police. He appointed an attorney general from an opposition party, reopened investigations into three political assassinations, replaced the entire supreme court and placed a reformer in charge of the federal police.

Now, Zedillo seems to be braking his pace, although last week the government announced a new plan to crack down on the country’s traffickers in drugs and migrants. So far, he has chosen easy targets for prosecution, either low-level hirelings or men with prominent names but little or no political base. Even the arrest of Raul Salinas de Gortari attests to the president’s caution. Zedillo has yet to move against drug kingpins or their political protectors.

There are reasons to go slow. More violence will further rattle panicky markets. A crackdown will be difficult to enforce, given the number of police and military commanders said to be on cartel payrolls. Most disturbing is the possibility that moving against drug traffickers will further harm an economy already in a tailspin, undermining the country’s precarious political stability.

Like it or not, Mexico’s real economy differs markedly from the paper economy described by official statistics. Left out are the earnings of some of Mexico’s largest and most profitable export corporations--drug cartels. Last fall, U.S. prosecutors estimated the annual earnings of Mexico’s biggest drug syndicate--the Gulf Cartel, based in the northeastern state of Tamaulipas--at somewhere between $10 billion and $20 billion. Such estimates are necessarily imprecise. Yet, even taking the lower end of the range, then halving it, would leave the income of the Gulf Cartel in rough parity with the value of Mexico’s single most important legal export to the United States--oil.

Devaluation of the peso has sparked an additional quantum leap in the contribution of narcotics to the Mexican economy. With the Mexican currency now worth half its value four months ago, all the country’s peso-denominated exports are bringing in fewer dollars. Only two industries have been spared--oil and drugs, both of which are priced in dollars.

Worse yet, Mexico’s dependence on narcotics extends well beyond the illegal sector of the economy. Though impossible to quantify, much of the country’s seemingly legitimate private investment comes from recycled narco-dollars. Tourism, the country’s third most important source of legal foreign exchange, is a money launderer’s paradise. The thousands of hotels, restaurants, nightclubs and casas de cambio that dot Mexico’s major cities and coastlines offer almost unlimited opportunities for unmonitored cash transactions. It is no coincidence these are favored investment zones for the cartels.

All of which puts Zedillo in a quandary. On the one hand, narco-investment is disastrous for the country’s long-term development. For starters, it has a corrupting effect on the structure of the economy. When the cartels and their political cronies buy stock in banks in order to name friendly directors who will launder their funds, it undermines the integrity of the banking system. Panama, once hailed as the emerging Hong Kong of the Western Hemisphere, has paid dearly for its reputation as a money-laundering center.

A second problem is that drug trafficking, especially in a country like Mexico, where transshipment is the primary activity, uses relatively little labor. This further concentrates wealth and income in a society already plagued by extreme inequality. Another problem is that violence, lawlessness and political instability frighten away foreign investors and tourists alike, as demonstrated first in Colombia and now Mexico. The outcome, dramatized by the coining of the adjective Colombianization , is a dead-end road, where the illegal sector of the economy all but consumes the legal one.

In the short term, however, drug earnings offer a quick fix in hard currency at a time when Zedillo is unable to offer much of an alternative. Moving too aggressively against the drug kingpins would not only risk more short-term economic pain (the kind that counts most in elections), but also would almost inevitably cause disintegration of the ruling Institutional Revolutionary Party.

For confronting the cartels would require striking at their political allies who hold strategic, though often informal, positions in the PRI. The most important of these are said to be former senior Cabinet officials, who continue to enjoy impunity under an unwritten rule that forbids prosecution of present or former presidents or members of the Cabinet (a taboo only skirted by the arrest of President Carlos Salinas’ brother).

The narco-politicians have also been able to extend their influence by sharing their wealth. If senor presidente can no longer dispense the bribes and subsidies that have helped keep the PRI in power for two-thirds of a century, there are plenty of new patrones who can, especially to the individuals that matter. Federal police and military commanders can earn millions of dollars from the cartels, depending on their areas of jurisdiction. They, in turn, pass some of their earnings to subordinates to ensure their loyalty.

If Zedillo needed any reminder of the power of such co-optation, he got it immediately after taking office. In a challenge to the drug lords’ control of the federal police, the president picked an incorruptible former prison administrator to head the federal police. Hours before Juan Pablo de Tavira was scheduled to meet with the attorney general to plan a purge of police commanders, he was administered poison gas in his sleep, apparently by his chief bodyguard. De Tavira is now completely paralyzed, unable to utter even a word.

Yet, Zedillo has an advantage: He has almost six years left as president, which enables him to take a longer economic view and to configure a new political base. He has already begun doing so by picking a center-right opposition leader as his attorney general and by courting the center-left opposition, in general. The only way out of his quandary is to stay the course, outmaneuvering the narco-politicians by sacrificing a discredited and corrupted party and building a new working majority through a coalition of reform-minded PRI members and representatives of the country’s two principal opposition parties.*