[Texgreen] Mexico in collapse?

[Roger Baker]

<http://www.theoildrum.com/node/2752#more>


".......  Mexico=92s Monopoly on Violence is Collapsing

Not that Mexico was ever a poster-child for civic safety and =20
effective policing, but the situation has grown considerably worse in =20=

the past year. There are mass desertions among the federal police. =20
Outright infantry battles between crime organizations and the =20
government are becoming a common occurrence. Hundreds, perhaps =20
thousands, of police, judges, government officials, and reporters =20
have been assassinated over the past few years. What control the =20
federal government continues to exercise in states such as Sonora, =20
Sinaloa, and Nuevo Leon is mainly due to the fact that crime =20
organizations don=92t want to actually take over the territory=97they =20=

already experience the benefits of acting as a sovereign government =20
without the burdens, and they=92re happy to leave those burdens to the =20=

=93official=94 government.
Can Mexico Protect Its Oil Infrastructure?

Mexico's increasing inability to deal with drug violence within its =20
own borders begs the question: can Mexico protect its oil =20
infrastructure? A string of attacks on Mexican gas pipelines this =20
week suggest that they are ill-prepared for this threat.


Photo: Flames from the attack on a gas pipeline in Queretaro, Mexico =20
illuminate a passing army truck. (AP)

The same profit motivation that increasingly drives attacks on oil =20
infrastructure in Nigeria and Iraq is tailor-made for the combination =20=

of disaffected rebels and powerful criminal organizations that =20
already exist in Mexico. The chief source of revenue from oil attacks =20=

in Nigeria is the ransoming of foreign contractors working in the oil =20=

sector. The more that Mexico succeeds in modifying its constitution =20
to bring foreign service workers and foreign concession-holders into =20
its oil and gas industry, this same problem could spring up with a =20
fury in Mexico. Similarly, the high return on investment for attacks =20
on Mexico's oil industry make this the most promising target for =20
politically motivated groups. Finally, while "illegal bunkering"--=20
poor consumers stealing various hydrocarbons direct from production =20
pipelines--is not yet a common occurrence in Mexico, "Export-Land" =20
effects will likely make domestic consumers, especially rural and =20
poor consumers, feel a financial crunch that will drive bunkering.

Mexico's military and police forces have, to put it mildly, not =20
demonstrated much competence over the past decades. The same =20
corruption, desertion, and competing interests that are causing the =20
Mexican state to lose its monopoly over violence will prevent Mexico =20
from effectively protecting its oil infrastructure. The simultaneous =20
(and partially resulting) financial crunch will further degrade their =20=

ability to respond. How long until we hear that "oil rose in New York =20=

today on news of continued attacks on oil facilities in Mexico"??
Collapse is a Positive Feedback Loop

Every one of these factors, individually and in combination, act as =20
positive feedback loops. Collapsing oil production decreases =20
available revenues to reinvest in exploration and delays bringing new =20=

fields to production. The comparative success of Mexicans outside of =20
Mexico drives further emigration. Failure of the Mexican government =20
to provide for its people drives more economic activity to the black =20
market, erodes the tax base, and makes taxes more difficult to =20
justify at election time. And failure of the government to provide =20
for fundamental security compels the population to turn to primary =20
loyalties for protection=97corrupt local governments, criminal =20
organizations, etc. These factors in combination erode the foundation =20=

of the rule of law and the viability of Mexico=92s infrastructure =20
network, which in turn puts the brake on foreign investment, tourism, =20=

and the ability of legitimate businesses to produce and export goods =20
and services from within Mexico. To the extent that Mexico uses =20
central banking to prop up the peso, it drives a wedge between =20
actual, local economic production and the monetized economy...."=