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People, Assets, Reputation. Protected. 1|Page
Country Profile
Mexico
August 2018
T: +44 (0) 20 3355 0084 Registered office: Registered in England
E: ops@alchemyglobal.co.uk Berkeley Square House No. 06035590
W: www.alchemyglobal.co.uk Berkeley Square VAT No. 911730944
London. W1J 6BDContents Country Overview 2…… Threat Ratings 3 …… Profile Summary Security Threats 5 …… International Relations 6 …… Political Violence 8 …… Civil Unrest 10…… Kidnap 12…… Crime 15…… Environment 16…… Medical City/Territory Profile 17…… Mexico City Additional content 18…… Maritime 19…… Regulatory Environment 21…… Fraud and Corruption 23…… Infrastructure 24…… Latest incident
Mexico overview
International Relations
3
Political Violence
3
Civil Unrest
7
8
5.6
Kidnap
Overall
9 Crime
Environment
7
Medical
4Mexico overview The greatest security threats present in Mexico are associated with endemic levels of organised crime. This particularly affects several northern border and Pacific coast states and renders some remote areas lawless and subject to frequent outbreaks of violence between drug gangs, the security forces and vigilante groups. Associated with this are high levels of kidnapping and corruption. Occasional, high-magnitude earthquakes have proven deadly in the past, and annual hurricanes can cause widespread destruction. Excessive bureaucracy and the dominance of certain companies in several key strategic sectors present challenges to foreign businesses. Efforts to curtail the power of drug trafficking organisations since 2006 have resulted in high levels of instability and violence, particularly in northern and Pacific states such as Nuevo Leon, Sinaloa, Tamaulipas, Guerrero and Michoacán. Increased competition between groups and the militarisation of the conflict have led to escalating rates of violence, with more than 100,000 people having been killed over the past decade. The gangs have also diversified their activities, including the theft and sale of oil and iron ore. The cross- border activities of certain gangs, most notably Los Zetas, have provoked international tensions with Guatemala and other Central American states, though the need to cooperate in this area as well as in addressing illegal migration has reduced tensions. Rates of kidnapping and extortion are high and have become major sources of revenue for organised crime groups. Abductions occur most commonly in states affected by the drug war, such as Tamaulipas and Veracruz. Authorities, including police as well as local and state officials, have been implicated in abductions, reflecting the endemic levels of corruption and difficulties in tackling crime. Students, rival political groups, civil society movements and trade unions are all politically active and the high levels of violence over the past decade have provoked reactionary protests. Political reforms and the liberalisation of key sectors including energy and electricity have in the past provoked mass demonstrations across Mexico, and students and political opposition regularly organise protests against government policies. The deterioration of law and order in parts of the country and high rates of violent crime in the past decade have provoked mass protests by targeted groups such as journalists, as well as wider public demonstrations organised by civil society movements. Protest management techniques employed by police can at times be excessive and provoke clashes with demonstrators. Some public protests are periodically infiltrated by radical demonstrators who can instigate violence or vandalise government and commercial property. Mexican trade unions in public services are strong and have traditionally held significant political influence and resisted reforms. Past opposition to changes in policy in education, energy and electricity have fuelled mass protests and industrial action, which can paralyse the affected sectors. Environmental threats include earthquakes and hurricanes. High-magnitude earthquakes have caused extensive damage in the past, such as in 1985 when an 8.1-magnitude quake killed 9,000 people in Mexico City. Since then, improvements to building regulations, as well as public awareness campaigns and drills, have reduced the danger somewhat. Hurricanes occur annually, affecting both the Atlantic and Pacific coasts between June and November. Businesses face extensive levels of corruption in Mexico, particularly affecting state bureaucracy and the judiciary. Judicial officials are subject to manipulation by powerful interest groups, and have failed to adequately address the issue of corruption in office. The government is taking steps to open up major sectors of the economy to private investment and improve competitiveness, particularly evident in the previously highly restricted energy and
telecommunications sectors. However, the limited powers of the Federal Competition Commission mean that oligopolies in certain sectors, including construction and food, are likely to persist. In addition to security challenges to operations, including supply chains and goods theft, bureaucratic inefficiencies can also present significant obstacles to business.
3 International Relations Mexico maintains strong relations with its Latin American neighbours and the threat of conflict is low. Bilateral relations with Washington have led to increased uncertainty and episodes of tension since the election of Donald Trump as US president in November 2016, fuelled by disagreements over funding for a border wall and the renegotiation of the North American Free Trade Agreement (NAFTA). Mexico’s 3,000 km border with the US has necessitated close bilateral cooperation on efforts to stop the trafficking of drugs, arms and people across the border. Washington has contributed significant resources to Mexico’s efforts in pursuing its war against drug gangs, including more than USD 2.3 bn since 2007 through the Merida Initiative. The initiative includes the provision of equipment, intelligence and training to the Mexican security forces, and the US has maintained support for the package despite claims that pervasive corruption has undermined its effectiveness. However, bilateral relations have deteriorated under the administration of US President Donald Trump. Trump repeatedly threatened to withdraw from NAFTA after saying the deal negatively impacted the US, although in April 2017 he announced intentions to renegotiate the deal instead. Another source of tension is Trump’s intention to build a wall along the US-Mexico border, which he has insisted will be funded by Mexico City. The Mexican government has repeatedly refused to fund the wall. Relations with Mexico’s southern neighbour, Guatemala, are strengthened by the need to cooperate over trade and border security. Traffickers and armed groups have proven capable of crossing the border with ease. Mexico’s powerful Los Zetas drug gang has operated across the border between the two countries since at least 2008, in conjunction with Guatemalan armed groups. The gang has been known to conduct attacks in Guatemala, such as in 2011 when the group massacred 27 farmers in Los Cocos, Peten department. Guatemalan authorities have worked with their Mexican counterparts to mitigate the threat, helping to capture and extradite leading Los Zetas figures, such as Daniel Perez Rojas in 2013. Mexico also faces a growing amount of migration from Guatemala, with thousands of people from across the region crossing the border each year. In the first four months of 2016 alone, Mexico deported more than 43,000 foreign nationals from Guatemala, El Salvador and Honduras. Previously tense relations with Cuba have improved. Relations had deteriorated during the administration of President Vicente Fox after Mexico abandoned its previously supportive stance of Havana by voting in favour of a UN resolution criticising Cuba’s human rights record in 2002. However, President Felipe Calderon took steps to improve relations during his presidency, visiting Havana in 2012 and making efforts to bolster trade relations. This rapprochement continued under President Enrique Pena Nieto, who in 2013 cancelled USD 340 mn of Cuban debt to Mexico. In 2015 both countries signed a series of bilateral cooperation agreements aimed at fostering closer economic and cultural ties.
3 Political Violence The threat of political violence in Mexico is low, with no international terrorist groups having a known operational presence in the country. Insurgent groups that were active in the 1990s, specifically the Zapatista Army of National Liberation (EZLN) and the Popular Liberation Army (EPR), have largely curtailed their militant activities. Drug trafficking organisations have adopted tactics that at times resemble militant groups, including targeted killings and the use of explosive devices. The EZLN was formed in 1994, coinciding its launch with that of the North American Free Trade Agreement, which the group said was harmful to the interests of indigenous communities. The group conducted low- level guerrilla activity in the southern states of Chiapas, Guerrero and Oaxaca, and managed to take control of much of Chiapas state before the armed forces intervened and forced them back into remote mountain and jungle regions. The Zapatistas persisted in attacking the security forces and commercial interests using small-scale explosive devices, but following a peace accord signed in 1996 their activities diminished substantially. They now maintain autonomous communities in several regions in Chiapas, and though they claim to be subject to frequent harassment by the armed forces, their promotion of ideological goals remains largely peaceful. The Popular Revolutionary Army (EPR) is a leftist group formed in 1996, operating mainly in Guerrero but also in other southern states including Chiapas, Oaxaca, and Veracruz. The EPR’s attacks during the late 1990s killed tens of people, predominantly soldiers. In mid-2007, the group carried out a number of bomb attacks, including some intended to sabotage state oil firm Pemex’s facilities and pipelines in Veracruz and Tlaxcala. Pipeline explosions forced the evacuation of more than 20,000 people, with millions of dollars’ worth of damage inflicted upon Pemex equipment. Mexican businesses were estimated to have lost USD 100 mn per day due to supply disruptions. This was followed by a government crackdown on the group, during which more than 20 of the group’s members disappeared. Since then, there has been a decline in the group’s insurgent activities, and it has been suggested it is seeking to align with more mainstream protest groups, altering its operational methods in the process. The government claimed that the kidnapping of two children of an Oaxaca businessman in May 2013 was carried out by the National Coordinator of Educational Workers (CNTE) union with the collusion of the EPR, though the CNTE denied involvement. EPR has also been linked to the Popular Assembly of the Peoples of Oaxaca (APPO), which has been involved in violent demonstrations in the region. Although the gangs involved in the ongoing drug war do not possess overtly political goals, they have been known to adopt tactics resembling insurgencies, and their well-funded and well-armed nature can at times pose a challenge to state authority in some areas, particularly in the northern border states as well as Guerrero and Michoacán. Gang members have resorted to the use of grenades and car bombs, along with targeted assassinations of rival gang members, security forces and politicians. Politicians who have criticised or sought to tackle organised criminal activity have been the most likely to be targeted for assassination. Drug trafficking organisations have also periodically used explosives in attacks against security forces and rival groups. In July 2010, in the apparent first use by the drug gangs of a car bomb, an explosive-laden vehicle detonated near a federal police headquarters in Ciudad Juarez, killing four people. Such attacks are rare but have continued periodically since, including a car bombing carried out by Los Zetas against a hotel being used as a police barracks in Nuevo Laredo, 6.5 km from the US border, in May 2012. The attack left eight officers wounded.
Anarchist, environmentalist and animal rights groups conduct sporadic waves of small-scale bombings, usually targeting banks and ATMs in Mexico City along with research centres and universities. The anarchist group Reacción Salvaje, part of the Contra Info anarchist network, left an explosive device in the Coacalco campus of the Universidad del Valle de Mexico in April 2014. The device was left outside the communications faculty, in an expression of the group’s anti-technology stance. In October 2014, anarchist group Wild Instinct detonated petrol bombs at the main campus of the National Autonomous University of Mexico (UNAM) in the Coyoacan area of Mexico City, allegedly due to the university’s collaboration with the security forces in detaining group members. UNAM had previously been targeted in 2008-2009 by the Earth Liberation Front, who claimed responsibility for arson attacks against the university because it had built on a designated ecological reserve. Attacks have also occurred beyond the capital, with Guadalajara, Jalisco state also experiencing isolated attacks.
7 Civil Unrest Civil unrest presents an important threat, with protests and strikes periodically causing major disruption to travel and operations. Protests can occur spontaneously, often attracting large crowds at little notice, and demonstrators may seek to block streets and major highways. Though mobilisations are usually peaceful and effectively policed, clashes with security forces do occur, and commercial properties have been subject to vandalism during protests. Strikes are often staged by large and politically influential unions which can paralyse targeted unions or sectors. Political, economic and security issues are among the primary motivators of unrest in Mexico, and have provoked mass demonstrations. Common drivers of protests include government corruption, sector reforms and the violence associated with the ongoing drug war. Commercial and economic interest are vulnerable to disruption and damage from civil unrest. In January 2017, the government’s removal of fuel subsidies and deregulation of prices led to mass unrest targeting petrol facilities across the country. In the first week of the protests, some 1,500 people were detained, six were killed, fuel stations across the country were blockaded and Mexico’s retail association reported losses of more than USD 2.4 mn from looting. The potential of unrest to impact on businesses was also illustrated in February 2015, when Coca Cola reduced operations at its largest Mexican bottling plant and distribution centre in Chilpancingo, Guerrero. The company lost around 250 trucks to robberies and attacks during protests by the relatives of 43 students who went missing from Iguala in September 2014. The protesters were calling on the government to hold those responsible to account. Unions in some sectors, including education and energy, wield a significant amount of power, and have proven capable of generating substantial unrest. Strikes and protests often manifest in opposition to proposed policy reforms that are perceived to threaten long-standing vested interests. In the education sector, the National Educational Workers Union (CNTE), has staged mass protests and strikes since the government passed unpopular education reforms in 2013. Months of strike action launched by the CNTE in May 2016 led to the deaths of eight people in clashes in Oaxaca in June, and a week-long blockade of rail lines in Michoacán in July, causing at least 200 trains carrying imported products to become stranded at Lazaro Cardenas port. In June, service stations across Chiapas were left without fuel after the CNTE established road blockades around a Pemex refinery. Reforms to end the state’s 75-year-long ownership of the energy sector saw energy unions lead repeated protests in 2013, with demonstrations in Mexico City drawing tens of thousands of protesters on several occasions. Mexico’s indigenous and rural communities can also organise unrest, staging occasional protests over land rights issues and infrastructure projects. Such protests may target both government agencies concerned and private companies. For instance, in October 2012, indigenous groups from Oaxaca demonstrated outside the offices of participants in a major wind-energy project including Coca Cola, the Inter-American Development Bank and the Danish embassy. Local groups including land cooperatives, or ejidos, have proven capable of organising community- based opposition to business. The Ejido La Sierrita in Durango has staged repeated protests over mining operations in the area, and in 2012 succeeded in forcing the suspension of operations at an Excellon-run mine. Plans for the increased use of hydraulic fracturing, or fracking, to extract shale gas are likely to encounter persistent localised protests. Domestic and foreign companies’ plans to drill up to 10,000 fracking wells in Coahuila state have already provoked such protests, with the ‘Coahuilians Against Fracking’ group staging protests outside the Energy Expo at the Autonomous University of Coahuila in
November 2014. The protesters blocked federal highway 57 for an hour during the demonstration. A number of anti-fracking groups across the country are seeking a congressional ban on fracking, and protests are likely to continue as the sector develops.
8 Kidnap The threat of kidnapping is high in Mexico, particularly in northern and central parts of the country. Kidnappings are predominantly financially motivated but have occasionally targeted politicians or their family members for political motives. Although the vast majority target Mexican nationals, foreign nationals have been subject to express kidnappings and thousands of Central American migrants have also been abducted while on route to the US. Although kidnapping has previously targeted the wealthy, less affluent people are increasingly affected. Responsibility primarily lies with drug gangs, but police and even local officials are often suspected of involvement. The rate of kidnappings in Mexico escalated after President Felipe Calderon launched the war against drug gangs in 2006. In response to a crackdown on the narcotics trade, drug trafficking organisations have diversified their activities, focusing increasingly on kidnapping for ransom as a source of income. In 2005, there were 278 reported kidnappings in Mexico, and by 2016 this figure had risen to around 1,865. However, as the police are often perceived as unreliable or even complicit, it is believed that the majority of kidnappings go unreported. The Mexican National Institute of Statistics and Geography (INEGI) estimates that only around 1 percent of abductions are reported. The threat of abduction is pronounced in Mexico City and other major urban areas, as well as along the northern borders with the US. Mexico state regularly sees the highest kidnapping rate, followed by Tamaulipas state where there have been reports of entire busloads of passengers being held for ransom. Border towns such as Ciudad Juarez and Tijuana are also particularly badly affected. However, the problem has worsened elsewhere, especially affecting the states of Tabasco, Guerrero, and Morelos. Within urban areas, there is a notable risk of express kidnapping, in which victims are forced to withdraw cash and then released. The 24-hour withdrawal limit at ATMs means that such abductions will usually last no longer than 24-48 hours. Longer-term kidnapping for ransom has typically targeted people with perceived wealth, and for this reason affluent families may travel with bodyguards and armoured vehicles. However, as abductions have increased, those with less wealth have also been targeted, with reports of ransoms as low as USD 500 being demanded. The perceived wealth of foreign nationals leaves them vulnerable to kidnapping. In 2016, the US State Department reported more than 150 kidnapping events with a US nexus nationwide, with 38 of these taking place in Mexico City. In January 2014, the police launched a major campaign to combat kidnapping, focusing on the states of Durango, Guerrero, Mexico, Michoacán, Morelos, Oaxaca, Tamaulipas and Zacatecas. However, the effectiveness of the security forces in addressing the issue has been brought into question by frequent allegations of complicity, with the police believed to be heavily infiltrated by drug gangs. In March 2015, 14 police officers were charged with kidnapping and extortion, relating to the abduction of the owner of a construction company in Matamoros for a ransom of USD 2 mn. Police and local officials are also alleged to have been involved in the abduction and apparent murder of 43 students in Iguala in September 2014. There are frequent instances of large numbers of migrants being kidnapped by criminal groups, who then demand cash from their relatives in exchange for their release. This has become an important revenue stream for criminal groups, and the National Human Rights Commission has estimated that such abductions may earn gangs as much as USD 250 mn per year. There have also been reports of massacres of abducted migrants. In 2010-2011, the bodies of hundreds of migrants were discovered in mass graves in Tamaulipas, with the Los Zetas group believed to have been responsible. Groups such as Los Zetas are also believed to force kidnapped migrants to work along drug-trafficking routes.
9 Crime Mexico experiences critical levels of organised crime, with profound effects on security in much of the country. The war against drug gangs first initiated by former president Felipe Calderon in 2006 has seen security forces kill or capture leading figures among the major gangs, and the resulting competition for territory between various armed groups has resulted in persistent violence. More than 100,000 people having been killed during the past decade, and more than 1.5 mn displaced. The pressure on the gangs has also encouraged them to diversify their activities, to include kidnapping, theft of goods and commodities like oil and iron ore, and extortion of businesses. The impact on business of such activities has entailed higher costs, including greater expenditure on security, and has even forced some companies to re-evaluate their operations. Criminal activities have also been linked with high rates of corruption among the authorities. Drug trafficking organisations The drug gangs are engaged in the large-scale production and trafficking of illegal narcotics including cannabis, cocaine and heroin. While much of this involves the transportation of drugs from Latin American to the US, some drugs – particularly cannabis, opium poppy and methamphetamine – are produced in Mexico for the North American market. Since the 2000s, supply from Mexico has superseded that from other Latin American countries including Colombia. An estimated 90 percent of all cocaine consumed in the US arrives from Mexico, and the value of all Mexican drug trafficking is believed to be as high as USD 13 bn per year. Crime related to drug gangs has traditionally been greatest in the northern states of Chihuahua, Coahuila, Nuevo Leon, Sinaloa, Sonora and Tamaulipas, where various gangs compete against each other for control of highly lucrative drug trafficking routes toward the US. Within the northeast, the powerful Los Zetas and Gulf Cartel organisations have been engaged in a prolonged turf war for domination of the routes. The worst affected cities include Ciudad Juarez, Monterrey, Nuevo Laredo, Reynosa and Tijuana. Violent criminality has surged in recent years in central states including Guerrero, Jalisco, Mexico and Michoacán, and in 2016, Mexico state and Guerrero respectively experienced the highest murder rates in the country. The government’s policy of killing and capturing the leaders of major groups such as Los Zetas, the Gulf Cartel and the Sinaloa Cartel has contributed to escalating levels of violence. In 2016, Mexico recorded at least 23,000 homicides, the highest level since Enrique Peña Nieto became president in 2012, and in May 2017 the country recorded the highest number of monthly murder probes since records began in 1997. The long-term effect of the government’s targeting of gang leaders has been to create turf wars between those in the next line of succession, along with the fragmentation of groups and formation of new ones. The gangs have become less well-organised and controlled, with smaller groups engaging in increased violence and an expanded range of activities including kidnapping and counterfeiting. Security experts posit that the government is unlikely to bring about a meaningful reduction in crime and violence until sustained efforts are made to reform the police and justice system and counter a culture of corruption.
Business considerations Certain professions have found themselves particularly vulnerable to targeting by the drug gangs. Foremost among these are journalists. The Committee to Protect Journalists has said that Mexico is the deadliest country for journalists in the Western Hemisphere following the deaths of 11 reporters in the country in the first 10 months of 2017. Criminals are believed to particularly target those who have investigated and reported on crime and corruption. Politicians represent another vulnerable group in Mexico. Since the start of the drug war in 2006, tens of politicians have been targeted, both to assert the authority of criminal groups and to remove the threat of politicians who promise to take action against them. Local officials have proven particularly vulnerable. Car-jackings and haulage theft target commercial and passenger vehicles, particularly in isolated areas and at night. Security checkpoints on roads can be hazardous if manned by criminal or vigilante groups who will demand tolls, and have been known to fire upon drivers who have failed to stop. Criminal groups have also used roadblocks as obstacles to the security forces, placing vehicles on major roads to restrict police access to areas where they are committing criminal activities. Cargo theft has become another source of income for organised criminal groups in Mexico. Data from the Mexican Association of Private Security, Information, Tracking and Applied Intelligence (Amsiria) shows robberies of commercial cargo increased by 180 percent between 2014 and 2016, leading to an estimated USD 30 bn in losses of stolen merchandise every year. The worst affected states in 2016 were Puebla, Mexico state and Veracruz. Cargo theft takes place on roads and trains, and at warehouses and service stops, and usually targets products that can be readily sold such as expensive electronic merchandise. The gangs have exhibited an increased technical proficiency, and have demonstrated their capability to disable vehicle tracking devices. As well as kidnapping, criminal organisations have diversified into several other illicit activities. State oil company Pemex loses up to USD 1 bn annually due to oil theft, which is most prevalent in the states of Guanajuato, Jalisco, Sinaloa, Sonora and Tamaulipas. Drug gangs have also targeted the mining sector, with companies in the states of Chihuahua, Guerrero, Michoacán, Morelos and Tamaulipas reporting being subject to extortion and theft. The iron ore sector has also been targeted, and the iron and steel industry is believed to have lost USD 1.3 bn to criminal groups during 2013. The Knights Templar group is believed to control much of the extraction and exportation process in Michoacán, and in May 2014 the authorities intercepted a ship that had left Lazaro Cardenas with around 70,000 tonnes of iron ore likely linked to the group. Organised criminal groups commonly charge ‘protection fees’ to companies in the oil and mining sectors, with the threat of violence toward those who do not pay. They have been known to designate company employees to work as lookouts, couriers and representatives, and have even reportedly formed cooperative relationships with firms. In April 2015, the head of Canadian firm McEwan Mining admitted that the company had interacted with criminal groups in order to facilitate its operations in Sinaloa state. Extortion represents a further source of revenue for criminal groups, with 8,945 cases reported in 2016, a notable increase from 5,262 the previous year. Like kidnappings, many incidents go unreported due to a lack of confidence in police and fear of reprisals. In 2014, the Mexican employers’ association COPARMEX estimated that more than a third of businesses had been directly subjected to crime, much of it extortion. This is believed to cost as much as USD 5.8 bn per year. Petty crime poses a notable risk in Mexico. Street crime is particularly prominent in major cities and tourist areas, with high crime rates linked to the low rate of criminal convictions. Theft is common on public transport and at transport hubs, with pick-pocketing highly prevalent on the Mexico City Metro. There is a significant threat of assault and robbery in unlicenced ‘libre’ taxis, though the better regulated ‘sitio’ cabs tend to be safer. ATMs also carry a risk of theft, and it safest to use them during daylight.
Police response Complicity of the political and security authorities in criminal activities, especially the police, is such that in some areas it is considered necessary to hire private security. The police are known to carry out petty extortion on a wide scale, but have also been implicated in far more serious crimes, including abduction and murder. Poor pay especially at the local level means that the police remain highly susceptible to corruption. The poor rate of success among criminal investigations contributes to the widespread perception of the police as corrupt and ineffective. According to a February 2016 study by the University de las Américas Puebla, only 4.46 percent of crimes committed in Mexico are punished with a prison sentence, leading the study to conclude that impunity is one of the most serious problems in the country. In response to the perceived failure of the security forces to address endemic levels of criminality, so called ‘self-defence’ groups of vigilantes have arisen in some states. These groups have engaged in clashes between one other and faced allegations of infiltration by the drug gangs they were set up to combat. Such groups first manifested substantially in February 2013 in Michoacán state, where they targeted the Knights Templar drug gang, successfully driving them out of a number of towns in the state. However, with increasing reports of deadly clashes between the groups, in 2014 the government attempted to bring them under a degree of control by requiring them to register their weapons and integrate into the rural police force. Clashes between vigilante groups have nonetheless continued sporadically.
7 Environment The primary threats facing Mexico include storms during the annual hurricane season between June and November, flooding, earthquakes and high levels of air pollution in Mexico City. Mexico experiences an annual hurricane season between June and November, affecting both the Atlantic and Pacific coasts. This can involve highly damaging storms, such as Tropical Storm Earl in August 2016, which killed 49 people in Puebla and Veracruz. The storm caused mudslides that damaged more than 1,600 homes and disrupted transport, including the closure of a main highway to Mexico City in Puebla. In 2005, the Atlantic coast experienced the most intense tropical cyclone ever recorded in the Atlantic basin, Hurricane Wilma. The storm hit the Yucatan peninsula, killing at least eight people and causing USD 7.5 bn in damage, including USD 4.6 bn worth of damage to agriculture alone. Tourist hotspots such as Cancun were among the worst affected areas, experiencing severe flooding and widespread damage to infrastructure. Earthquakes also present a risk in Mexico, particularly in the states of Guerrero and Oaxaca. High- magnitude quakes occur fairly frequently, and can pose danger to lives and property. The country was hit by two major earthquakes in September 2017, a magnitude 8.1 earthquake that struck in the Pacific, some 87 km south-west of Pijijiapan, and a magnitude 7.1 earthquake with its epicentre near Atencingo in Puebla state. The quakes killed 471 people and damaged 180,731 buildings, leading to estimated reconstruction costs of USD 2.5 bn. A series of aftershocks also prompted state oil company Pemex to suspend operations at its Salina Cruz refinery for several weeks. The worst earthquake in the modern history of Mexico was in 1985, when Mexico City was hit by an 8.1- magnitude earthquake. The quake killed at least 9,000 people, injured 30,000 and left 100,000 homeless. Improvements have since been made in building regulations and emergency planning, but the continued possibility of high-magnitude earthquakes means that the threat to life and property persists, particularly in high-density urban areas. Mexico City is particularly vulnerable to severe flooding during periods of heavy rainfall, due both to its location in a dried lake bed and the lack of adequate drainage. Poorer areas such as Iztapalapa are especially susceptible. A further threat is posed by water-borne infections, and flooding in September 2013 caused cases of intestinal infections to increase three-fold, while 10 cases of cholera were recorded. The most active volcanoes in Mexico are Colima, found in the states of Colima and Jalisco, and Popocatepetl, which is located 70 km southeast of Mexico City. Both are closed to the public and have danger zones which adjust depending on current levels of volcanic activity. Although they pose no danger to people outside of the immediate vicinity, in the event of eruption, their ash clouds can cause disruption to air travel. In November 2015, the eruption of Colima Volcano led to the temporary suspension of flights from Colima National Airport. Densely populated Mexico City and Guadalajara, the two largest cities in Mexico, suffer from high levels of air pollution. Authorities in Mexico City have issued several pollution alerts since 2016, and in May 2017, Mexico City experienced a six day state of environmental emergency, the longest since 1998. The emergency declaration entailed restrictions on vehicle use and required factories to reduce emissions of ozone precursors by up to 40 percent.
4 Medical Healthcare facilities tend to be of an adequate standard in major cities. In Mexico City, facilities are very good, though emergency response may be somewhat less reliable. In other medium or large cities, high standards of healthcare are obtainable but in remote areas medical care is usually limited. Although healthcare in Mexico is highly affordable, including the provision of universal public healthcare, hospitals may demand upfront payment from patients before beginning treatment, regardless of the possession of insurance policies. The water supply in some areas is not potable, and so bottled water is often preferable. In 2009, Mexico was the epicentre of an outbreak of the H1N1 ‘swine flu’ virus, in which almost 400 people were killed across the country. The outbreak appeared to have begun in Mexico City in February, though the first death was recorded in Oaxaca in April. The response of the government, which shut down public places including schools in order to limit the spread of the virus, proved effective and infections began to decline by May. However, the virus remains present in Mexico, and a further severe outbreak could lead to the re-imposing of quarantines and shutdowns. There has been an increase in cases of illnesses transmitted by the Aedes aegypti mosquito in the country. Since 2016, Mexico has seen thousands of infections from Zika, which can cause the birth defect microcephaly, as well as chikungunya and dengue. The use of insect repellents and mosquito screens can mitigate the risk of infection. There are sporadic outbreaks of cholera, which are worsened by the occurrence of tropical storms and hurricanes, and the associated incidence of flooding. Avoiding water that may be tainted, such as by filtering, treating or boiling water supplies, reduces the threat significantly.
City/Territory — Mexico City Although organised crime is not prevalent in Mexico City, the rates of robbery and kidnap in the city are of notable concern. Civil unrest is also common and can disrupt movement in central areas of the city. Environmental threats include earthquakes and high levels of pollution. Drug related violence in Mexico City is lower than in many other cities in the country. This is due to a smaller presence of organised criminal groups in the capital and a strong police presence. However, Mexico City has become more vulnerable to organised crime and 206 murder investigations were opened in Mexico City between May and June 2017, the highest number since records began in 1997. The mayor has attributed this increase to poor economic growth and low wages driving residents into crime. Theft, robbery and kidnap are common crimes in Mexico City, which are exacerbated by a weak response from police. Neighbourhoods with particularly high levels of crime include Morelos, Roma, Mixcalco- Heraldo, Revolución-Alameda and Corredor Centro. Travellers are advised to exercise caution on city buses and the metro, where pickpockets and other thieves widely operate. Unlicensed, ‘libre’ taxi cabs should also be avoided due to the risk of express kidnappings. Kidnapping rates in the city are high, with the US Embassy reporting 771 kidnapping events in Mexico City in 2016, although the real number is likely to be greater as the vast majority of abductions go unreported. Protests are frequently held in Mexico City, most commonly driven by political grievances. Clashes between police and protesters are not common, although there is a high probability of travel disruption resulting from road blockades and closures, particularly at larger events. Common protest points include Plaza de la Constitución (Zócalo), the presidential residence Los Pinos, and the Angel of Independence and Monument to the Revolution located along the city’s primary avenue the Paseo de La Reforma. The capital is vulnerable to periodic earthquakes with the potential to lead to loss of life and widespread destruction. In September 2017, a 7.1 magnitude earthquake with its epicentre in Atencingo, some 123 km from Mexico City, killed approximately 100 people and led to the collapse of tens of buildings. Some 2 mn people were also affected by a power outage. In 1985, Mexico City experienced one of the most devastating earthquakes in the country’s history when a magnitude 8.1 earthquake struck the capital, killing at least 9,000 people and seriously damaging more than 3,000 buildings. Substantial improvements have been made to building regulations and response planning since then. Mexico City is vulnerable to severe flooding during periods of heavy rainfall, due to its geographical location and inadequate drainage. Among the neighbourhoods most susceptible to flooding is Iztapalapa, where drainage systems are especially rudimentary. Pollution is a serious problem in the city, and prompted authorities to issue ten alerts over dangerously high levels of atmospheric pollution in the first eight months of 2016 alone. The alerts led to restrictions on the number of vehicles allowed to circulate, as well as industrial activity. Anarchist, environmentalist and animal rights groups conduct sporadic waves of small-scale bombings, usually targeting banks or businesses in Mexico City. In November 2015, a group called the Pagan Sect of the Mountain claimed responsibility for the bombing of four vehicles owned by transportation company Mexibus, which they said was a protest against environmental damage. No one was injured in the blasts, although the vehicles did suffer damage.
3 Maritime The threat of piracy is low but there is a significant threat to maritime interests posed by the infiltration of ports by criminal groups. In June 2017, the Marine’s Navy Secretariat (SEMAR) assumed all security functions at the country’s 103 ports for the first time in 41 years. In addition to port security, SEMAR will also authorise the arrival and departure of vessels, as well as inspecting and certifying Mexican and foreign vessels. The move to militarise ports indicates increasing issues with drug and weapons and trafficking at maritime facilities. Criminality has also had major effects on the security forces within port towns. In 2011, the entire police force of the port city of Veracruz was fired due to corruption. The force was believed to have been heavily infiltrated by Los Zetas. Criminal groups move drugs along the Caribbean and Pacific coasts, using vessels ranging from fishing boats to submarines. Although these rarely cause issues for commercial vessels in the region, there have been reports of armed groups robbing shrimping boats off the coast of Sinaloa. During the 2013-14 shrimping season, such robberies amounted to an estimated USD 800,000. There have been sporadic reports of pirate activity in Lake Falcon, an international reservoir on the Rio Grande between Texas and Tamaulipas. In 2010, armed men reportedly shot and killed a man on a boat, after he and his wife crossed into Mexican waters from the lake. Such incidents are likely the result of organised criminal activity in the area and do not represent a sustained threat. Hurricanes that occur along the Atlantic and Pacific coasts between June and November can annually disrupt port operations, often for several consecutive days.
5 Regulatory Environment Although businesses in Mexico must contend with some bureaucratic inefficiencies and the presence of oligopolies in certain industries, the country generally has a positive regulatory environment, and the government has implemented important reforms to streamline regulations. In particular, regulations restricting private enterprise and investment in oil and gas and telecommunications have undergone a programme of liberalisation under President Nieto since 2013. The World Bank report ranked Mexico 49 out of 190 countries on the overall ease of doing business in its 2018 report. Mexico performed well on access to credit, cross-border trade and enforcing commercial contracts through lawsuits. The report also found that paying taxes is simpler in Mexico than much of the region. The Foreign Investment Law of 1993 governs foreign investment in Mexico. Foreign investors receive the same legal treatment as local investors, and approximately 95 percent of all foreign investment transactions do not require government approval. Foreign investments that require government authorisation and do not exceed USD 165 mn are automatically approved, unless the proposed investment is in a legally reserved sector. In restricted sectors, the National Foreign Investment Commission is the government authority that decides on foreign investment, and has 45 business days to make a decision. Investment security is guaranteed in Mexico after it ratified the Recognition and Enforcement of Foreign Arbitral Awards and codified it into domestic law, and the country is also a member state to the International Centre for Settlement of Investment Disputes (ICSID). However, the duration of investment disputes varies, and cases concerning real estate transactions have been known to take years to resolve. The constitution guarantees the inviolable right to private property and expropriation can only occur for public use and with due compensation. Bureaucratic hurdles for operators in Mexico remain, however. Despite reforms, obtaining construction permits, paying taxes and registering property remain challenges. The persistence of oligopolies in certain sectors, such as construction, chemicals and food, acts as a barrier to entry for many companies, results in high prices among domestic businesses, and hinders international competition. The lack of competition results in poor incentives to develop infrastructure, as has been evident in the telecommunications sector, though this has been subject to reforms. Such executive-led measures have been necessitated in part due to the fact that the Federal Competition Commission, though autonomous, lacks the necessary powers to encourage a move away from oligopolies and cannot enforce overlarge companies to split. The country’s economic potential is hindered somewhat by its over-reliance on the external market, most notably trade with the US. The high reliance upon exports, particularly since the introduction of the North American Free Trade Agreement in 1994, leaves the Mexican economy vulnerable to external shocks, such as slowdowns in US growth. Since the 2008 financial crisis in the US, Mexico has made efforts to reduce its dependency upon the US market, resulting in only a minor reduction, with exports to the US falling from 88 percent of the total to just under 80 percent in 2013. US and Canadian investors receive national and most-favoured-nation treatment in setting up operations or acquiring firms in Mexico. The reliance upon Pemex’s activities for around 40 percent of state resources is also problematic, and requires diversification of economic activity.
During the course of 2013, the government introduced changes in the regulations covering taxation and financing, as well as taking steps to encourage greater foreign investment. The banking regulator was empowered to punish lenders who fail to put sufficient resources into credit, and efforts were made to improve competition. These steps were intended to address the poor access to credit among small- and medium-sized enterprises, which received only 15 percent of credit despite generating nearly three- quarters of Mexico’s jobs. In 2014 the corporate tax rate was raised from 17.5 to 30 percent, and varying retail taxes were harmonised at 16 percent. Much needed reforms are also underway in the formerly highly restricted energy sector. Oil exploration and production had been nationalised in Mexico for almost 80 years, but reforms introduced under President Enrique Pena Nieto have opened up the sector to joint ventures with private firms. This has seen the opening of some oil and gas fields to exploration and development by private and foreign firms. The government hopes the bidding process will bring in USD 50 bn in the first four years. The move is intended to address high levels of inefficiency within Pemex and boost production, which declined dramatically between 2004 and 2014. Reforms have also been undertaken in the telecommunications sector. The market has long been dominated by two firms, America Movil and Televisa, resulting in high consumer costs, poor service and insufficient infrastructural reinvestments. The new, constitutionally autonomous Federal Institute of Telecommunications has been established to oversee reforms in the sector, enforcing regulations and applying sanctions on companies dominating the market. The reforms have made consumer prices more competitive and boosted internet connectivity rates.
7 Fraud and Corruption Corruption poses a major concern to businesses in Mexico, and is significantly worsened by the infiltration of organised criminal groups into security and judicial bodies at municipal, state and federal levels. Money laundering and extortion are widespread. The gangs are suspected of infiltrating political parties, and possibly even funding the campaigns of some senators and deputies. In Transparency International’s 2016 Corruption Perceptions Index, Mexico was ranked 123 out of 176 states. In most states that experience high levels of drug-related crime, such as Tamaulipas, Sinaloa and Guerrero, gangs have successfully infiltrated politics, the police and the judicial system. Corruption in some areas has even reached as high as state governors, including former Tamaulipas governor Eugenio Hernandez Flores, who was arrested in October 2017 for misuse of public funds, and the former governor of Veracruz Javier Duarte who was charged with corruption, money laundering and involvement in organised crime in July 2017. The police are perceived as particularly susceptible to corruption, in part due to poor wages, particularly among municipal forces. The Mexican Institute for Competitiveness estimates that political graft costs the country’s economy some USD 51 bn a year in lost output. Corruption affects the judiciary and contributes to high levels of impunity for criminals. Judges at all levels are subject to manipulation by powerful economic interests and criminal groups. Wealthy defendants are much more likely than the poor to receive an ‘amparo’, which involves the declaration of constitutional rights and hastening of the judicial process. The judiciary also lacks independence from the executive, which has intervened in cases in the past. For example, President Calderon’s administration is believed to have played a role in the conviction of a French national accused of involvement with a kidnapping gang in 2008, despite irregularities during the trial. One of the foremost forms of corruption affecting Mexico is money laundering, which occurs on a wide scale, often in service of drug trafficking proceeds but also in relation to kidnapping, human trafficking, arms trafficking and counterfeiting. The large amount of legal commerce with the US facilitates the high volume of laundered money, and US authorities claim that drug gangs send as much as USD 29 bn in laundered funds to Mexico from the US annually. The payment of bribes in the country is endemic. A 2016 survey of businesses by the National Institute of Statistics and Geography (Inegi) found that Mexican businesses paid nearly USD 90 mn worth of bribes, and 65 percent of respondents said bribing public officials was necessary to expedite business permits. Foreign businesses have at times been implicated in Mexican corruption scandals. For example, Brazilian engineering company Odebrecht has reportedly admitted to paying officials USD 10.5 mn in kickbacks in return for securing public works contracts between 2010 and 2014. In May 2017, Citigroup’s Mexico unit Banamex agreed to pay USD 97.44 mn to federal authorities to settle claims that a lack of internal controls and negligence may have allowed customers to launder money. Federal authorities allege that Banamex’s internal controls alerted the bank to 18,000 potentially suspicious transactions from the US to Mexico, but that fewer than 10 were investigated.
Another factor exacerbating corruption in Mexico is the country’s large informal sector, which is believed to account for as much as 40-50 percent of the Mexican economy. Its high prevalence leaves informal businesses without property rights and highly vulnerable to corruption and criminal exploitation, such as demands for the payment of protection money. The presidencies of Felipe Calderon and Enrique Pena Nieto have seen efforts to address the high corruption rates. In 2012, a number of anti-corruption bodies were created, including the National Anti-Corruption Agency and the National Anti-Corruption Prosecutor’s Office, along with the passage of the Anti-Money Laundering Law and the Federal Anti-Corruption Law. The government later passed a series of wide- ranging corruption reforms in July 2016 including harsher sentences for public officials accused of bribery, embezzlement and illicit enrichment, and the introduction of asset declarations for officials and public contractors receiving benefits from the government. The reforms will also see the creation of an autonomous anti-corruption agency. It remains to be seen whether the legislation can combat the entrenched culture of impunity in the country
4 Infrastructure Transport infrastructure in Mexico is generally adequate, expect in rural areas. However, road conditions are variable, including within cities. This contributes to high accident rates in urban areas, and on nearby highways, amid high concentrations of commercial traffic. In some rural areas road lighting and signage can be severely lacking. Roads and highways often contain security checkpoints, and these are not always manned by the security forces but sometimes by criminal or vigilante groups, who have been known to open fire on vehicles that have failed to stop when requested. Authorities may request identification documents from people travelling between states. Proof of legal residence may also be requested, and there have been instances of foreign nationals lacking such proof being detained. Due to high levels of air pollution, authorities in Mexico City have introduced restrictions on driving, including prohibitions on cars with certain license plates on specific days. These restrictions normally do not apply to newer, less polluting vehicles. Under President Enrique Pena Nieto, a major rail expansion programme was launched, particularly focusing on passenger services. Among the proposals is a high-speed link between Mexico City and the manufacturing hub of Queretaro, and an eventual extension to Guadalajara. The current network, which largely supports freight, is old and experiences periodic derailments. Mexico has a history of major industrial accidents, suggesting inadequate enforcement of industrial regulations. In August 2014, a vast spillage of toxic chemicals entered the Sonora river from a Grupo Mexico mine in Sonora state, with the resulting pollution affecting thousands of people in surrounding municipalities. There have also been a series of fatal accidents at facilities owned by state oil company Pemex in recent years, including an explosion caused by a gas leak at a petrochemical plant in Coatzacoalcos that killed 32 people in April 2016. The Mexican telecommunications sector has low penetration rates, partly due to the longstanding dominance of two companies, America Movil and Televisa, leading to poor competitive incentives to improve infrastructure and high consumer prices. Reforms introduced under President Nieto have improved the sector’s competitiveness. Major investments are due to improve the electricity network, with a series of large-scale investments underway since 2014. Among these are the Norte III power plant near Ciudad Juarez, which will add 928 MW capacity to the national grid at a cost of over USD 1 bn, and the Guaymas II plant, which will add 714 MW at an investment of USD 725 mn.
Latest incidents Cartel violence spikes in Guanajuato 30/07/2018 Guanajuato authorities stated that cartel violence related to drug trafficking and fuel theft has spiked since the beginning of 2018 in the state. A territorial dispute between Jalisco Nueva Generación and the local Santa Rosa de Lima criminal groups has led to an upturn in violence. Authorities recorded 1,200 homicides in the first half of the year, with just over 4,000 perpetrated in the past three and a half years. Gunmen kill five plainclothes police officers in 29/07/2018 Puebla state Unidentified gunmen shot and killed five plainclothes police officers at an unspecified location in Puebla state. The officers belonged to the Naupan police force, but were found along the Mexico City-Tuxpan highway. Fourteen police officers have been killed in Puebla state since 1 June. Gunmen kill five in Cancun 28/07/2018 Unidentified gunmen shot and killed five people, including a police officer, in a restaurant in Cancun, Quintana Roo state. The shooting also injured three others in the restaurant, which is located on the road between Puerto Juarez and Punta Sam. The killing comes amid rising violence in Quintana Roo in recent months as multiple criminal groups fight for supremacy in regional drug trafficking. Authorities find two dismembered bodies in Quintana Roo 27/07/2018 Authorities found the dismembered bodies of two males in their mid-thirties in Quintana Roo. One of the victims had tattoos usually borne by gang members while the other had duct tape covering his mouth, suggesting the murders were related to gang warfare. Quintana Roo has seen an increase in violence over the past year that police attribute to a turf war among rival criminal organizations. President-elect Lopez Obrador pledges USD 16 bn 27/07/2018 investment in energy sector President-elect Andres Manuel Lopez Obrador pledged to invest USD 16.3 bn to increase Mexico’s energy output. Most of the funds are to be invested in increasing oil production. USD 4 bn is due to go toward drilling new wells and increase production from the current level of 1.9 mn barrels per day to 2.5 mn bpd by the end of 2020. Another USD 8.57 bn is to be invested in building a seventh refinery at Dos Bocas, Tabasco state, Lopez Obrador said.
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