Drug War Capitalism

by Dawn Paley

  Total US funding appropriations for the Mérida Initiative in Mexico between 2008 and the end of 2014 totaled $2.35 billion. Congress requested $115 million for the Mérida Initiative in 2015.[19] It was estimated in 2012 that for every dollar that the United States spent on the Mérida Initiative, Mexico spent thirteen.[20] Central America Regional Security Initiative funds began flowing to Central America in 2008, by the end of 2014 totaled approximately $806.3 million, with an additional $130 million requested by Congress for 2015.[21] By mid-2013, the US had disbursed $27,151,000 for the Caribbean Basin Security Initiative, a fraction of the over $157 million allocated.[22]

  The US government did not provide any cash to the Mexican government as part of the Mérida Initiative, instead spending the earmarked dollars on US-made equipment and various private contracting firms. Additionally, non-Mérida counter-drug assistance was provided by the US Department of Defense, totaling $208.6 million between 2009–2012.[23] Through newspaper reports generally focus on the police and military aspects of the drug war (the violence), recent testimony by the US point man for anti-drugs policy in the Americas, William Brownfield, highlights how the US government’s motives in funding the Mérida Initiative go beyond security: “In every society, citizen security underpins economic stability and allows trade, investment, energy development, and education exchanges to flourish. The partnership forged between the United States and the Government of Mexico over the past six years under the Mérida Initiative exemplifies how strengthening citizen security supports these broader objectives.”[24] The objectives outlined by Brownfield could be more important than they first appear. According to economist Dr. Paul Collier, “Conflicts are far more likely to be caused by economic opportunities than by grievance. If economic agendas are driving conflict, then it is likely that some groups are benefiting from conflict and that these groups therefore have some interest in initiating and sustaining it.”[25] Collier is referring to civil wars, but the same applies to Mexico. The drug war in Mexico can hardly be called a civil war, due to the extent of international involvement in the conflict (the same can also be said of other so-called civil wars, like those in Guatemala and El Salvador, for example). The scale of the killing has pushed the conflict far beyond the frame of being a dirty war. In some senses, it is a war with no proper name. Regardless, Collier’s point about economic opportunities holds true for Mexico.

  In the case of the drug war in Colombia, Central America, Mexico, and elsewhere, it is clear that dominant factions in the state apparatus stand to benefit. State military power, policing, and the prison system are strengthened through increased aid and cooperation with the world’s military superpower. Another beneficiary of drug war policies generally is the transnational corporate sector. It experiences improved conditions for investment thanks to reforms as well as an increasingly militarized and repressive social context that allows a freer hand to pursue destructive and/or controversial mega projects.

  Criminal groups, the ones moving the drugs, are the third category of beneficiaries. These are the war profiteers the mainstream media and governments focus on. According to a 2010 report by the UN Office on Drugs and Crime, 85 percent of gross proceeds in the $35 billion cocaine market stayed in the United States. Of that amount, 15 percent went to US wholesalers and mid-level dealers, and 70 percent went to street-level dealers who sold to US consumers. Compare this to the $4.6 billion (13 percent) that stayed with traffickers moving the product between the Andean region and the US, or with the mere 1 percent that stayed with Andean producers.[26] These statistics help us understand that drug traffickers in Mexico are accessing amounts of money that are, all told, relatively small. A similar division of profits in the narcotics trade exists worldwide. According to the Global Commission on Drug Policy, “drug prohibition has fueled a global illegal trade estimated by the UNODC to be in the hundreds of billions. According to 2005 data, production was valued at $13 billion, the wholesale industry priced at $94 billion and retail estimated to be worth $332 billion.”[27]

  Though it is the military aspect of the Mérida Initiative that gets the lion’s share of funding and media attention, it is worth examining policy aspects that constitute the first component of the Mérida Initiative. Of the $400 million the United States promised to spend on Mexico’s security, $73.5 million was devoted to funding judicial reform, institution building, and rule of law. The rule of law, judicial and institution building or policy component of the Mérida Initiative is of crucial importance. It brings together security and economy in what is perhaps one of the greatest innovations of Plan Colombia: the militarization of aid and the steering of anti-drug money toward fostering the creation of more welcoming investment policies and legal regulations. Though not often talked about in the context of the drug war, these policy changes often have little or nothing to do with illicit substances and everything to do with the transformation of the business environment.

  The policy part of the Mérida Initiative is carried out and coordinated by USAID, with participation by the Department of Justice, the Department of Homeland Security, the Department of Defense, the State Department, and the Office of National Drug Control Policy.[28] USAID’s general focus is on “furthering America’s foreign policy interests in expanding democracy and free markets while also extending a helping hand to people struggling to make a better life, recover from a disaster or striving to live in a free and democratic country.”[29] The agency, together with the US State Department, requested nearly $50 billion from the federal government in 2014.[30] “U.S. policy toward the Western Hemisphere seeks to seize and expand opportunities for inclusive economic growth, transforming the region’s emerging middle class into dynamic new markets for U.S. exports and creating jobs at home,” according to the US State Department.[31] The US government plans to spend about $205.5 million in Mexico in 2014, a significant reduction from the previous year, but still the third highest amount in the hemisphere, after Colombia at $323 million and Haiti at $300 million (together these three countries make up over half of total US government spending in the Western Hemisphere).[32]

  After seven years of destabilization and terror linked to the drug war, Mexico is undergoing a series of reforms and signing on to new agreements that deepen the North American Free Trade Agreement, which took effect in 1994. As the Mérida Initiative continued into 2014, the US government proposed to use it increasingly to focus on political and legislative reforms that are under way. “In Mexico, Mérida Initiative assistance will continue to transition to increased capacity-building activities geared towards strengthening Mexican institutional reforms, rule of law, and violence prevention in partnership with the Peña Nieto administration.”[33] There’s no shortage of ways for the US to get involved in policy changes in Mexico, as there has been a slate of reforms since Peña Nieto was elected in July of 2012, including energy reform, financial reform, tax reform, labor reform, political reform, education reform, and telecommunications reform. “If all of this unfolds successfully, Peña Nieto will have moved Mexico forward more than anyone since NAFTA was passed, putting Mexico on the path to economic and democratic modernity,” James R. Jones, co-chair of Manatt Jones Global Strategies, told journalist Eva Hershaw in late 2013.[34]

  In addition to the reforms, Mexico is party to the Trans-Pacific Partnership, a secretive trade agreement between twelve nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. According to the Office of the US Trade Representative, “This agreement will advance U.S. economic interests with some of the fastest-growing economies in the world; expand U.S. exports, which are critical to the creation and retention of jobs in the United States; and serve as a potential platform for economic integration across the Asia-Pacific region.”

  The US and Mexican economies are deeply linked, and the robustness and protection of both countries’ economies is an oft-cited justification for the drug war. According to Strategic Forum, a US m
ilitary journal, “In recent years, almost 85 percent of Mexico’s exports have gone to the United States, making Mexican economic success dependent on the balance between trade and security. U.S. economic success is also dependent on this balance. Continued prosperity depends on reliable homeland defense and security, which can only be achieved through greater coordination and information sharing among military partners as well as the law enforcement and interagency community. President Calderón promised to improve security, thereby enhancing prosperity for the Mexican people.”[35] Though at the beginning of his term Peña Nieto made links between violence and economic growth, it is an increasingly rare refrain for high-level politicians in Mexico and the United States, who are attempting to shift the discourse toward the purely economic. “Preventing violence and promoting economic and social development are part of a vicious cycle,” President Enrique Peña Nieto told Time magazine after his election. “Without better economic opportunity you can’t have better public security, and vice versa.”[36]

  Not all of the policy reform work is taking place using Mérida Initiative funds. Nonetheless there is coordination between Mérida programs and USAID’s competitiveness programs, which aim to create a policy environment that is more favorable to transnational capital.[37] One of USAID’s program goals is to see that the “Government of Mexico becomes more effective in curbing monopolies and eliminating anticompetitive practices.”[38] According to a call for proposals issued in January 2012, “USAID is working with Mexican partners to improve economic governance and increase private sector competitiveness.”[39] The agency’s focus is on advocating for a new regulatory regime and additional privatization, efficiency, and foreign direct investment in the transportation, financial, energy, and telecommunications sectors.[40] “USAID is supporting Mexican-led initiatives to improve the country’s competitiveness by working with Mexican federal, state, and local government entities, nongovernmental organizations, and the private sector to improve Mexico’s business-enabling environment and build sustainable support for continued policy reforms and systemic changes.”[41] USAID funds the Red Mexicana de Competencia y Regulación (Mexican Network on Competition and Regulation, RMCR) and the Centro de Investigación para el Desarrollo, A.C. (Center for Research for Development, CIDAC), whose policy proposals for Mexico’s economy look like they are drawn directly from a US State Department wish list.[42] CIDAC promotes the advantages of increased foreign direct investment and more aggressive privatization programs. In addition, USAID subcontracts work to private firms, which are tasked with carrying out various programs designed to improve the investment climate in Mexico. This is significant because many of the firms subcontracted by USAID are military contractors who have participated in reconstruction efforts in post-war zones. These firms are the same ones that were tasked with helping implement reforms once the US and its allies invaded and occupied Iraq. In Mexico, the destruction isn’t wrought by US bomb attacks, but nevertheless the country has been deeply damaged by the drug war. Here, reconstruction and reforms are implemented alongside ongoing terror and violence.

  In 2009 USAID awarded Abt Associates $17.8 million to carry out the Mexico Competitiveness Program, which is made up of four parts: building sustainable environmental governance, increasing private sector competitiveness, making precursor markets more competitive, and increasing investment in and use of clean energy.[43] Abt subcontracted out the private sector competitiveness section of the program to Casals & Associates. According to Casals & Associates, this segment of the program has the following goals:

  • Increasing government transparency and accountability

  • Promoting competition within government through policy reforms and regulatory changes

  • Improving government communication

  • Promoting nongovernmental organization networks and public-private partnerships to strengthen the role of civil society [44]

  Casals & Associates and Abt Associates both have direct ties to the US military; Casals & Associates belongs to DynCorp, a defense contractor that, according to its website, has “recruited, trained, and deployed more than 6,000 highly-qualified civilian peacekeepers and police trainers to 11 countries, including Haiti, Bosnia, Afghanistan, and Iraq, for the Department of State,” while Abt got its start “transferring defense-related technology and systems to civilian application.”[45]

  Both of these military-linked corporations are today at work in Mexico promoting policy reforms designed to improve the experience for transnational corporations and investors seeking to do business in Mexico. Their programs are unfolding at the same time as the country undergoes militarization and paramilitarization because of the drug war.

  Another USAID-funded program in Mexico is being carried out by Evensen Dodge International, a global capital markets firm that helps Mexican states raise money by arranging for the issuance of bonds and loans that make resources available to invest in public private partnerships.[46] According to the US State Department, “Evensen Dodge International, a financial company, is working with U.S. Embassy Mexico and the Government of Mexico to carry out reforms to the legal framework of pension funds at the federal level. [Fernando J. Gama of Evensen Dodge] said that these reforms are enabling Mexican states to finance renewable energy systems.”[47] If there is any doubt about the benevolence of USAID and foreign assistance programs, it was quelled in 2001 by US Secretary of State Colin Powell, when, in a rare admission, he spoke to the true role of US development aid: “Just as surely as our diplomats and military, American NGOs are out there serving and sacrificing on the front lines of freedom.… [NGOs] are such a force multiplier for us, such an important part of our combat team.”[48]

  Peña Nieto’s Reforms?

  Days before President Enrique Peña Nieto’s inauguration, the New York Times reported that “he has promised to rewrite the tax laws, open the state-owned oil sector to private investment and rein in Mexico’s powerful monopolies.”[49] Peña Nieto’s promises align almost perfectly with USAID-coordinated economic and financial proposals for Mexico.

  Before assuming office, Peña Nieto’s PRI party joined with Calderón’s PAN to pass a labor reform law that introduced hourly wages (about 70¢ per hour) instead of daily minimums, and lessened the legal requirements on corporate contributions to the social security program. This strike against the already precarious Mexican working class was Calderón’s parting shot and helped usher in a new era of reforms under the PRI. When he took office on December 1, 2012, Peña Nieto launched the “Pact for Mexico,” a coalition of the country’s three largest political parties that has introduced education, financial, tax, political, and energy reforms.[50] By and large, the reforms being implemented in Mexico are based on the model of austerity and structural adjustment. The promotion of structural reforms in Mexico is enshrined in the Mérida Initiative and provides a crucial example of how drug war capitalism works to transform national economies to benefit the corporate sector.

  In early 2014, I visited Alejandro Hope at his office in Polanco, one of Mexico City’s swankiest suburbs. He’s an analyst who has worked with a variety of Mexican and US think tanks—including the Mexican Institute for Competitiveness (IMCO) and the Wilson Center—and I asked him what he thought of Peña Nieto’s first year. “There’s a lot of wishful thinking and propaganda. Peña Nieto’s first year was not a good one,” he said. Hope pointed out that the education reform, the telecommunications reform, and the political reform are still only partially realized, stalled at the level of implementation and state acceptance. “If the energy reform hadn’t have been passed in mid-December, Peña Nieto’s first year would have been declared a failure.”

  Regardless, it’s worth a look at some of the reform initiatives that have been pushed through under Peña Nieto’s leadership. On December 11, 2012, ten days after he took power, the Mexican government changed two articles of the constitution, resulting in what they said was an education reform. “What was approved isn’t an education re
form, rather a labor and administrative reform in disguise,” wrote columnist Luis Hernández Navarro in La Jornada.[51] Hernández maintains the legislation opens the pathway to the privatization of the education system. The changes introduce standardized testing and increased labor precarity for Mexican teachers, and require English classes for Mexican students. The reform was heavily contested; two months of marches and blockades by teachers, especially Indigenous teachers from impoverished rural areas in the southern states of Oaxaca and Chiapas, showed street-level resistance against it. Tents were erected, and a protest camp, which lasted for months at the Monument to the Revolution in Mexico City, was built. For months, teachers refused to return to classes until their demands—for multilingual education (Spanish and Indigenous languages, not English) and no standardized testing—were met.