Mexico Country Risk Report

Political

RISK LEVEL: LOW

Mexico is a functioning democracy. It has a federal presidential representative democratic republic based on a congressional system, whereby the President of is both head of state and head of government. The federal government is divided into three branches: executive, legislative and judicial. Suffrage is universal, free, and secret for all Mexican citizens over the age of 18. However, while elections are free and fair, the Mexican government does experience a high level of corruption and infiltration of those working in the interests of drug cartels and criminal gangs.

Following the national elections held in 2018, and after his third bid for the presidency, left-wing president Andres Manuel Lopez Obrador (AMLO) came to power on 1 December 2018. He will serve a six-year term, governing as the head of the National Regeneration Movement (MORENA) party coalition. AMLO holds enough seats in both houses in Congress to approve legislation without requiring negotiations with the opposition. This allows the MORENA coalition to pass or modify legislation, however support of smaller parties is required for significant constitutional reforms. AMLO’s chief pledge when voted into power was to eradicate corruption, a commitment that earned him a commanding 53% of the popular vote. He is likely to revise contracts awarded by the previous administration on grounds of corruption.

The widespread nature of drug cartel activity and the resultant capital it produces, an estimated $40 billion a year, has allowed bribery within governmental institutions to become rife in Mexico. Those believed to be involved in corruption and criminal activity include mayors, governors, and top federal law enforcement officials. Previous attempts to prosecute officials for alleged corruption have often failed due to the weakness of cases. AMLO has promised he will eradicate corruption through a “Fourth Transformation” of Mexico. However, the President has been criticised for his choice not to prosecute past corruption offences that took place before he was elected to office. Under increasing pressure from Mexican citizens, it is expected AMLO may reconsider this stance in relation to certain cases. The President has implemented other programmes to help tackle Mexico’s socioeconomic issues, introducing training programmes for unemployed youths, and launching a universal pension scheme. AMLO is the country’s first leftist President, with a history of introducing social-welfare driven policies as the mayor of Mexico City. A similar theme is expected in his approach to governing the country. As AMLO is only five months into his six-year term, many of his progressive socioeconomic and anti-corruption driven policies remain to be seen.

As can be expected, another key concern for the President and his governing party is the matter of improving economic stability in the country. Analysts have stated that AMLO must tread a fine line between keeping markets happy and pursuing liberal policies. In his election campaign, he set out an ambitious target for an annual GDP growth of four per cent. In order to achieve this, AMLO must ensure corporations and investors remain allied with the government. This may be a challenge, as the President will also be expected to work to tackle corporate corruption, thus risking making unpopular market decisions. AMLO has announced plans to invest heavily in public services and lowering taxes in order to stimulate growth, the economic implications of such reforms will develop in due course. In the business sector, there is an elite network of businesspeople who oversee monopolies over key areas, aided by corrupt government insiders. Along with the issue of cartel-related crime and corruption, the contention of anti-corruption within politics and business will therefore present one of AMLO’s biggest legislative challenges in ruling the country.

Internationally, Mexico enjoys a positive relationship with its neighbouring countries of Belize, Guatemala, and the US. The country advocates foreign investment, co-operation, and trade; therefore military conflict is unlikely. The country is heavily dependent on the US, with over 80 per cent of its exports being sent north of the border. The United States-Mexico-Canada Agreement (USMCA), signed by US President Donald Trump, Canadian prime Minister Justin Trudeau, and previous Mexican President, Enrique Peña Nieto is currently awaiting ratification to replace the 1994 North American Free Trade Agreement (NAFTA). The new agreement would govern $1.2trillion in annual trade, however there is a possibility of the deal being delayed if the US refuses to scrap steel and aluminium tariff imposed on Mexico.

The pressing political issue of immigration between Mexico and the US is currently a pertinent subject. Public declarations suggest AMLO’s approach to immigration will be largely consistent with his predecessors. He has vowed to pursue a more humanitarian-based approach to the immigration of Central Americans, however possible backlash from the US could prompt the implementation of more conventional immigration policy. There has been criticism over AMLO’s changing approach to immigrants, initially issuing temporary humanitarian visas, followed by an increase in immigrant detentions. Currently, AMLO is cooperating with Trump on the issue of immigration for pragmatic reasons; he wants to see an increase in the number of legal points of entry increased, and has assisted in attempting to prevent migrant caravans from reaching the Mexico-US border. Mexico’s first female ambassador to the United States, Martha Bárcena Coqui, an experienced diplomat, has encouraged cooperation between the two countries on the contentious issue of immigration.

The outcome of reforms and proposals presented by AMLO will remain to be seen in the coming months and years. Reports suggest the president currently enjoys an 86 per cent approval rating, however he faces significant obstacles, such as anti-crime and corruption measures, a struggle for economic stability, and wider international relations with neighbouring countries such as the US.

Operational

RISK LEVEL: MODERATE

Due to the ongoing issues regarding immigration at the US-Mexico border, people may experience delays and increased security when attempting to cross. The border is the most frequently crossed international boundary in the world, with 48 official crossing points and 330 ports of entry. Despite claims of a ‘crisis’ at the US-Mexico border with regards to violence perpetrated by migrants, those attempting to cross face no significant danger, especially when using the majority of official border crossing points. There is, however, an increased level of bureaucracy and security that can cause significant delays to the passage of personnel and goods.

Travel within Mexico is conducted primarily by road or air. There is an expansive network of intra-state highways, consisting of both free and toll roads. Travel via toll roads is considered the safest option. The public highways suffer higher levels of crimes, such as carjacking, kidnap, robbery, and road traffic collisions. Illegal roadblocks have been reported with increased frequency, therefore travellers are advised to remain vigilant, and cooperate if they do encounter roadblocks. Domestic flights are considered a relatively safe and quick option to travel within Mexico. There is also a national bus network that operates throughout the country, however passengers can be targets for theft. The country does not currently have a functioning public rail system. Those who choose to travel in Mexico are advised to keep their valuables safe and only travel in licensed, pre-booked taxis, and keep to government-run toll roads where possible.

Companies and individuals wishing to conduct business in Mexico are likely to face operational challenges when dealing with state and municipal governments. As previously mentioned, corruption is rife and financial bribery and demands are a common occurrence. Firms dealing with financially-troubled corporations and states face non-payment risks. Caution should be exercised when conducting business with possible links to criminal gangs. The US Treasury Department estimates that the largest criminal organisation in Mexico, the Sinaloa Cartel, has direct links to at least 95 businesses throughout Mexico, 14 of which connected to state-owned entities. It is likely other dominant cartels also have expansive business links.
Protests can occur frequently throughout the country, however they are more concentrated in the capital Mexico City. Protests are, however, also increasingly likely to affect private companies and supply chains with interests in the manufacturing belt along the country’s northern border region. The cause of protests can vary depending on location; they can include trade union disputes, local community unrest, and public-sector workers. Tactics employed by protestors may include the blocking of public roads, disruption of public transport or cargo, and blockading commercial sites and airports. Government advice is to avoid demonstrations and follow the advice of local authorities if you are in an affected area.

The Centre for Disease Control and Prevention advise that any persons travelling to Mexico should be up to date with routine vaccinations, especially those for Hepatitis A, Typhoid, and Malaria. More recently, there have been reports of a risk of Zika virus transmission. Other possible diseases in the country include Dengue Fever and Rabies. Travellers should remain cautious when eating and drinking, avoid mosquito bites, and reduce exposure to germs. Drinking tap water in Mexico is not recommended. Mexico provides free healthcare to its citizens, with a satisfactory level of care and hygiene. Travellers without insurance should expect to pay “out of pocket” if they require medical assistance, taking out medical insurance prior to your trip is recommended.

Geologically, Mexico is highly exposed to many natural hazards. Over 40 per cent of the country’s territory is exposed to earthquakes, volcanic eruptions, hurricanes, and floods. Mexico City has suffered several devastating earthquakes in recent years, often made worse by the density and poor construction of the infrastructure in the city. The country is at a significant risk of hurricanes and tropical storms, with both its Pacific and Atlantic coasts being struck by several storms every year. The hurricane season typically runs from June to November.

Security

RISK LEVEL: MODERATE to HIGH

Mexico suffers from substantial ongoing security issues, often displayed through high levels of violence and prevalent endemic corruption. A key factor in the unpredictable security environment Is the presence of drug cartels within the country. Since 2007, the Mexican government has led a heightened crackdown on drug-trafficking organisations, deploying military personnel, an approach that is likely to continue for the foreseeable future. Cartels have broadened their scope into other illegal activities such as fuel theft, cargo theft, and people trafficking. The aforementioned presence of corruption and bribery within government and local judicial authorities has enabled criminal gangs to survive. Other possible low-level crimes to be aware of include express kidnapping, card theft and cloning, and petty theft in public areas.

The presence of cartels and other organised crime gangs poses a threat to the safety of individuals throughout Mexico. However, it is advised that cartel activity is pronounced in states including Tamaulipas, Veracruz, Guerrero, Sinaloa, Michoacán, and Colima. The US and Canadian governments also generally advise to avoid Chihuahua, Coahuila, Jalisco, Nuevo León, and Sonora, unless travel is an operational necessity. The intensity of conflict between the gangs varies by region and often shift geographically, therefore it is important to seek advice on where is safe to travel.

The cartels and organised crime syndicates across the country operate according to hierarchy and territory. Those in charge govern over “plazas” or geographical areas, running “cells” who act as enforcers and engage in a variety of illegal activities. Cells operate lower level drug, arms and human trafficking. Members also extort, kidnap, and murder possible opposition or family members of those involved in the drug trade. Recent figures released show that the first three months of 2019 have seen a 9.6 per cent increase in murders from the same period in 2018. The figures are particularly concerning as 2018 was the highest murder rate since Mexico began keeping records of homicides. It is of note that crimes are still widely believed to be under-reported by victims and their families. It is understood the increase of violent conflict is a result of the fracturing of cartels and disputes over drug-trafficking routes; such as those in Baja California, disputed by the Jalisco and Sinaloa cartels. The scale of conflict is significant as there could be as many as 100,000 members involved in the drug-trafficking industry, with profits from US exportations estimated at between $19 billion and $29 billion annually. The drug-trafficking business and the governmental corruption that has allowed it to exist is pervasive within the country; because of this many Mexican and foreign businesses have chosen to hire private security.

However, most individuals are not in direct danger of cartel-related violence. There is a risk of being caught in the crossfire or of becoming a victim of gang-related crimes such as theft, however targets of the main cartels are typically involved in the industry, or family members of someone known to the cartels. Individuals may be more at risk of petty crimes in specific areas, such as densely populated municipalities like Mexico City. The crime of express kidnapping appears to be on the increase; holding a person in order to extort money, often through the use of credit and debit cards at ATMs. Credit card “skimming” by bank or shop employees is also a threat. Individuals are advised to use bank branches during business hours and pay attention to any suspicious activity shown in bank statements. The use of inside ATMs is also recommended. Tourists are advised to conceal valuables and exercise caution when paying for items or withdrawing cash. Moped riders often target those carrying bags or mobile phones.

Despite experiencing significant security issues, largely due to the widespread cartel activity, Mexico received over 10.6 million tourists in the first quarter of 2018. Popular areas for visitors include Cancun, Mexico City, Oaxaca, and Los Cabos. Tourist areas and resorts are relatively safe for visitors, although travellers are discouraged from using street taxis and to stay close to resort areas where security is in operation.

Terrorism

RISK LEVEL: LOW

The risk of traditional and ideologically-driven terrorism is low in Mexico. Methods employed by criminal gangs and drug cartels appear synonymous with those of extremist groups, however do not share the same motivations. Practices used by drug cartels such as kidnap, torture, bombings, and beheadings are used as revenge and scare tactics to assert power and authority. Nevertheless, there are suggestions that criminal organisations are generally increasing their ties to terrorist organisations. The issue of terrorism in Mexico is not recognised by the government as a principal threat, however the possibility of a coordinated attack cannot be discounted completely.