Crime Costly for Mexico’s Businesses and Economy

This article was recently posted in the Latina American Herald Tribune, following a number of other articles regarding how drug violence has affected doing business in Mexico for American companies.

 The wave of drug-related crime and violence in northern Mexico has affected key sectors of the economy and cut the gross domestic product by 1 percent, industrial security expert Alejandro Desfassiaux told Efe.
Crime is “the biggest risk factor that could limit economic activity in coming months,” Desfassiaux, who is president of the National Private Security Council, said.
The council is a trade group that represents about 200 security firms in Mexico. About 27 percent of businessmen are reconsidering their investments in Mexico, according to the latest survey conducted by the council, while 16 percent have suspended investing and 8 percent are considering shifting investment to other countries.
Some 88 percent of businessmen agree that the crime problem should be dealt with immediately, Desfassiaux, who is also head of security firm Grupo Multisistemas de Seguridad, said. Many businessmen have limited their trips to Mexico in response to the rising violence, the security expert said.
“Crime is affecting the economic performances of Chihuahua, Guerrero, Jalisco, Nuevo Leon and Tamaulipas (states), where murders related to drug trafficking have risen threefold to 18-fold,” Desfassiaux said.
The states most affected by job losses and business closings due to crime are Tamaulipas, Nuevo Leon, Chihuahua, Baja California, Baja California Sur and Sinaloa, all located in northern Mexico, the security expert said.
Only 23 companies opened in 2010, while 3,000 had opened in 2007, and many firms based in northern Mexico moved to other parts of the country, are being managed from abroad or reduced operations because of the drug-related violence, which has claimed the lives of nearly 40,000 people since 2006, Desfassiaux said.
Between 80 and 100 real estate firms closed in the border region, while in Monterrey, the capital of Nuevo Leon, the surging crime and violence “killed” medical tourism, which had been drawing from 60 to 70 foreign patients a month to the industrial city for surgical procedures of all kinds, Desfassiaux said.

“80-100 real estate firms have closed.” So far we have seen few offices close, but then we have seen very little of the violence these regions are experiencing (although you’d think differently from what the mainstream media is portraying). It IS bad in Monterrey, this is a place that has been severely affected by a major turf war taking place within the city limits.

Visits “have been reduced, on average, to one every three months,” Desfassiaux said, adding that tourism in the border region was down 10 percent. Nightlife in the border region has been reduced drastically, the security expert said.
“Patrons prefer to stay home, leading to the closings of 36 percent of restaurants and of 53 percent of nightclubs and bars,” Desfassiaux said.
The assembly plants, or “maquiladoras,” that dot the border region have also seen production fall, prompting management to try to cut costs to prevent the shifting of operations to other countries, the security expert said. Sales at shops and department stores have dropped by about 10 percent, Desfassiaux said.
“In 2010, output grew 5.5 percent in the entire country, the highest level since 2000, but the perception of crime does not just affect some sectors and the northern border, it affects the whole country,” Desfassiaux said.
Construction companies and real estate developers reduced investment in Mexico by 240 billion pesos (about $20.5 billion) last year due to the wave of violence, the security expert said.

Well, not solely because of violence. I’m sure the economic world crisis hasn’t helped any. But that’s a huge number. In Vallarta, we saw 50 new real estate projects start up in 2007, adding thousands of new condos to the market, whereas this year there were nine new products and most of these were quite small.

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2 Responses to Crime Costly for Mexico’s Businesses and Economy

  1. Brock Squire says:

    Hi John

    Our good freind Nick Coates just sent this to me that I think is very credible and very interesting…

    Puerto Vallarta, Mexico´s second beach vacation destination is an annual vacation destination for millions of visitors from around the world. Thomas Dale & Associates (TDA), is a leading global investigative and security firm that lists several Fortune 100 companies amongst its clients.
    The international security company visited the destination between April 6 to April 13 to conduct interviews and a through security and safety risk assessment on the ground. It has now published a comprehensive report in relation to all aspects of tourist security in the destination. In it, the firm concludes that Puerto Vallarta is one of the safest tourist destinations for international and national tourists.
    TDA individually interviewed domestic as well as international tourists, American and Canadian Consuls, retired ex-pats, time-share members, part-time residents, seasonal boaters, business owners, hospital administrators, gay community business representatives, health insurance professionals, cabbies, conventioneers, and honeymooners. The interviews were followed up by requests to local law enforcement sources for crime data and department deployment. The Civil Protection Department (FIMA) was also consulted regarding natural disasters.
    The interviews focused on the following three areas; safety in Puerto Vallarta and the perception of its visitors; personal experiences and the US Travel Warning on Mexico.
    The study found that the number of negative events involving foreigners or non-foreigners is fractional compared to the large ex-pat resident population and the millions of visitors that come to vacation each year in Puerto Vallarta. Overall the study found that visitors to the destination feel safe and continue to visit Puerto Vallarta numerous times through their lifetime and that the destination’s support services are well above the average standards and dedicated to serving the visiting public. In relations to the drug wars, TDA found that the limited land transit makes the smuggling of guns and drugs through Puerto Vallarta very difficult and thus a non-issue in the destination.

  2. johnlifestyles says:

    Yeah, I got it as well. I’ve been trying to substantiate it, find a link for more information regarding this, but I can’t find anything. Nick hasn’t replied yet as to where he got the information. If you know more, Please let me know…

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