Violence, Governance, and Economic Development at the US-Mexico

“Violence, Governance, and Economic Development at the US-Mexico Border: The Case of Nuevo Laredo and its Lessons” Paper to be Presented at the Puentes Consortium’s 2nd Annual Symposium on US-Mexico Border Security February 2011 Freddy Mariñez Leonardo Vivas Escuela de Graduados en Carr Center for Human Rights Policy Administracion y Politicas Publicas Harvard Kennedy School Instituto Tecnologico de Monterrey Contents Introduction Comparative Advantage of Nuevo Laredo as a Border City Shape and Strength of Drug Traffic Organizations (DTOs): The Mexican Logic The Growing Influence of DTOs in Nuevo Laredo Like Santa Claus, Violence always shows up Sister Cities and its Impact on NL’s Elite The “Big Push” to Modernize Local Institutions Conclusions Annexes The Michael Porter “Diamond” Model Maps Tables Figures Graphs References 2 Introduction 1 This chapter is an attempt to make sense of the impacts and responses to the current war on drugs in Nuevo Laredo, a border city with the U.S. that has been on and off at the center of the mayhem of violence confronting Mexico during the last decade. Most analyses about the narcotics wars in Mexico tend to center either on the business logic of the narcotics traffic– and its corollary: the best security strategies to deal with it 2–or in the daily narrative of the violence and its deadly body count3, usually provided by journalists with enough guts to bear directly with the human tragedies it causes. Our angle is different. We look at the impacts the Drug Trafficking Organizations (DTOs) have had in Nuevo Laredo as well as the prospects for recovery in a city that, like many others in Mexico has fallen under a nefarious spell, but that for decades has been consistently building for the future. As with any other type of business, narcotics production and distribution take place in specific geographical and human locations. Though drug trafficking in Nuevo Laredo has always been part of its economic and social landscape, until only recently the role narcotics played was relatively marginal in a city whose people have mainly devoted their lives to the different facets of international trade to 1 Many thanks and appreciation for three great partners: Mary Hilderbrandt, Executive Director of the Mexico Program at the Harvard Kennedy School. Mary has provided ample support to complete a broader research on ho Meia order ities are respodig to the ipats of the ar o drugs. José Gerardo Pepe Rodríguez Herrera from Universidad Autónoma de Tamaulipas granted one of the authors guidance in the meanders of Nueo Laredos life, logisti support ad otats ithout hih ost proal the stud ould hae eer taken place. Finally Federico Schaffler from the local municipality graciously handled a tight agenda and maximized contacts with very busy people. Thanks to Sylvia Longmire, who reviewed the first draft, as well as two anonymous reviewers from the organizers. 2 See for instance John Baylor and Roy Godson, Organized Crime & Democratic Governability, Mexico and the U.S.—Mexican Borderline Pittsurgh, Uiersit of Pittsurgh Press, , or Roert J. Buker, Strategi threat: aros ad arotis oerie, Small Wars & Insurgencies, Volume 21, Issue 1 March 2010 , pages 8 – 29. Also specialized consulting organizations have devoted extensive research efforts to analyze the changes in the narcotics industry and traffic in Mexico on more global terms. See Stratfor, http://web.stratfor.com/images/writers/MEXICAN_DRUG_CARTELS_UPDATE.pdf?fn=9616243265. Checked on January 2, 2011. 3 Perhaps the best example is the Frotera List, a follow up Google Group composed by a long list of journalists, scholars, and others about violence in Mexico. 3 nurture and derive advantages from their location at a strategic point in the border with the U.S. The chapter is intended as an exploration of the assets and specific circumstances – both negative and positive– the city and its leaders have at their disposal to overcome the narcotics spell once (and if, a huge if) the influence of the narcotics is bound to diminish. In this sense, it draws from different perspectives. One is a particular understanding of local competitiveness by tackling both economic and noneconomic factors. In this regard we explore the nature of the economic advantages, such as location and specialization but also the role of the local elite in providing leadership or the importance of sharing a common destiny with Laredo, its sister city across the border. If we were to define it in broad terms we could call it an exploration into the political economy of competitiveness in a border city. Sections one and four of the paper argue in that direction. A second angle examines the specifics of both drug trafficking organizations (DTOs) involved in Nuevo Laredo and their impact on the city’s life over the last 10 to 15 years. We explore those aspects of the Mexican and the local context in three sections that allow us to understand the kind of impacts NL has been subject to, especially after President Calderón declared the current war on drugs. We shed some light on the structure of the narcotics business and its actors by looking at Colombia, in order to make sense of the overall rationale moving the narcotics business in that country and why circumstances have been different in Mexico. Though not intended as a systematic comparison, in the sense of considering a set of common factors, it seeks to understand the specific impacts the city has been experiencing with other examples in mind. In order to look at the narcotics industry both in Colombia and Mexico we draw on the “Competitiveness Diamond” developed by Michael Porter and used by many followers around the world to examine why some industries achieve sound growth 4 in particular locations and under a given set of circumstances. As a result of examining the main DTOs involved in Nuevo Laredo we end up arguing that, for reasons that will be explored in sections 2, 3, and 4, the main difference between Nuevo Laredo and other border cities in Mexico is the way how social capital has played out. It seems that in the city focus of our analysis the positive side of social capital has been stronger than the negative one. A third and final angle of examination looks into local government as an actor. As part of the broader process of democratization in Mexico in the last 10 years, a quiet and modest revolution has been taking place throughout the nation at the local level. For reasons that are explored in the last section of the paper, Nuevo Laredo seems to be living its own peaceful revolution in government. We argue that no matter how much political will power is displayed to make things happen, the shift in governance policies taking place in NL occur against the backdrop of the narcotics drama and as a direct response to it. To what extent it will prove successful is still a pending matter and we address that and other issues in the conclusions. A short digression on method and analysis is warranted at this point. When we argue about the exploratory nature of this research, what we imply is that no given set of hypothesis are subject to testing. It is neither strictly a historical account of the impacts of the narcotics in a border city nor it is a theoretical interpretation. Given the political economy complexities of a city under the stress of violence, it brings together data about performance, as well as the peculiar commercial ethos created by international trade and its influence over both elite and government. Last but not least, it looks into the specific actions and strategies by the local government regarding decentralization, at times when Mexico has been undergoing very important political changes. 5 The same holds true for the use of evidence. We use an array of evidence: historical, economic and sociological, as well as that deriving from 20 interviews made to a selected group of actors (businessmen and economic organizations, government and parastatal organizations, academic both in Nuevo Laredo and Laredo, the media, religious, civil society leaders, law enforcement officers, and politicians). All interviews were made under a confidentiality agreement; thus names are not provided. As a result of this methodological choice we believe that whatever may be lost in analytical rigor gains in richness of details, which serve the purpose of making sense of the prospects of a real city and its people in turbulent times. Comparative Advantage of Nuevo Laredo as Border City Nuevo Laredo (NL) is as typically a border city as it is atypical. It is typical in the sense that everything revolves around the activities taking place at the border. Its economy, its culture, and a very acute commercial ethos stem from the city’s direct involvement in the business of commercial border crossing. When examined through Latin American eyes, though, it does not fit the typical image of the border city. The visitor will not find the dirty streets, the piles of garbage everywhere, and the cloud of child beggars present in other border cities across the region. First impressions are not always accurate. But in NL this first impression seems to point to other important aspects that make the city rather special. In NL a strong sense of history combines with the awareness on the part of its economic and political elite that its location at a strategic crossroads into the US marks its life today and well into the future. The sense of history will be examined later, but the city’s location clearly remains its fundamental comparative advantage. To what extent NL’s elites have been able to translate those advantages into competitive ones remains to be seen.

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