Political, Drug-Related Assassination in Mexico: Another Gunshot to Mexican Economic Growth

July 6th, 2010

Photograph by Will's Online World Paper Money Gallery

On June 28th, only six days before the election for governor of the Mexican state of Tamaulipas, favored candidate Rodolfo Torre, was shot and killed by masked gunmen.  Torre was a member of the Institutional Revolutionary Party (PRI) whose main message commanded a fight against Mexico’s crippling drug activity. Drug-related violence and corruption continue to stifle efforts at economic and political stability and development in the country.

Mexico’s largest economic challenges are primarily reducing poverty and creating jobs, both of which are extremely hard to tackle with continued political violence and little trust by investors in the stability of Mexican markets.

According to the US Department of State 2010 International Narcotics Control Strategy Report, Mexico is a major source of and a transit country for drugs entering the U.S. Approximately 90 percent of the cocaine that enters the US market is trafficked through Mexico. Clearly, the drug-related violence in Mexico is not only a problem for the country’s own political stability and economic development, but also a threat to U.S. security.

GFI estimates that, on average, up to US$ 46 billion leaves Mexico in illicit flows per year. Mexico receives an average of US$ 161 million per year in Official Development Assistance – foreign aid – from the rest of the world. That’s more than 285 times the amount of foreign to the country that is illegally leaving through black market and other corrupt methods.

As the world continues to funnel money to Mexico in efforts to promote economic growth and build the institutions and security measures that the country needs to maintain governance, vicious drug-trafficking organizations are doing everything in their power to seize and maintain control of the black market and even “legitimate” political positions in the country. The assassination of Rodolfo Torre is highly suspected to be tied to Los Zetas, the most dangerous cartel in Mexico that is also fighting for control of the state of Tamaulipas. This was not an isolated incident: just one month earlier Diego, “El Jefe” Fernandez, a 1994 presidential candidate in Mexico, was kidnapped from his ranch in Querétaro, and his ransom is supposedly still being negotiated.

According to a recent article in the Economist, the brutal murder of Rodolfo Torre contributed to a weakening of the peso that same day, which closed 0.46% down at 12.71 to the US dollar.

The inverse relationship between corruption and violence in a country and that country’s ability to climb out of poverty and disorder is demonstrated consistently. As corruption goes up, sustainable growth and security of the State goes down. The monetary incentives to be corrupt are strong. Curbing illicit financial flows through transparency and multi-lateral international policies is a tangible affront to such violence and corruption.

Written by Karly Curcio

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