Mexico's rocketing murder rate

Mexico's newspaper of record Reforma is the source for the numbers in this chart, though you may prefer this report on the same data as Reforma needs registration.

10,035 murders in the first 10 months of 2010, which compares to 2275 in Felipe Calderón's first year.

Mexfiles on form this morning

Absolutely Nuthin (say it again)

Hit this link to go see The Mex Files' excellent analysis of the recent Foreign Policy article that compares the economies and drug-related problems of Colombia and Mexico. So much neolib dross is bandied about regarding LatAm that it's hard to keep track of it all, but every now and again the crass and facile analyses from the very doctrine that causes, rather than solves, the problems in question needs to be spanked the way Mexfiles has spanked 'em. Here's an extract, but you really need to see the whole thing to appreciate RG's sharp brain at work here.

"Whistling in the dark — claiming that the “war on drugs” is not a factor in foreign investment — is plainly silly. It is. And, while that does make economic recovery all that much more difficult, ignoring the Administration’s creation of a crisis — and mishandling of it — while simultanously ignorning the clear signs of a problem with a one-market export economy — made the Foreign Policy article an exercise in ad hoc ergo propter hoc reasoning..."

CONTINUES HERE

You think sentiment is bad today?

Just wait til Thursday evening when Mexico announces its GDP has dropped by 10%. Think I'm joking? Just watch.

Interestingly, Pres Calderon wants to be best pally pals with Brazil and Lula now,with all channels reporting (eg AP):

SAO PAULO (AP) -- Mexican President Felipe Calderon says he supports the idea of a free trade agreement between Brazil and Mexico, the two biggest economies in Latin America.

Calderon says he's enthusiastic about the idea of a deal proposed by Brazilian business executives to push for a commercial accord for the two nations.

Calderon made the comments Saturday in Sao Paulo at the start of a three-day visit to Brazil. He will tour installations of Brazil's state-run oil company Sunday and is to meet Monday with Brazilian President Luiz Inacio Lula da Silva.

The Mexican leader says a free trade accord could help both nations because yada yada continues here

...because?....because, Bueller? Yes, that's right, because Mexico exports 88% of everything it exports to the USA (and I'd estimate the other 12% is beer and tequila to the UK). So widening its export base is a pretty neat idea, right? Therefore it's strange to note how Lopez-Obrador, the left wing candidate that Calderon defeated by a gnat's fart back in the election tussle, made a FTA with Brazil one of the main 50 points of his election manifesto as correctly pointed out by country authority The Mex Files.

Good to see intelligent people like Calderon admitting the error of their ways. Took him three years and a financial crisis but finally Mexico is getting the Socialism it voted for all along.

LatAm Presidential Popularity: Full Chart Rundown

We haven't done an update on this for a while, so as the new Mitofsky poll of polls for regional presidential approval ratings was published this week (here's the link to the Spanish language PDF) and we have the Summit of the Americas on the event horizon it's as good a time as any.

Here's the full table, all colour-coded for your dee lek tay shun. The base source for the ratings is the Mitofsky report, but I've also added the latest updates from Angus Reid Monitor (example, Bachelet's recent 62.1% polling from last weekend). Click the chart to expand it if necessary and feel free to swipe it for your own blog, website or whatever (but a h/t this time, please guys, yeah?):

click to enlarge

So now a few selected OttoComments:

• Lula: He is Yoda. The end.

• Uribe: It's high but it's also dropping. NastyBrutishAndShort was polling 80+% this time last year. It's the economy, stupid.

• Calderón: Must be really annoying Lopez "legit" Obrador by polling so well. He's been surprisingly likeable in his first two-and-a-bit years, in fact. An example of the 'art of the possible' definition of politics.
  

• Chávez: Amazing how the Venezuelan majority opinion gets lost in translation via the English media, innit? Media bias is one thing, but ignoring the views of almost 2/3rds of Venezuelans is nothing short of disgraceful.
  

• Bachelet: Probably the best recent performance. Michelle was in the low 40s this time last year. Chileans are going to miss this quality head of state when her time is up at end 2009. We like Michelle, yay!
  

• Correa: Studmuffin wins April 26th. Nuff said.

• Lugo: Very likely to drop in the near future, all things considered.

• Morales: Steady as she goes, he always polls high 50s.

• Ortega: Low at 38% but was a lot lower. Notable that when this ratface STFUs and gets on with the job in hand he gets better numbers. The world would still be better off without him, though.

• García: The man least likely to go on hunger strike in THE WHOLE WORLD. Amazing how outsiders think Twobreakfasts is doing a good job in Peru. The man is a disaster.

• Klishtina: Ugh. She deserves less and is going to get hammered at the polls in June.

Mexico confuses me

Call me slow if you like, but how can a country that

• has a currency like this
• 

• that ran a U$16.8Bn trade deficit in 2008

• that has an economy set to drop by 5% this year according to Morgan Stanley

• and that according to this Bloomie report, is about to accept thirty to forty billion dollars in bailout cash from the IMF

How can it still be classed as "investment grade"? Can somebody please explain this one to me?

UBS continues to call Mexico well

UBS delivers the real enchilada

Find linked here a UBS report dated March 25th (today) that includes the company's call on Mexico and the transcript of a very interesting conference call between four Mexico sector experts (namely UBS Mexico economist Gabriel Casillas, Latin America FX strategist Marcos Mollica, Latin America fixed income strategist Alvaro Vivanco and Mexico equity strategist Tomas Lajous). Here's an excerpt from the report to whet your appetite. It's well worth reading the rest, so use that link.

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The main conclusions (of the conference call debate) are as follows: First, this will almost certainly continue to be a very weak year for Mexican growth, although we do look for stabilization by end-year and recovery in 2010. On the other hand, despite fears of widening current account deficit and external corporate debt, the Mexican foreign financing position actually looks well-supported – and this in turn means that although we don’t expect a sharp recovery in the level of the peso, we also don’t see sharp depreciation risks from here. With the surprise 75 basis-point cut by the central bank last Friday we are no longer taking strong positions in the domestic rates market, preferring to focus on external bonds and CDS. And finally, while the equity market has already fallen to very inexpensive levels, in light of ongoing earnings risks we prefer to wait for more visibility before jumping back in to buy stocks.

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FWIW*, I think UBS has been calling Mexico really well recently and this paper just is more confirmation. There's no need to fall for all the 'failed state' idiocy propagated by those who want to see that wall finished (Fox News et al) but on the other hand the big exposure the country has to the USA (traditionally the market for 80% of all exports) means that there are real economy woes still in the pipeline, so no need to exposure yet.

*not much

Citigroup (C): Mexico moves the goalposts

And so Citigroup can likely keep Banamex, according to Mexican gov't politicos that have just earned themselves a "one large favour owed to me" card (and will surely know how to use it). Reuters translates the moneyline which is being used....

"The law does not cover emergencies derived from the global crisis"

.....which is, of course, a total affront to logic and commonsense. Y'see according to Mexican lawmakers the clear legal statute that does not allow any foreign government to hold more than 10% of a bank doing trade in Mexico suddenly doesn't count because......because....because the US gov't didn't WANT to buy 36% of Citigroup ....and that makes it different. Cos they said so. And that national laws go out the window and Mexican pants are dropped to US pressures isn't really news. After all, it's greedy human beings we're dealing with here so logic obviously has to take a back seat. I'll just shrug my shoulders and scrunch my brow a bit and go "waddya expect?".

Bloomberg does a good job of explaining the outcome of the Mexican mental and legal gymnastics that lawmakers have gone through to get to this point. Here's the link worth reading. The only thing lacking from both Reuters and Bloomie's reports are meaningful opposition quotes and positions. Bloomie has.......

"If it’s a proposal that helps, that doesn’t infringe against the sovereignty, the nationalism and the interests of Mexico, I say it should be approved. If it infringes, we’re going to dispute it.”

.......from an opposition PRD flunkey and Reuters hints at previous "pressure from nationalists", but the comments are low key. This is strange, because this story will create open season on a Felipe Calderon (allegedly) selling out la patria to the gringos. Lopez Obrador and company will milk this one for all it's worth; and it's worth a lot. Calderon gets the piñata treatment as of tomorrow morning.

Regarding Cocaine, The USA and Latin America

Stolen with no shame from The UK Guardian

After reading yesterday's Borev shredding of that Guardian fool Rory Carroll and his half-baked note on the cocaine trade, my thoughts returned to how the USA doesn't seem to be able to come to terms with the fact that it is a major, if not the major, piece in this whole puzzle (as that above map lifted from the Guardian report illustrates). Let's see now..... hmmmmm....U$1,700 a kilo in Colombia....hmmmm....U$30,000 a kilo in the States.... hmmmm...tellya something dudes, I'll wager you a full dollar that if Adam Smith were alive he'd be able to spot the demand motor straight away.

That the USA doesn't like hearing how it is the problem from Evo Morales is pretty obvious and even understandable (to a point). It certainly doesn't like hearing about it from Venezuela, even in the fine style that Coronel Reverol of the Venezuelan National Anti-Drugs Office quoted to the Washington Post last April:

"We're between the biggest producer of cocaine and the biggest consumer of cocaine, and we're the problem?"

But watch out, people! Nowadays there are "friendlier" voices calling the same tune, ones that will be more difficult to ignore in the weeks and months ahead. For example The Mex Files this week noted how President Felipe Calderon is quickly losing patience with his northern neighbour, along with normally conservative and establishment-loving bodies in Mexico such as the Catholic church (that packs serious political clout as well). In the words of Calderon:

"The main cause of the problems associated with organized crime is having the world's biggest (cocaine) consumer next to us"

So why can't the USA seem to see that which is blazingly obvious to the rest of us? That is to say, once the world's largest consumer of cocaine admits that it is part of the problem it can start to become part of a meaningful solution, not just some outside observer that thinks it can throw money at the problem and make it go away.

Then, bad scholar and slow on the uptake as I am, something occurred to me that must have occurred to thousands of people previously. The USA, being a cocaine addicted entity, is displaying the classic psychological symptoms of the addicted person. So to shed some light, here's a link to a nice, brief article called "Obstacles to Recovery From Addiction" by Dr. Floyd P. Garrett that seems to hit the nail on the head when it comes to the United States of America and its addiction to Colombian marching powder. Extracts here:

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The principal obstacles to recovery from any addiction are ignorance, shame, dishonesty, and personal exceptionalism..........

..........Simple ignorance of addiction and recovery, for example, is in theory easily remediable by exposure to accurate medical information on the topics – but the adjoining and interlinked "forts" of shame and dishonesty serve to limit the amount of understanding the addicted individual can acquire about his real condition. Similarly, the rectification of the dishonesty and evasiveness that is a central and necessary part of the psychology of addiction is rendered far more difficult by the co-existence of the addict's ignorance of addiction and his resulting shame about his addictive behavior........

...Personal exceptionalism makes it difficult for the addict to seek or accept help for his problems. Other people, people unlike himself, can and should receive help in overcoming their addictions – but he, precisely because of who he is, should neither need nor obtain such help. To do so would be a serious threat to his entire system of uniqueness.

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For me at least, that sums it up. We down here talk can logic and sense on the issue until blue in the face, but the US defence of ignorance will be held in place by shame (the USA knows what nationality owns the noses of the cocaine end-users) and will dishonestly evade facing up to its responsibility. As for that "personal exceptionalism", does that fit or does that fit?

So, ready to get mature on the subject?


UPDATE: The Mex Files has carried this baton further tonight. As you'd expect from RG, it's smart and insightful stuff. Here's the link.
.

Citigroup and Banamex: There's a fight brewing

The Mex Files has a post up that notes the Mexican angle to last week's news about Citigroup giving 36% of itself over to the US Government. RG starts his note by saying that it's a story you probably won't get to read North of the Rio Grande.

I beg to differ. I think it might become a very big story indeed.

The nub of the issue revolves around Mexican law, which states in crystalline manner that foreign governments cannot own more than 10% of any bank that operates inside Mexico. It's as clear as a bell and on the statute. So as Banamex is a wholly owned subsidiary of Citigroup (C paid $12.1Bn or so back in 2001 for the bank) if the US Gov't takes its 36% stake in Citigroup then it will be a larger-than-10% shareholder of Banamex, something against Mexican law. Won't it?

Well, maybe yes and maybe no. It was interesting that Citi's CEO, Vikram "still got a job" Pandit, spent two days down Mexico way earlier this month. He met with the bank honchos of course, but also gov't lackeys and the regulator dudes too, so we hear. He also made it very plain that Citigroup plans to hold on to Banamex, saying things like the Banamex is Citi and Citi is Banamex and may sacred matrimory reign etc etc. Pandit dixit Feb 20th 2009:

"I want to make it very clear: Citi and Banamex are one and the same......The future of Citi is in emerging markets. It’s in Latin America. It’s in Mexico with Banamex.”

So with last week's Citigroup/US Gov't announcement that already has Mexican officialdom and opposition politicos smelling blood, it's worth noting how Pandit recently split C into two parts, namely Citi Holdings (all the bad stuff) and Citicorp (all the retail banking things that are profitable and everyone likes, including Banamex).

So here's the question that's been itching at me all weekend: Do Citigroup's intentions regarding Banamex signal that the US Gov't is only (or majority) buying into Citi Holdings, the toxic end of C?

It's intriguing. It would be an über-underhand move concealed from the market so far and would cause uproar if the news hit. If it is true, then the US taxpayer is getting an even worse deal than s/he thought. In fact, it would likely make Uncle Sam the majority holder in the toxic bank to end all toxic banks. However it does fit the Citigroup line that says Banamex is safe and not in any legal trouble and will stay part of C.

However, if in all likelihood it's not true and the US gov't is getting 36% of the whole shebang, Citigroup is undoubtedly breaking Mexican law by holding onto ownership of Banamex. So either Mexico changes the law to suit present circumstances (possible, though it will be an absolute political field day for Calderon's opposition) or Banamex will have to be sold to a third party, something that Pandit clearly doesn't want to happen.

Already there are overtures being made by other banks, which isn't surprising because unlike its lamentable parent company Banamex is a well-managed and highly profitable bank. I'd go as far as to say that Banamex is quite the jewel in the Citigroup crown and as such a prized asset that would be a major loss for both C and Pandit. But sharks are circling all right. For example here's an AP report noting Brazil's Itau is interested in the asset.

The price tag being bandied around the market right now is something in the region of U$12Bn to US$15Bn, meaning that Citigroup would most probably walk away with its original investment money (not to mention the eight years of profits generated by the subsidiary). Let's see how the story develops, but you have to wonder if Banamex is the canary in Pandit's coalmine. After all the moves and sounds made by Pandit this month any eventual sale of Banamex might become the straw that breaks the camel's back* and sees him "being resigned".

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Appendix: A few stats about Banamex as culled from the C website. This gives you an idea as to why Pandit wants to keep a tight hold.

• 1,233 branches
• 28,759 employees
• 4,492 ATMs
• 7.9 million credit cards
• 2.6 million checking cccounts
• 20.52% of all assets in the Mexican banking system

But wait! There's more!

• Seguros Banamex (Insurance): 5th largest Mexican insurance company
• Afore Banamex (Pension Funds): Mexico's largest private pension fund with over 4 million affiliates
• Accival - Acciones y Valores de México (Brokerage House): Top Brokerage of the country holding 16% of assets

UPDATE Monday 1pm: Here's a great little quote in an e-mail just received from Mexican political expert and owner of The Mex Files blog, RG:

"Yesterday's Jornada quoted the Sec. of Treasury for the cabinet of "presidente legitimo¨ Andres Manuel Lopez Obrador (yup, he's still around) as pointing out that legally, this would allow Mexico to nationalize Banamex outright. Gonna be fun to watch."


* metaphor mixing is a sacred right of the blogger

New Update Post: Banamex, Itau and Citigroup: Rumours in the village

Exclusive: We Leak Calderon's TV Speech to Mexico tonight

Calderón: On the quiet, a talented dude

After using U$6.4Bn in international currency reserves to prop up the Mexican Peso today (and a total of U$12Bn over the week), Incakola can reveal that President Felipe Calderón will appear in a 10 minute TV address to the Nation tonight. And as a further revelation, IKN has gotten its grubby little hands on the tapescript of the speech Calderón uses to explain this drastic financial move to his electorate.

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"My fellow citizens. Today I, along with the directors of the Central Bank, decided to screw up the future for your children...NOOOO!!! I DIDN'T SAY THAT!! CUT! Start again...."

"My fellow citizens. Today the gringos up North begged us to sell our hard-earned reserves in order to save their fractured economic model ...DAMN!!! CAN'T SAY THAT!! Trying again...."

"My fellow citizens. Because we have been stupid enough to rely on the USA as destination for 85% of our exports....OHHHHHHHHH NOOOOOOOO......AGAIN.... AGAIN......"

"My fellow citizens. Today the Central Bank intervened in the foreign exchange markets and sold U$6.4Bn in international reserves in a very short space of time. I'm not going to explain why because economics and finance are very difficult subjects, and as most of you are peasants you wouldn't understand anyway. All you need to do is believe me when I, your elected President, say, "It's for the best". ¡Que Viva Mexico!

Ok, cut...I think we can go with that.....what?....this isn't a recording...................?"

Mexican Peso to US Dollar forex, five day chart