Latin America] A look at the crisis in the region - How are the neighbours doing?(3)

• MEXICO 

This was a very sick country long before it became internationally contagious, and it might now be a terminally ill country. I first used the term "failed state" some months ago, and it seems it was now taken up by some official US report. We are not alone (I would hate to be alone with the US government on the same side of any fence). The country's richest (and world's second richest) businessman, Carlos Slim (with whom I proudly share a Lebanese background) also declared recently that the situation was dire. As the USA is busy bombing wedding parties in Afghanistan, and condoning Israel for killing hundreds of children in Gaza, the Mother of all Crises is building up along its borders (Pace Saddam Hussein, wherever you are, you must be laughing your head off that the new Michael Jackson in the White House is also called Husain. For those who like to split heirs, it is the same name, with only the transliteration being different). 

One does not really know where to start. The economy shrank by 1 % in the last quarter of 2008, though the full-year figure was a modestly positive 1.5 %. Even official forecasts expect the economy to shrink by 1.8 % this year. In January, car output was 50.9 % down with exports plunging by 56.9 %. Official unemployment is at an 8-yearhigh. Job losses in December alone totalled 327,000. Credit card borrowing rates in early February were over 100 %. Tell me about monetary policy to rekindle the economy.. 

The 2008 trade deficit of U$ 16.84 bn was the worst in 17 years. Not least among the responsible items was a 34 % increase in gasoline imports, which reached the incredible sum of U$ 14.28 bn (over 42 % of the gasoline sold in Mexico, still a major oil producer, is imported!). In any case, it will soon cease to be an oil exporter, with 2008 output 9.2 % down, and a 13-year low, with exports plunging 16.8 %. Within a decade or less, the country will be barely self-sufficient (in fact, it will have a negative balance much earlier with all those gasoline imports). Whatever it sells is now worth much less, in terms of exports and tax revenue. 

All this is bad economic news, but does not in itself make a failed state. That is seen on the security side, with the authorities, despite increasing reliance on the regular army, losing the battle against violent crime, particularly drugs-related. Throughout the country, the crime wave is unstoppable and often takes the form of pitched battles between criminals (I was tempted to write "insurgents") and the security forces. We are steps away from a total breakdown of law and order. Mexico had a clich?imaged of violence until the PRI came to power, and once it did, it managed to keep the lid on intelligently for over 70 years. Vilipend by many abroad, its loss of power was greeted with the sort of exaggerations written about Sarkozy and Obama. Here is your result. I hope you are proud. 

The death certificate of the PRI was in any case premature in signing, and the latest opinion polls show the party 15 % ahead of the PAN in the run-up to the mid-term July elections when 500 deputies and several local authorities will be elected. Apart from not solving any of the country's problems (violence, corruption and growth having all deteriorated under its tenure), the PAN also let its hypocritical moralistic slip to show. One of its mayors in the colonial town of Guanajuato has made kissing in public illegal (unless of course you belong to the Mexican-origin legionnaires of Christ whose founder has now been found out as not only a child molester but a fornicator and father of an illegitimate child...). 

A major fiscal crisis also looms ahead, and the recent fiasco of an attempt to place an international loan on a reluctant market will not help plug it. The off-balance sheet debt of IPAB, which bore the cost of saving banks the last time around, is over U$ 50 bn.