Tuesday, May 20, 2008

The Corn Bomb

The US is starting to break its “addiction” to foreign oil as high prices, more efficient cars, and the use of ethanol significantly cut the share of its oil imports for the first time since 1977.(...) This new trend is likely to have domestic and international policy implications, making it harder to prove the case for drilling in Alaska’s Arctic National Wildlife Refuge and to reverse the ambitious biofuels production targets regardless of their impact on global food prices. Financial Times

Frustrations over rising prices and poor living conditions and resentment at a flood of immigrants from other parts of Africa have sparked some of the most chilling scenes in South Africa since the end of apartheid(...) "the problem will become worse because many people are without jobs and houses and food prices are rising. I can only predict worse." Financial Times

David Seaton's News Links
Above these lines are excerpts from the Financial Times. The first gives the "good news" that America is less dependent on Foreign oil, in great part thanks to Ethanol made from corn.... "regardless" of its impact on world food prices.

The second excerpt from the FT explains how the rising cost of food affects the poor of the third world and explains the horrific violence we are witnessing in South Africa.

And below these lines I have an extensive quote from an article by George Friedman of Stratfor warning of the dangers of Mexico collapsing into narco-anarchy as the drug cartels
bribe and intimidate civil servants at the highest level, fueled by the high prices their wares bring in the USA, prices pushed up by America's "war on drugs".

As Mexican President Porfirio Díaz once said, "Poor Mexico, so far from God and so near to the United States". How near and how far can be illustrated by the following excerpt from Business Week,
The U.S. slowdown is compounding poverty in rural Mexico as jobless migrants struggle to pay for rent and groceries, let alone send money home.(...) Mexico accounts for more than half of all remittances from the U.S., and they represent Mexico's biggest source of foreign earnings after oil. The country's rural poor, who rely on the wire transfers for basic consumption, are reeling from the drop. "For the families who are receiving this money, it can [be] around a third of household income," says Robert Meins, an IADB remittance expert. "It's that third that helps many…stay above the poverty line."(...) In the unpaved hamlet of Los Cuachalates, subsistence corn farmer Julián Calvillo, 65, sadly surveys a roofless bare brick construction site. His son, who worked in restaurants in Kansas City, Mo., had been wiring money to build a house. But he was fired because of the slowdown, has not been rehired, and has sent nothing for months. "We're all very sad," says Calvillo. "I'm borrowing from friends so that we can eat."(...) Even a crackdown on drug trafficking has been a mixed blessing. Michoacán is a major center for methamphetamine production and traffickers used to buoy the economy by splashing out on luxury goods. But an army crackdown by President Felipe Calderón has driven them underground and curbed their spending.
It seems so long ago, that it is hard to recall that once upon a time, when he was running for president in the year 2000, Bush said a number of sensible things that he quickly forgot on being elected. One of the most sensible was defining America's relationship with Mexico as its the most important foreign policy relationship. It was true then and it is true today: what happens in and to Mexico affects Americans, their prosperity and even their physical safety, much more than what happens in and to, say, Israel... Much, much more.

9-11 and the invasion of Iraq caused Mexico to disappear from America's agenda. However while we are following events far, far away, the rise in the price of corn, the staple food of Mexico's masses, due to ethanol production in the United States combined with the corruption flowing from drug money derived from from the bottomless appetites of American addicts, has put the political stability of Mexico is in grave danger.

If we add to that the effects of massive layoffs of Mexican workers in the USA due to the recession, with waves of unemployed
immigrants returning home empty handed to find corn meal priced out of their reach... combined with stringent border controls and the mass expulsions that so many US politicians are clamoring for... Add to that many armed and horribly violent cartel gunmen with money and automatic weapons.... we are looking at a potential geopolitical disaster far worse than the war in Iraq...

Mexico is not to be trifled with.

Mexico is a country of 100,000,000 people with one of the world's greatest revolutionary traditions. The legitimacy of the present government is not very great. As Professor Immanuel Walerstein observes, "the conservative government (of Felipe Calderón) won the last elections with about the same degree of legitimacy as Bush won the 2000 elections in the United States". If the drug cartels assassinated Calderón, who knows how quickly things might unravel?

In the same way that so many of the concerns we had in the golden summer of 2001 seem so frivolous and far off after 9-11, so today's disputes between Obama, Hillary and McCain may appear if Mexico explodes. All the elements are in place for disaster. And nobody seems to care very much. DS

Friedman: Mexico: On the Road to a Failed State? - Stratfor
Abstract: Violence along the U.S.-Mexican border has been intensifying for several years, and there have been attacks in Mexico City. But last week was noteworthy not so much for the body count, but for the type of people being killed. Very senior government police officials in Mexico City were killed along with senior Sinaloa cartel operatives in Sinaloa state.(...) Mexico now faces a classic problem. Multiple, well-armed organized groups have emerged. They are fighting among themselves while simultaneously fighting the government. The groups are fueled by vast amounts of money earned via drug smuggling to the United States. The amount of money involved — estimated at some $40 billion a year — is sufficient to increase tension between these criminal groups and give them the resources to conduct wars against each other. It also provides them with resources to bribe and intimidate government officials. The resources they deploy in some ways are superior to the resources the government employs. Given the amount of money they have, the organized criminal groups can be very effective in bribing government officials at all levels, from squad leaders patrolling the border to high-ranking state and federal officials. Given the resources they have, they can reach out and kill government officials at all levels as well. Government officials are human; and faced with the carrot of bribes and the stick of death, even the most incorruptible is going to be cautious in executing operations against the cartels.(...) There comes a moment when the imbalance in resources reverses the relationship between government and cartels. Government officials, seeing the futility of resistance, effectively become tools of the cartels. Since there are multiple cartels, the area of competition ceases to be solely the border towns, shifting to the corridors of power in Mexico City. Government officials begin giving their primary loyalty not to the government but to one of the cartels. The government thus becomes both an arena for competition among the cartels and an instrument used by one cartel against another.(...) It is important to point out that we are not speaking here of corruption, which exists in all governments everywhere. Instead, we are talking about a systematic breakdown of the state, in which government is not simply influenced by criminals, but becomes an instrument of criminals — either simply an arena for battling among groups or under the control of a particular group. The state no longer can carry out its primary function of imposing peace, and it becomes helpless, or itself a direct perpetrator of crime.(...) The killing of senior state police officials causes other officials to recalculate their attitudes. The state is no longer seen as a competent protector, and being a state official is seen as a liability — potentially a fatal liability — unless protection is sought from a cartel, a protection that can be very lucrative indeed for the protector. The killing of senior cartel members intensifies conflict among cartels, making it even more difficult for the government to control the situation and intensifying the movement toward failure. It is important to remember that Mexico has a tradition of failed governments, particularly in the 19th and early 20th century. In those periods, Mexico City became an arena for struggle among army officers and regional groups straddling the line between criminal and political. The Mexican army became an instrument in this struggle and its control a prize. The one thing missing was the vast amounts of money at stake. So there is a tradition of state failure in Mexico, and there are higher stakes today than before.(...) Mexico’s potential failure is important for three reasons. First, Mexico is a huge country, with a population of more than 100 million. Second, it has a large economy — the 14th-largest in the world. And third, it shares an extended border with the world’s only global power, one that has assumed for most of the 20th century that its domination of North America and control of its borders is a foregone conclusion. If Mexico fails, there are serious geopolitical repercussions. This is not simply a criminal matter. The amount of money accumulated in Mexico derives from smuggling operations in the United States. Drugs go one way, money another. But all the money doesn’t have to return to Mexico or to third-party countries. If Mexico fails, the leading cartels will compete in the United States, and that competition will extend to the source of the money as well. We have already seen cartel violence in the border areas of the United States, but this risk is not limited to that. The same process that we see under way in Mexico could extend to the United States; logic dictates that it would.(...) So long as vast quantities of goods flow across the border, the border cannot be sealed. Immigration might be limited by a wall, but the goods that cross the border do so at roads and bridges, and the sheer amount of goods crossing the border makes careful inspection impossible. The drugs will come across the border embedded in this trade as well as by other routes. So will gunmen from the cartel and anything else needed to take control of Los Angeles’ drug market.(...) One way to deal with the problem would be ending the artificial price of drugs by legalizing them. This would rapidly lower the price of drugs and vastly reduce the money to be made in smuggling them. Nothing hurt the American cartels more than the repeal of Prohibition, and nothing helped them more than Prohibition itself. Nevertheless, from an objective point of view, drug legalization isn’t going to happen. There is no visible political coalition of substantial size advocating this solution. Therefore, U.S. drug policy will continue to raise the price of drugs artificially, effective interdiction will be impossible, and the Mexican cartels will prosper and make war on each other and on the Mexican state.

1 comment:

RC said...

Well the ethanol part of that post was not explained that much, although plainly ethanol is an idiocy.
The rest of the post about Mexico was accurately dire. I am suggesting that readers who might have more interest in the items that Dave points out should read the Narco News blog published by Al Giordano {google, please}. Covers the whole Narco War in Latin America.