This report explores a series of political risk scenarios based on various possibilities and the confluence of negative factors. The scenarios are outlined in the order of likelihood with the first one being more probable and the last one highly unlikely, although none of these risks should be dismissed.
Drug Violence & Terrorism
As noted in our Outlook for 2010, we foresee the country’s security situation to deteriorate this year with even higher levels of drug violence and growing concerns for drug-related terrorism. Drug violence during 2010 is likely to be distinguished by increased cruelty from cartels against their rivals, as well as more frequent confrontations between cartels and authorities. But there is also a strong possibility of this conflict taking upon higher dimensions with a sharp increase in the executions of law enforcement and rivals, potentially crossing the boundaries of the already brutal violence into more extensive acts of terrorism as a means of retaliation and intimidation against the state or rival cartels. These terrorist acts might include bombings that target government buildings, public events, key officials, rivals, or even their families.
As a matter of fact, on Dec. 30th a number of media outlets disclosed an internal report from the US Drug Enforcement Agency (DEA) warning Mexican authorities about the Zetas preparing a series of attacks for January 1st, although no such incident occurred. According to the report, these attacks were supposed to be against federal, state, or local police forces—or even civilian targets such as shopping malls, bridges, metro stations, etc. The following states were suspected to be in danger: Chihuahua, Durango, Estado de Mexico, Michoacan, Nuevo Leon, Sinaloa, Zacatecas, or Mexico City. Although the motives for these attacks were not discussed in report of reference, it would have been in retaliation for recent arrests and confiscations against the Gulf Cartel.
The intensity of the upcoming violence will be determined by the progress made by the government against the cartels—thus provoking a more violent reaction in the short term—as well as a number of external factors such as turf wars between rival cartels.
Although we do not foresee a return to the bitter fighting that characterized Congressional dynamics during the Fox administration—particularly during the second half of his term, there is a possibility of a stalemate in Congress which could manifest simply by not making timely progress in legislation, just as it occurred with the 2008 energy reform where discussions lasted for more than seven months until a watered down reform was approved.
The stalemate could be a result of the PRI not agreeing internally on particular legislation, either due to ideological considerations or because of increased antagonism among powerful groups defending their interests and priorities, with the party not being able to move forward until internal consensus is achieved. Of course, the stalemate could also come from increased antagonism between the PRI and the PAN over a variety of contentious issues, including the upcoming state and local elections or even accusations of corruption. In this context, the political reform submitted to Congress by President Calderon will be a testing ground for the PRI in the upcoming Congressional session, but it will also prove the capacity of the PRI and the PAN to reach consensus over difficult reforms now that the balance of power has drastically changed.
New discoveries of infiltration by the cartels in the upper echelons of security institutions (both civilian and military) would no doubt reinforce the belief that civilian-run security institutions continue to be highly prone to corruption. In the case of the military, this would contribute to the erosion of the army’s image which is still on high ground, but has recently begun to decline in polls. Overall, corruption in security agencies would also reinforce the lack of effective coordination between civilian and military agencies, but particularly in regards to the fact that the army does not like to cooperate with civilian agencies.
But corruption scandals could also take place at the state or federal levels. The main reason why the current administration has avoided any charges against governors or union leaders—despite mounting evidence of monies being funneled or wasteful spending—is because it fears a deterioration of national politics, particularly as corruption cases tend to be linked with party identity. But as pressure is growing for increased transparency and accountability, there are higher chances of corruption being unveiled—with much political spin to follow.
Calderon Losing Maneuverability and Political Capital
The continuance of economic hardship for Mexican households, a deteriorating security situation, political or corruption scandals, and adverse electoral results could hasten the erosion of Calderon’s leadership and further tarnish the PAN’s strength in national politics. In particular, adverse results in the upcoming 2010 state and local elections would confirm the widespread perception that the PAN does not really stand a chance in the 2012 Presidential elections. The latter would de facto strip Calderon of political capital. Although we do not foresee the Executive becoming a lame duck the way it happened to President Fox, Calderon’s ability to negotiate and strike balanced deals with the PRI could be severely impaired. A deterioration in national politics with increased hostility, accusations, and vetoing among the largest political parties is a more extreme (and unlikely) variation of this scenario, but nevertheless it should be considered. In the latter variation, we foresee increased social discontent with the political choices made by these parties.
Guerrilla Activity & Sabotage
Finally, the year 2010 could also bring a series of unpleasant surprises in the area of security. As a commemorative year of Mexico’s independence from Spain (1810-1821) and revolutionary movements (1910-1917), there are fears about emerging guerrilla groups or dissenting social organizations who could use this opportunity as a platform to launch radical movements. Although the possibility of a guerrilla group directly engaging the state is extremely low (this was not even the case in Chiapas in 1994), there is the possibility of sabotage such as the bombings carried out by the EPR against energy infrastructure during 2008. Clearly, the possibility of guerrilla activity would test the capacity of the Mexican army to fight multiple enemies on two different fronts.