Diageo's Seiersen: crime could chase away investment. Diageo's Seiersen: crime could chase away investment.

Crime, impunity put investment at risk

Diageo chief sees volatility, insecurity at highest level in nearly 3 decades

Rising levels of violent crime in Mexico this year resulted not only in record-breaking homicide figures but also took a heavy toll on companies operating in the country.

ADVERTISEMENT

The official number of homicide investigations reached 23,101 by the end of November, surpassing the record for the previous most violent year set in 2011. Figures for a range of other crimes including robbery, extortion and kidnappings are also up.

The increased insecurity doesn’t make for an environment conducive to successful business dealings, especially for companies that use Mexico’s transportation infrastructure to move large quantities of products for distribution.

The Mexican head of British multinational alcoholic beverages company Diageo said that in the almost three decades he has been in Mexico, he has not experienced a situation similar to the one the country currently faces.

“I’ve been working in Mexico since 1990 and I’ve never seen this level of volatility and insecurity,” Erik Seiersen told the Financial Times.

Seiersen, who is also the president of the national Wine and Liquor Industry Commission, said that transporting merchandise on freight trains became too risky this year due to the high number of robberies.

Consequently, many companies switched to the nation’s highways halfway through the year in order to ensure that their products reached their destinations intact. But the decision came at a considerable cost, he explained.

ADVERTISEMENT

“When you shift to trucks, there is a high increase in costs,” Seiersen said, adding that those costs could “skyrocket 100, 200, 300%.”

When thefts also became increasingly common on certain key highways, such as that between Puebla and Veracruz, many companies switched back to rail transport again.

However, robberies are not the only problem that companies have to contend with, according to the head of the National Association of Private Transport.

“It’s not just the theft of cargoes. They are selling these goods on illegal markets at below the price of production and competing against our own products,” Leonardo Gómez said.

One example is the illegal fuel market.

Pipeline thieves known as huachicoleros set a new record this year for illegal taps on Pemex fuel lines, and over the past seven years the practice has cost the state oil company an estimated 160 billion pesos.

The Wine and Liquor Industry Commission also reported that its members were victims of 151 robberies in 2017, in which 109,000 cases of alcohol worth 352 million pesos (almost US $18 million) were stolen.

Some analysts believe that the insecurity problem could get even worse in 2018 due to factors such as police corruption and the 2018 presidential election.

Last week, President Enrique Peña Nieto promulgated the controversial Internal Security Law (LSI) after it was passed by both houses of Congress. Critics of the law argue that it will militarize the country and act as a disincentive for the nation’s police forces to professionalize.

They also point to a failure to reduce violent crime since Felipe Calderón first deployed the military in the so-called Mexican War on Drugs in December 2006.

But the government counters that the law is necessary so that the military can help to curtail crime in the country by supporting local security forces while working within a legal framework that directs their actions.

Some of the crimes committed in 2017 have been particularly brutal and confronting, such as six bodies that were found hanging from bridges in Baja California Sur last week and severed heads that were left in a cooler outside an office of broadcaster Televisa in Guadalajara last month.

Twelve journalists have also been killed in Mexico this year, ranking Mexico alongside Syria as the deadliest country in the world for journalists, according to the organization Reporters Without Borders.

Seiersen believes that the alarmingly high incidence of violent crime, coupled with high levels of impunity, could result in less investment in the country at a time when NAFTA renegotiations, a plunging peso, U.S. tax reform, high inflation and political speculation have already created significant economic uncertainty.

“We want to invest in Mexico but this level of insecurity is unheard of . . . People are going to lose interest in [investing in] Mexico,” he said.

Source: Financial Times (en)

Stories from our archives that you might enjoy

  • WestCoastHwy

    That’s just brilliant!

  • cooncats

    This next election is a make or break for this country. If they put the PRI back in, it is game over. It is no accident the crime and corruption exploded after Peña Nieto was elected. It gave a green light to all the PRI thieves that they could steal everything and anything without fear of consequences.

    • Güerito

      Hard to believe now, but in Feb. 2014 Time magazine put EPN on the cover with the headline “Saving Mexico – How Enrique Peña Nieto’s Reforms Have Changed the Narrative in His Narco-Stained Nation.”

      Looks like they were either drinking the Kool-Aid or getting some of that Mexican Government propaganda $$$ we’ve seen reported lately. At least they got the “narco-stained nation” part right!! LOL

      http://content.time.com/time/covers/pacific/0,16641,20140224,00.html

      • cooncats

        Time magazine is a leftist joke full of stupids masquerading as journalists. Not surprised they got taken in by Peña Nieto. They got taken in even worse by Obama and Clinton and still haven’t figured it out.

        • Güerito

          I agree.

          I think the whole idea of pushing this bogus “Mexican Moment” and “EPN Saving Mexico” back in 2014 was an attempt by liberal media to convince the American people they didn’t need to worry about Mexican immigration anymore. It didn’t work… LOL

    • michael grosser

      I do not believe the answer is political. Education is and that is Not happening here and the future isn’t too bright when the so called “student teachers” engage in kidnapping, robbery and blockades of highways and airports. Again, the word “IMPUNITY” rears it’s ugly head.

      • cooncats

        Of course the answer is political. Most of the politician/thieves are well educated. The kickbacks and scams they put together are not the product of illiteracy. The basic problem is that they know they can get away with it and even if caught, there will be no or token punishment and likely they will be able to keep the money they have stolen.

        In Mexico crime pays. When that changes so will the impunity. Unfortunately, I don’t think the future looks very bright for this country. As I noted, this is a change from when we came.

        • michael grosser

          Excuse me my Dear, I was not aware that the politicians/thieves were so well educated.
          So let’s go ahead and study it from a cultural basis. I do have agreement with you but please study the basic Mexican family..many many are single mother dominated and there is virtually no disciple directed toward the sons (not so with the girls as much) OK OK< I am making general subjective statements based solely upon my personal experience and observations. The sons of mexicanas are put upon a pedestal and they can do no wrong.
          This a culture with a thirst for blood as demonstrated by bullfighting and cockfighting torture and mutilation (heads in coolers…bodies dangling from bridges etc). I do not know the answer….I am not God. I do believe that if the education system was better and these "Normalistas were not the practioners of education and those setting an example and childeren were exposed to concepts other than the hell that Mexico has disintergrated into we may see a change in attitude…the church certainly hasn't done that. ( and no coonperson…illiteracy is very very high in Mexico) So if we are having some kinda debate here, OK< you win…but politics and money go hand and hand (in US and everywhere) So what do you propose….we eliminate money?? I think the problem lies deeper within education and a family structure that encourages humanistic values.
          What I think we agree upon is that Mexico has gone to hell, Bigtime for whatever reason.

          Anyway, you win. What's the prize. NOW, do you feel better? Congratulations. Meanwhile Mexico continues to go to hell with no help in sight. Happy New Year.

        • michael grosser

          To paraphrase Ron Reagen , “Govt is not the solution to the problem, govt is the problem”

    • michael grosser

      Let me get this straight…the next election is going to “make or break” this country?
      Did you really say that? Really? Somehow you know more than anyone else on this planet.. Wanna share your source of information. Is it time for your meds, Darling?

      • cooncats

        Are you gay? Else why you address other males as “darling and dear?” Kindly knock it off, thanks.

        Yes this election is critical to stopping the slide here just as it was in the U.S. The PRI are Democrat corruption on steroids. Your average PRI governor here makes the Clintons look like petty thieves. Again, it is no accident the corruption and impunity exploded after the PRI took the national government back. While I don’t disagree with you about the cultural aspects, the corruption here now goes beyond what can be explained by that alone. I’ve lived here 10 years and it is the same culture then as it is now but the crime and corruption has multiplied many times over.

        All those dope users north of the border (yep Canada too) sure doesn’t help things. The connection between the decline of Mexico and the social decay north and in Europe is direct. Hell, the Mexicans should think about building a wall.

        • michael grosser

          Sorry Dude, from your handle and the drivel you post I would have sworn you were a chick
          and a loony one at that. In the meantime don’t tell me what to say. My name is Michael Grosser and you would be “Cooncats” That sounds pretty gay or feminine to me. Are you too ashamed to use you name ( I sure as hell would be if I were you). For the record, I am anything but gay and have been getting more pus here in Mexico than you can shake your limp little dick at. That is one of the few reasons I have been here so long.
          Anyway my Dear Darling what would be wrong if I was gay? Just goes to show you have some SERIOUS issues. FGeliz Ano Nuevo

  • Güerito

    That quote in the last sentence says it all. Violence in Mexico is now affecting the entire civilian society and threatening the country’s economy.

    I saw this article a couple days ago, and copied the whole thing. For those getting a pay wall with the link, here it is:

    ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

    Erik Seiersen manages a new crisis every day. “I’ve been working in Mexico since 1990 and I’ve never seen this level of volatility and insecurity,” says the Mexican head of British drinks group Diageo and president of the country’s wine and liquor commission.

    On just about every front, 2017 has been a catastrophic year for crime in Mexico. Homicide levels are higher than the worst years of former President Felipe Calderón’s war on drug cartels. October was the most murderous month in 20 years, with 2,371 killings, according to official data. Offences in virtually all categories — from murder to robbery to extortion to kidnapping — are rising. Only bank heists and cattle rustling are down.

    Some crimes have been particularly shocking: the 12th journalist to be killed this year was gunned down at his son’s school Christmas play. In November, an ice box containing two severed heads was dumped outside a television station. Six bodies were recently strung up from bridges in the state of Baja California Sur, a tourist draw.

    As the security crisis has spread beyond cartel heartlands to all but a handful of states, legislators in December enshrined the army’s decade-long role in policing and fighting crime in a controversial law. Critics, including Zeid Ra’ad al Hussein, the UN human rights chief, called the law ambiguous and open to abuse.

    For Mr Seiersen and other business leaders who use the roads and rail network to transport millions of dollars’ worth of merchandise every day, the security crisis is a logistical nightmare and a costly slap in the face after all their investment in Latin America’s number-two economy.

    It became too risky to move goods by rail when thieves were stripping cargoes of alcohol, televisions, iPhones and other high value consumer goods and throwing up roadblocks to keep police at bay. Many companies switched midyear to road haulage to try to get their goods to market intact – but at a price.

    “When you shift to trucks, there’s a high increase in costs,” Mr Seiersen said — including eye-popping insurance premiums. Companies’ total cost base could “skyrocket, 100, 200, 300 per cent,” he added.

    The Wine and Liquor Industry Commission, which Mr Seiersen heads, says there have been 151 robberies in 2017, of more than 109,000 cases of alcohol worth 352m pesos ($18m). It has no comparative figures but but says levels in 2016 were “minimal”.

    “It’s not just the theft of cargoes. They are selling these goods on illegal markets at below the price of production, and competing against our own products,” echoes Leonardo Gómez, head of the National Association of Private Transport, grouping major road haulage users. The government is also missing out on millions of dollars in sales and other taxes.

    As key roads became impassable companies switched back to rail haulage in November. But analysts see no meaningful measures on the horizon to combat the crime crisis as politicians focus on presidential elections in July and tough negotiations to update the North American Free Trade Agreement.

    “This [crisis] hasn’t peaked yet,” cautioned Gustavo Mohar, a former interior ministry undersecretary. “If you don’t take consistent, drastic, permanent action, it will keep on growing.”

    Part of the problem is Mexico’s police. They are underpaid, which makes them open to bribery, and overwhelmed by what Mr Mohar calls a “public security emergency”.

    Since the role of corrupt municipal police in the disappearance of 43 students in 2014 placed Mexico’s inadequate police forces under a harsh spotlight, the government of Enrique Peña Nieto has been promising an overhaul. But little has been done.

    The new Internal Security Law was passed in a bid to provide a framework for the military’s role in police duties. But as Eunice Rendón, a former government official and co-ordinator of Red Viral, an NGO, notes: “In 28 out of 32 states, there is some form of military presence. This is abnormal in any democracy.”

    Mexico’s crime wave and near total impunity levels are major election issues as former finance minister José Antonio Meade seeks to defeat leftist Andrés Manuel López Obrador.

    Meanwhile, the government’s “kingpin” strategy to knock out cartel chiefs has helped spawn 241 mafioso groups or gangs running extortion rings and protection rackets, Mr Guerrero estimates.

    One of the most lucrative criminal activities has been fuel theft. But as security forces closed in, the thieves branched out into robbery of merchandise.

    “We want to invest in Mexico,” Mr Seiersen said. “But this level of insecurity is unheard of . . . People are going to lose interest in [investing in] Mexico.”

  • Mike S

    I wonder why there was $40 billion (USD) of direct business investment in Mexico the last 12 months? Booze and gasoline would be two areas of thievery for sure. Most goods in Mexico are shipped by truck. Toll roads are relatively safe. It would seem to me there are high-tech security systems available for both trucks and trains. How does the government fight corruption when $50 billion in greenbacks pours south every year into Mexico from US hard drug addicts directly into the pockets of criminals? Cops are under paid and judges and politicians bought.Tough problem to solve.

    • Güerito

      The extreme security crisis Mexico is now facing has to do with a recent shift in focus with criminal groups. From trafficking drugs to the US the shift is to retail drug sales in Mexico and a whole host of other local crimes affecting the civilian population, such as those mentioned in the article above, along with kidnapping, extortion, etc.

      Cartel fragmentation and marijuana legalization in the US are some of the reasons behind this.

      From Mexico’s perspective, we might look back on the days of simple drug trafficking to the US as “the good old days”…

      • cooncats

        It took me a while but I finally figured out PRI means Party of Rampant Impunity. They aren’t the only thieves but they definitely are the leaders of the pack. As I said this next election is make or break and I hope the people don’t divide their votes between reformers and put the PRI back in.

    • Güerito

      The figures on foreign business investment for Mexico in 2017, of course, are not yet complete. But it appears, like 2016, it will come in a little below US $30 billion. The 27 billion in 2016, represented a 19% drop from 2015.

      For perspective, in 2013 the level was 45 billion:

      https://www.eleconomista.com.mx/economia/Inversion-Extranjera-en-Mexico-crecio-18-en-2015-20160615-0141.html

      • Mike S

        I am seeing some different numbers for last 4 quarters starting with Q4 in 2016 and ending in Q3 2017. Thirty billion may be more realistic. First quarter of 2017 was $7.8 billion:
        (https://www.reuters.com/article/mexico-fdi/mexico-says-foreign-direct-investment-in-q1-reaches-7-9-bln-idUSL1N1IP2EP).

        Q4 2017 is not in so we will have to wait and see. It would be understandable that many US and Canadian companies might be putting investments on hold after Trump announced he wants to start a trade war with Mexico, revoke NAFTA, build a wall, and impose big tariffs. That is far more important than corruption issues. If Trump’s threats turn out to be all bark and no bite and the midterm elections de-fang him, I would expect to see US direct investments pick up. If not, it will take a couple of years for increased Asian and European investments to replace US ones. Remittances from US have nothing to do with this discussion.

        • Güerito

          I see direct foreign investment falling from a high of 45 billion in 2013, to the upper 20’s in 2016 and 2017. The drop started post-2013, and it looks like it will be about the same level in 2017 as 2016. The foreign investor cited in the article above is worried it could be going down a lot if impunity and corruption are not stopped.

          How does Trump figure in here??

          • Mike S

            I was extrapolating from the $8 billion DFI number from Q1 2017 ($8 billion) but I now see Q2 & Q3 have dropped way off so Q4 is likely to be low too. So around $30 billion is more realistic. There does that make you Trumpeteers happy? DFI has everything to do with Trump and his policies toward NAFTA. Foreign investors expect goods to be exported to the US and a trade war initiated by Trump will certainly affect that. The drug war and corruption have been going on big-time for 5 years+ so what changed? In my opinion it was the election of Agent Orange much more than corruption issues. He just gifted US corporations a massive tax cut that will be added to the federal debt during “good economic times”…totally contrary to Keynesian proven economic theory. That plus attacking NAFTA hurts Mexico DFI. Eventually it will hurt us too.

          • Mike S

            It is impossible to talk about trade and DFI in Mexico without interjecting Agent Orange. A perfect example:

            Ford was planning on investing in a new small car plant in MX ($1.8 billion) in 2016 to free up production of popular gas-hog SUVs and PU trucks made in the US. Mx has far more “free trade” agreements than the US around the world and Ford could have benefited from that. The Mexican, US, and Latin American markets would be lucrative. Trump went on a rampage calling out Ford for investing in Mx although no US jobs were really at stake and unemployment was at historic lows. The F-150 (Ford’s biggest seller and many are exported to Mx) is a favorite of the Trump base and Ford could not afford to offend them and have them switch to Silverado or Ram. So they cancelled the small car plant based on politics instead of good business decisions. Ford discreetly expanded their small car Hermosillo plant so that Trump could crow about a big victory saving US jobs. Since then Ford has decided to open a small car plant in China and expect some of those cars to eventually show up in the US. China does not buy cars made here. Other US companies got the message. Trump’s narcissistic and unpredictable ego must be part of business decisions investing in Mx. Don’t forget Mx buys hundreds of billions in US products and many manufactured goods sometimes cross the border back and forth many tomes before they are finished. Six million Americans depend on that trade for high paying jobs.

            ;

    • cooncats

      I wonder why you can’t get your numbers right. Drug remittances are estimated in the 19 to 29 billion range. And Guerito blew up your investment numbers as well.

      • Mike S

        “…are estimated…”. Boy that’s a statistic we can all rely on. I’ve seen figures from $20 billion to $65 billion. Truth is nobody knows for sure but $40 billion would be a safe estimate. Whatever it is, that money is a primary cause of lawlessness and corruption in Mexico.

        http://www.laht.com/article.asp?ArticleId=342471&CategoryId=14091

        • cooncats

          Well I’d rather rely on that than some grab ass number out of the air by some Mexican.

  • Jeff Swanson

    Well I know somewhere in this Trump is to blame, as I read the posts, the “connection” has been made. It gets old here all the Nancy Reagan crap and war on drugs as the sole cause of ALL of Mexico’s ills.
    First off legalizing drugs, ain’t gonna fix this nor is it the answer, sounds good legalize drugs, tax them, cept for one oversight COST! When dope was “ILLEGAL” it went for a lot of money on the streets, when dope went “Legal” it went for a lot of money in dispensaries!
    OH guess what, liberals of rocket science “Ekonomecks”, STREET PRICE went down CHEAPER than the “Legal Dispensaries”, see THEY don’t have to pay the “Dream Tax” to save the world of liberal underfunded social programs, like drug addiction, what’s that costing me?
    Legalize drugs, WHO is going to produce them, same guys as now fighting the other guys who wanna make them, who is going to transport them, same guys as now killing the other guys for doing it, who is going to sell them, legal approved dispensaries at a high price con tax, AND EXACTLY WHO is going to undercut them and sell trato drecto?, BINGO!!!AND who is going to kill the other guy for selling on his turf, same guys as now. WOW REALLY? FOOLS YOU ARE ALL FOOLS!
    And yes, all the infighting in Mexico, murder and mayhem is fighting over the EVER growing Mexican drug Market, as well as what is rapidly becoming their main squeeze $$$$, kidnapping and extortion!

  • Jeff Swanson

    And if I may be so bold as to cite an actual study in the USA, when a dispensary (legal dope dealer showcase store, replete with “Brownies”) opened in an area, over night, muggings, robberies and car prowls, burglaries increased, in the immediate area WOW! WHO could have not seen that coming down the pike? Nancy Pelosi for one.

  • Jeff Swanson

    A post I put here was deleted on how legalizing drugs is not gonna solve this whole issue, Nancy Reagan blasted here all the time and “her” war on drugs as ALL of Mexico’s problem’s BS!
    Legalize drugs tomorrow, who is gonna keep making them? Same killers as today. WHO is going to transport them? Same guy’s killing the other guys to take over the route. WHO is going to sell them? Legal “Taxed” dispensaries at a high price! WHO is going to undercut them, marketing “Trato Directo” BINGO !!!! MAYBE the same killers as today? DO YA THINK?
    All the murder, mayhem and showmanship in Mexico today is infighting for control of the EVER growing lucrative internal drug market in Mexico, as well as what is becoming a huge source of their cash flow, kidnapping and extortion.
    Gangs (Cartels) are moving from one area into another, starting a war, inciting violence.
    Greedy young “Killers” are starting new gangs, new cartels hourly and want to outkill the others, first day on the block, sorry “Calle”, my mistake.
    Silly liberal “Ekonomicks .0000001” when dope was illegal it went for a lot of money on US Streets, when dope went above board and legal sold out of “Dispensaries” it went for a lot more money con (with) tax, street price dropped, as they don’t have to pay tax, a healthy “ILLEGAL” street corner baggie market continued to thrive, EXACTLY what will happen with the other stuff, see my other post here how crime increased as well in areas where they legally sell the stuff as well.
    Oh and how may shootings have there been in legal dispensaries? How many “partners” have cut the partner out with a gun? How many cut their former partner out with a gun for opening a new store down the street? Has happened folks, OH and “Legally Too” wink, nod!

  • michael grosser

    “Impunity” was just another word until Mexico put it on the map.

FreeCurrencyRates.com
ADVERTISEMENT