MÉXICO CITY — Edgar N. ran a profitable business in the state of Michoacán during most of his adult life, but after falling victim to extortion by local organized crime groups five years ago, he closed his export business and relocated to the state of Querétaro.
“Business was doing fine, 500,000 pesos of sales monthly; I was one of the most successful businesses in my area of the region,” he says. “Michoacán has always had organized crime. Different criminal gangs ran their drug businesses in the area. But in those days they operated like businessmen,” explains Edgar. “When I got to Michoacán, the first thing they told me was not to look for trouble. Things were quieter then. We all knew who were the bad guys and we simply didn’t get into it with them, and they didn’t get into it with us.”
Then everything changed. “It was around midyear in 2005 when we began to see the black pickups that nobody knew. They were a bad sign. By the end of the year rumor had it in the community that they were Zetas. Within two years these were replaced in a bloody battle by an even more unstoppable group: La Familia Michoacana [The Michoacán Family], a kind of military and religious sect that today controls the whole region.”
Fear, the new way of life
Edgar, 45, recalls that in Michoacán extortion became more frequent. First a fire at a chicken farm, two days later an auto parts was burned, after that a shoe store. The message was clear; if you don’t cooperate, pay the consequences. “They demanded a very high quota that began with 10,000 pesos. As your business grew they increased the amount.” Each time they sent somebody to collect, that person would look around taking notes in a little accounting book about the business and earnings. If they saw improvements they increased the demand. “Fear took over our daily lives. Profits were marginal and we made our decision to begin a new life in Querétaro.” He, his wife and son had to rebuild their entire lives there.
Edgar and his family have now lived in a two-story house in a modest colonia in Querétaro four years. He was lucky to leave Michoacán in time. In spite of having to start his business again from zero, today he can say he lives free of threats. He pays rent and earns one third of what he made before, but unlike his Michoacán friends, he is worry free. Querétaro has benefitted from a significant influx of small and midsize businesses like his during the last two years.
In contrast, Edgar’s friend, Samuel, who stayed in Michoacán, is not doing as well. Today it is difficult to move from the city because La Familia keeps track of its victims. Samuel has an auto parts business in Morelia and he pays La Familia a monthly fee of $(US) 4,000. When he tried to move his business, a thug from the cartel threatened him and his family, describing where his children, parents, siblings and nieces lived. “I prefer not to fight them,” he laments.
Sleeping in San Diego, working in Tijuana
The risk map has expanded in these last two years. According to a poll by the Bank of México of 1,100 businessmen in different regions of the country, it is now clear that two out of every three companies in the northern and northern-central areas of the country (where there is a concentration of manufacturing) have been negatively impacted by the insecurity created by organized crime.
The northern border is an important manufacturing beltway with considerable foreign investment and the businessmen in that area have had to take precautions. “On the northern border, especially in Tijuana, there are 84 Japanese enterprises and all their executives live in the United States. California is a beautiful state, with good climate, but most of all it’s safe. Every day those executives cross the border to San Diego, protected by a caravan of SUVs,” says Humberto Jaramillo Rodríguez, a businessman originally from Tijuana who until a few months ago was the president of the National Bureau of Industry and Transformation [CANACINTRA in Spanish].
Mexicans are also crossing the border. A large number of businessmen who leave Tamaulipas, for example, take refuge in the U.S. specifically in Hidalgo County, Texas where in 2010 alone more than 300 businesses were licensed from restaurants, bars, to discotheques. It is estimated that 80 per cent of the new immigrants are concentrated in McAllen and the rest in Brownsville.
Although most of the violence is concentrated in the north of the country, you can’t drop your guard, said Jaramillo, remembering a business friend who went south of Veracruz, an area where the Zetas are strong. “Within a year they burned three vehicles and burned down his entire business; finally, he decided to abandon his plans,” said Jaramillo.
Another collateral injury from the war against organized crime is its impact on family businesses, a tradition of Mexican industry. According to data from the Ministry of Economy [Secretaría de Economía in Spanish], over 87 per cent of Mexican companies are family run. This is true of companies as big as BIMBO Group or CEMEX (with sales of 117, 164 million pesos and 173,892 million pesos respectively in 2010). Therefore the threat to the economy is high. In northern México, “businessmen feel safer if their children live out of the country,” asserts Jaramillo. The problem is that the longer these businessmen live outside the country there is less likelihood that they will return to their original place. This displacement has serious long-term repercussions for employment in the interior of the country.
México City — the most dangerous “ex” in the world
In the past, few businessmen dreamt of moving to México’s capital because they say it is easier to go into business in another country than it is México City. According to Juan de Dios Barba, president of México City’s Employers Confederation of the Mexican Republic [COPARMEX in Spanish], “Presently, investors and entrepreneurs face three obstacles when they come to the city — the bureaucracy, high cost of real estate, and lack of bank financing.”
Nonetheless, during 2010 the Federal District recorded more than 6,500 micro, small and medium businesses coming from other states, adding an increase of 2% to the 320,000 economic entities in the city. The precincts that recorded the most influx of immigrants were Cuauhtémoc, Tlalpan, Tlahuac, Cuajimalpa, Milpa Alta and Xochimilco.
“The most dangerous city has become a safe place. Three years ago people were leaving the D.F. because of the insecurity, now it’s just the opposite,” Barba explains. Querétaro is another receptive state, it’s considered the “quiet immigration” state. Every 24 hours, on average, 49 new families arrive. The list of new vehicles added to the state registry has accounted for 13,315 units from other states from the northern part of México including; Nuevo León, Tamaulipas, Chihuahua, Sinaloa and Durango.
Violence and fear
The government has failed to provide protection to residents and their assets, and the security cost to Mexican companies has increased, according to studies carried out by COPARMEX [see above]. Every business spends around 10 per cent of its budget in security cameras, bodyguards and internal guards. “This cost undoubtedly impacts the country’s competitiveness internationally,” warns Jaramillo. The numbers from the Confederation of Industrial Bureaus of the United States of México [CONCAMIN in Spanish] are even more alarming. According to the Confederation, insecurity in México has an annual cost of 770 dollars per person; that represents an equivalent to 7 per cent of the GNP [PIB in Spanish].
Kidnapping is a business executive’s greatest fear. This danger exists while away from their businesses and also inside of them. Juan de Dios Barba recalls that around 85 per cent of extortion cases in México have taken place from inside the businesses, by criminals who infiltrate the organizations. Therefore, these problems not only impact executives, but also employees and workers who are frequently robbed of their weekly earnings.
The silent migration
Closed businesses mean lost jobs. From Tamaulipas to Michoacán there has been a significant lost of jobs, which leads people to migrate to other states. Michoacán is at the forefront of this phenomenon, experiencing significant closings of lumber and textile businesses in Uruapan, Zamora and the city of Morelia. The displaced workers ended up working in tourism or agriculture jobs in their new hometowns, especially those who relocate to Querétaro, Aguascalientes or México State.
According to the Internal Displacement Monitoring Centre [Centro de Monitoreo de Desplazamiento Interno in Spanish] an estimated 114,000 Mexican have been displaced by violence. Beginning in 2008, the numbers spiked in what are now considered the most insecure places in the country, such as Nuevo Leon, Sonora, Tamaulipas and Sinaloa. States such as Yucatán, Campeche, Chiapas, Puebla, Querétaro, Tlaxcala and the Federal District are considered the safest places for people that have relocated.
Where to next?
Edgar from Michoacán now living in Querétaro, says that so far he hasn’t heard of any cartel that controls the area and he hasn’t been threatened. He knows there is drug trafficking, but has confidence the government won’t permit it to completely infiltrate society. Today his business flourishes, and he hopes he will not have to move again because of organized crime.
Shaking a local newspaper, he shouts angrily: “The country is in ruins; just look at the front page. If the situation continues like this, my next stop will be the United States … or the cemetery.”