Reducing Illegal Immigration from Mexico: A Politically-Dependent FDI-Focused Approach

• The effectiveness of foreign direct investment (FDI) inflows in reducing immigration levels in a given country is well documented within the European Union (E.U.) as part of the E.U. regional policy governing admittance of new  member states.1
• Given the current failure of U.S. policies to stem tides of illegal immigration from Mexico, Washington policymakers would do well to better understand the North American Free Trade Agreement (NAFTA) as a vehicle for adapting a similar FDI-centered approach towards the problem.
• Yet Washington must coordinate such a policy along with the understanding that such an approach is intimately dependant on political stability in the region, and thus must only be undertaken alongside a revamped effort towards combating the out- of-control drug-trafficking trade within Mexico.

FDI Potential for Managing Cross-Border Migration

Fueled by the pursuit of greater socioeconomic opportunity and an improved quality of life, illegal immigration is often scrutinized for its harm or benefit to its country of destination. Yet continuous efforts to control illegal immigration into the United States undoubtedly reveal that, provided with a concrete strategy, many Washington policymakers would prefer to eliminate the phenomenon entirely. To date, all U.S. policies attempting to abate cross-border illegal immigration have centered either on offers somewhat akin to “blanket amnesty” to the resident illegal immigrant population or on some other category of increased border interdiction. The revision of Section A within chapter 11.01 of the North American Free Trade Agreement (NAFTA) to include structural funds modeled after the economic integration ‘cohesion policy’ of the European Union (E.U.) has been one new strategy proposed that would lessen the incentives for cross-border migration from Mexico by allowing for increased levels of foreign direct investment (FDI) into the country.*2 The commonly held implication is that such a policy would, in theory, substantially reduce cross-border migration from Mexico over the long-term through development of the Mexican economy and infrastructure, as it did in the case of the E.U.3

However, economic preparedness for FDI is often heavily dependent upon political stability in a given country. Indeed, the broader consensus within the academic community today is that effectiveness of FDI inflows are highly dependent upon factors such as central government stability, presence of internal conflict, basic democratic rights, and the ability of the government to enforce law and order.4, 5, 6, 7 Given this relationship coupled with the current state of Mexico, strategies for governmental and judicial reform within the Mexican context must first be examined to gauge whether the country is fully prepared to absorb such aforementioned FDI within its service and agricultural sectors (the largest components of Mexican GDP, calculated at 70.5% and 27.5% respectively) as part of an innovative new strategy for reducing Mexican illegal immigration across U.S. borders.

The Need for U.S. Immigration Policy Reform Toward Mexico

But is there any need for a new type of strategy towards combating illegal immigration in the first place? A wide body of evidence available suggests that there is. More important than the technical effects of illegal immigration on the elasticity of the U.S. labor market has been the reality of a continuous influx of illegal immigrants flowing northward from Mexico into the U.S. throughout the latter half of the 20^th century. In other words, regardless of oft-debated statistics following the passage of major amnesty acts such as the 1986 Immigration Control and Reform Act (IRCA), the Nicaraguan Adjustment and Central American Relief Act (NACARA) amnesty of1997, and the Haitian Refugee Immigration Fairness Act (HRIFA) amnesty of 1998, such legislation has more often than not failed principally in the area of preventing further illegal immigration into the U.S.8, 9, 10, 118

Such examples highlight the already urgent need for developing an entirely new approach to stemming the tide of illegal immigration into the U.S. Yet, contrary to such means of immigration reform proposed by Washington policymakers, such a new approach, if successful,  must be aimed at decreasing the incentives for northward migration across U.S borders. An FDI-centered approach towards reducing immigration – while it targets exactly these incentives – is heavily dependant upon Mexico’s political, economic, and social climate. Thus, such an approach can only be successful once governmental reform is solidly established within Mexico and a well-trained bureaucracy is available to strictly enforce such existing law and to implement specific social, economic, and political reforms.

A Stronger Mexico: Steps Toward Progress

But how to go about achieving governmental reform in Mexico? And is reform even needed at all? The conventional answer echoed today by those within academia is a resounding “yes”.Mexico  is currently in the throes of battling rampant corruption, a problem which has become endemic throughout the country and that has become exacerbated by a raging drug trade which has battered Mexico’s sense of public security and the government’s ability to safeguard the lives of its citizens. Beginning in 2007, there was a spike in drug-related violence characterized by increased assassinations of high-level law enforcement officials, beheadings, and violent kidnappings.12 Immediately following in 2008, Mexico saw a 110% increase in cartel-related deaths, counting over 500 Mexican military and law enforcement officials dead, according to a testimony from officials at the U.S. Department of State.13 , 14 Most recently, the Mexican government announced a tally of nearly 30,000 people who have been killed in drug-trafficking related deaths since the beginning of President Felipe Calderón’s administration.15

Given this ongoing problem, and especially its brutal and ferocious nature, policymakers within both Mexico and the U.S. have rightfully begun to look for new solutions towards stemming the violence from the cartels. A proper plan working towards Mexican political stability will primarily focus on mitigation of the narcotics trade within Mexico – a problem that has been named one of the greatest threats to U.S. national security worldwide.16 Undoubtedly, such a plan will first include a strong design for enhanced cooperation between the United States and Mexico, as both countries are inextricably tied to anti-narcotics efforts within the region.

The United States, for its part, must first and foremost crack down on drug flows within its own borders in order to tighten its vast market for illegal drugs. In a June 16^th interview with COHA, non-resident scholar in Foreign Policy Dr. Diana Negroponte of the Brookings Institute noted that in controlling U.S. consumer demand for illegal drugs, a major objective for the U.S. will be a comprehensive review of its education, treatment, and law enforcement policies towards illegal substances.17 Negroponte argues further that the U.S. must also work towards tightening its laws in the areas of arms sales as well as money-laundering regulation and implementation, in order to prevent the flow of funds and illegal arms through the U.S.18

On a similar yet different note, the U.S. must also focus on expanding socioeconomic opportunities for its own marginalized populations in order to reduce the demand for Mexican-transited narcotics while putting pressure on the Mexican cartels to move business elsewhere. To date, the U.S. remains the largest consumer of most illegal drugs, and its consumer demand directly  fuels much of the drug trade and ongoing violence in Mexico. Current figures estimate that over 95% of the cocaine in the U.S. is smuggled through Mexico.19 Similar estimates report Mexico as the largest foreign source of marijuana and the second largest source of heroin for the U.S. market.20

Additionally, the majority of methamphetamine sold in the U.S. is also produced in Mexico, and Mexican-run methamphetamine labs operating north of the border represent much of the remainder.21 Geographically, Mexico primarily serves as a bridge of tears for drug-traffickers to smuggle vast quantities of illegal drugs from Latin American producers to the throngs of consumers in the United States.22 Yet even as the transshipment of cocaine within Mexico has increased, it has not led to a dramatic increase in cocaine consumption in the country, suggesting that the United States is the primary target market in which the cartels aim to operate.23

If the joint problem of production, transit, and consumption is to be remedied, Washington must not falter in continuing to foster dialogue with the Mexican authorities. A historic first step was taken in 1989 with the signing of the U.S.-Mexican Agreement on Fighting Drug Trafficking and Drug Dependency, which formally set forth the aspirations of both nations in controlling the drug flows within their respective borders. Currently, the U.S. and Mexico have both indicated a desire to collaborate in the fight against drug trafficking, as demonstrated by their adherence to the Hemispheric Information System for Drug Control (SHICOD), a hemispheric-level intelligence network developed to coordinate anti-drug efforts. At the legislative level, legislation such as the Mérida Initiative enacted by the U.S. Congress in 2008, a bill aimed at combating drug trafficking,money laundering, and organized crime in Mexico which has disbursed over USD 700 million in combined aid to the country for improvements in technology and government regulation, must be continued. U.S.-Mexican cooperation in the struggle against drug trafficking rests upon an institutional foundation that must be continually strengthened even further. It is clear that much of the bilateral solution to this problem will rely on persistent teamwork between the administrations of both countries.

Mexican Drug Trade Policy: A History

The drug trade gained prominence as a national issue in Mexico in the late 1980’s when the Institutional Revolutionary Party (PRI) was ousted from power after 71 years of control over the political system.  Ernesto Lopez Portillo, President of the Institute for Security and Democracy in Mexico City, notes that “narco-trafficking, as well as other organized crime, developed and was consolidated under the protection of political power,” and further states that this relationship was shattered when the PRI lost its power, leading to direct challenges between drug traffickers and the existing government administration.24 Additionally, another factor that contributed to the development of the Mexican drug cartels was the demise of the Colombian trafficking organizations. As Colombian drug-traffickers were forcibly broken up in the late 1980’s, they increasingly began subcontracting their business through Mexican cartels for their trafficking routes, as the traditionally used inroads to the U.S. through the Caribbean were shut down due to strict enforcement efforts pursued by the U.S. government.25 These organizations gradually evolved from being mere handmaidens of the Colombian cartels to the wholesalers they are today.

The Mexican government maintained a general policy of targeting the capos of the drug cartels over the years with the threat of military intervention. This is primarily because the government traditionally lacked the capacity to do otherwise. Recently however, Mexican President Felipe Calderón has involved federal troops in combating the cartels because of his growing distrust in the municipal police organizations that have fallen particularly prone to being bribed by the cartels because of historically low compensation levels, among a variety of other factors. The continuing challenges posed by police corruption were illustrated in August 2010 with the firing of 3,200 federal officers, roughly 10% of the 34,500-Mexican federal police force, by Mexico’s Police Commissioner after they failed to pass basic integrity tests.26 Another 465 officers were to lose their jobs after the incident for failing to carry out their duties.27 Yet Calderón’s kingpin-like strategy  only to further violence as once former cartel leaders are captured or arrested rival cartel leadership immediately moves in to exploit the organization’s power vacuum, while catching innocent civilians in the crossfire.

The Mexican government persists in its belief that the increased drug-related violence throughout Mexico is a sign of progress, because it is evidence that cartel leaders have been captured or killed, and that the cartels are becoming increasingly disorganized. However, the Mexican public sees the recent level of violence from the cartels as an overwhelming problem.1

Overall, the main concern for Mexican citizens is their safety and security. With drug violence on the rise throughout the country, much of the Mexican public’s support for Calderón’s administration has collapsed.28 As a result, policy debate is often polarized between simply continuing with the current methods of fighting the cartels on the one hand or, on the other hand, legalizing the drugs entirely.29

For the Mexican government, the key reform strategy is first and foremost to reduce drug cartel violence in the region in such a way as to strengthen the rule of law and the sanctity of the judicial system.30 In a May 28^th interview with COHA, Dr. Vanda Felbab-Brown, Foreign Policy Fellow in the 21^st Century Defense Initiative at the Brookings Institute, affirmed that for Mexico,its primary goal in controlling the drug trade must be in reducing its prevailing level of violence. The trade itself is nothing new and has been around for decades. What is novel and unique about this phase of the conflict is the recent level of brazenness and violence that have come to characterize it. Cooperation in this effort must represent a joint initiative between the two countries. In reforming their current policy, the Mexican government must examine how it can effectively carry out its policy of interdiction against the cartels. It must begin to move away from its high-value targeting strategy, since this approach has proven to be a wasted effort in combating the drug organizations. At the same time, the government must focus on building institutions within the law enforcement and judicial systems so as to strengthen their legitimacy as well as their ability to function as effective bodies.

Another key factor that remains to be dealt with is reform of Mexico’s monetary and fiscal policies, which no doubt are directly tied to the drug trade problem. As mentioned previously,government spending in the areas of institution-building help is likely to neutralize demand for drugs and contribute to job creation in both the public and private sectors. The Mexican Central Bank would also do well to reduce interest rate targets in order to encourage large-scale investments and small business growth. Such economic policies are critical to expanding opportunities for marginalized populations throughout Mexico in order to lessen the incentive for participation in the drug trafficking industry.

Conclusion: The Road Ahead

Major progress on the problem of illegal immigration has yet to be seen. Despite Washington’s numerous botched attempts at solving the problem of illegal immigration, the data is in, and the verdict is that illegal immigration is still a very pressing problem facing America today. The above policies, when pursued emphatically by both the United States and Mexico as part of a new FDI-centered approach toward combating illegal immigration, will effectively begin to prepare Mexico to be a platform for increased levels of FDI – the chief means of developing the Mexican economy and infrastructure. Once achieved, empirical data demonstrates that the battle over illegal immigration will inevitably tend to lessen in its intensity over the long run as the incentives for cross-border migration are diminished. Over the next 10 to15 years, both nations must work towards achieving such goals so as to facilitate their fight against illegal immigration in the most effective way possible.