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 Business News | July 2007 
A Growing Security Problem Confronts Investors in Mexico
 von Adam Thomson - FTD.de
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 |  | Security is an aspect that has worried investors for more than a year.
- Larry Rubin, Chamber of Commerce |  | | Pick up just about any newspaper in Mexico these days and the chances are that reports of crime, particularly drug-related crime, will be splashed all over the front pages.
Stories of kidnappings have become commonplace, the slaying of police officers caught up in the narcotics trade seems to be an almost everyday occurrence and, last year, levels of violence appeared to reach new highs when the press confirmed that severed heads were washed up on the beaches of Acapulco, one of Mexico's best-known beach resorts.
Carlos Lozano de la Torre, a senator for the state of Aguascalientes, is so alarmed by the crime wave that he told Congress: "It is an inescapable fact that organised crime is flooding Mexico."
According to the senator, the murder rate during the first three months of this year increased 35 per cent compared with the same period in 2006. Organised crime, he said, "has turned into powerful structures that have penetrated both state and society".
Against this backdrop, businesses in Mexico have become increasingly concerned. "Security is an aspect that has worried investors for more than a year," says Larry Rubin, who heads the American Chamber of Commerce in Mexico City. "When a company looks into investing [in Mexico] they certainly think a lot about the security issue."
Unsurprisingly, perhaps, security experts say that companies worry most about the safety of their employees, particularly with regard to the extreme cases of murder and kidnapping.
One reminder of such dangers came in January when armed men opened fire on a top executive of a German company in Mexico City. His Mexican driver was killed while the executive, a German citizen, survived in spite of a gunshot wound.
Meanwhile, kidnapping has grown voraciously. Until a few years ago, high-profile kidnappings, typically involving taking a top executive and holding him for modus operandi.
Today, so-called express kidnappings, in which people are usually held for between one day and a week while the kidnappers milk their credit cards, have become far more popular. Many experts say in Mexico this type of crime is now as bad as - if not worse than - Colombia, traditionally the world's kidnapping capital.
Jack Harary of Harary Systems, a security company in Mexico City, says that it is difficult to measure the increase in kidnappings because a lot of victims do not report incidents to the police. "A lot of the data is skewed so we can only go on what the market tells us," he says.
In recent months, the market seems to have sent a clear signal: last year, his company received roughly three emergency calls a month in relation to express kidnappings compared with just one every several months four years ago.
Paul Doran, director of Blue Hackle, a UK-based business-risk consultancy, says that in the past many companies would react to such incidents in a knee-jerk fashion, increasing their security budgets without a coherent plan in place.
"They made the mistake of simply going for quantity over quality," he says. "Massive budgets don't necessarily translate into best policy."
Such types of crime are rare compared with theft and damage to company property. In Mexico, perhaps the most common form of theft is the hijacking of freight, particularly on Mexico's vast - and unpatrolled - network of roads.
Moreover, because so many companies operate on a "just in time" basis, keeping inventories low to maximise efficiency, theft of merchandise can have a highly disruptive effect on a company's operations. "The problems caused often go way beyond the mere value of the goods lost," says Mr Doran.
In response, businesses have taken to installing GPS and tracking systems in lorries. They also often try to change delivery times or transport goods in convoys complete with - expensive - armed police escorts.
"Companies are now spending much more than they did 10 years ago," says Mr Harary at Harary Systems.
The government of Felipe Calderón, Mexico's centre-right president, appears to be taking rising crime seriously. One of Mr Calderón's first moves in office was to send thousands of troops to "retake control" of the country from groups of organised crime, which had infiltrated government and judicial structures.
He has also pushed hard to reform the country's state and federal police forces, as well as create a single, co-ordinated crime database to make intelligence and intelligence-gathering efforts more effective.
Mr Rubin of the American Chamber of Commerce says he is optimistic that such plans will deliver tangible results by the end of the year. "I am much more optimistic than I was with previous administrations," he says.
Until then, however, companies operating in Mexico will just have to get used to thinking a lot harder about security. |
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