Mexico Trucker Online

Back in February, Mexico Trucker received a [cref guestbook request] for an interview, an occurrence that is fairly common reflecting the success of this site. Jessica Meyers, a UC Berkeley Grad student expressed interest in talking to us about the Cross Border Program.

On March 29, 2008, we spent a pleasant day with her and her accomplished photographer, Erich Schlegel, Senior Staff photographer for the Dallas Morning News based out of Austin.

Although Mexico Trucker was not mentioned in the article published today, we take pride in knowing that this site, and myself, was minimally responsible for the excellent article she wrote concerning the Cross Border Program. And while I am not in complete agreement with some of her conclusions, the majority validates what we have been preaching here all year. The Mexican trucks are as safe as any of ours, at least the ones which will be allowed in the US.

Here’s the article in it’s entirety.

By JESSICA MEYERS / Special Contributor to The Dallas Morning News
Jessica Meyers is a freelance writer based in Berkeley, Calif.
LAREDO – Javier Gonzalez is the middleman in a mandatory three-way handoff at Laredo’s World Trade Bridge. He picks up goods that have come from Mexico City and takes them across the border in a shuttle truck. He then hands them over to an U.S. truck or warehouse within a 25-mile commercial zone limit.

Trucks going into Mexico follow a similar procedure.

For 25 years, the system has worked that way, seeming to satisfy truckers and safety officials on both sides of the border.

But in 2001, seven years after the North American Free Trade Agreement took effect, the Department of Transportation and a NAFTA tribunal persuaded Congress to approve a pilot program that would allow specially registered U.S. and Mexican trucks to travel deep into each other’s countries. Twenty-nine trucking firms – 21 Mexican and eight U.S., including two from Texas – now take part in the program.

It was a gesture toward fulfilling NAFTA’s open-border requirement.

The program has been under fire in Washington from organized labor and environmentalists ever since.

A decision is expected any day on a lawsuit filed last August in federal court in San Francisco to block the program on the grounds that Mexican trucks failed to meet adequate safety requirements. The Teamsters Union, the Owner-Operator Independent Drivers Association, Public Citizen and the Sierra Club formed an odd alliance to fight the Bush administration.

And in December, congressional opponents of expanded Mexican trucking in the U.S. persuaded colleagues to cut off funding for the pilot. Although the Transportation Department and the White House got it restored, Sen. Byron Dorgan, a North Dakota Democrat who heads the Subcommittee on Interstate Commerce, is threatening to cut it off again.

NAFTA is a sticky word in Washington these days.

President Bush, Mexican President Felipe Calderón and Canadian Prime Minister Stephen Harper all defended the trade agreement at a recent summit in New Orleans. But Democratic contenders Barack Obama and Hillary Clinton say they will rework it. And much to the Bush administration’s chagrin, Congress just blocked a vote on a Colombian free-trade agreement.

Here at the border, trucking is not about politics. It’s about practicality.

One Mexican trucking company owner sees no benefit to sending drivers deep into the U.S. Similarly, many American U.S. truckers appear content depositing their goods at Laredo’s warehouses.

“I would have to have my drivers go from Monterrey to Dallas and come back empty with nothing to reload,” said Transportes Aguila de Oro owner Genaro Gonzalez Amaro, who chose not to participate in the demonstration program.

“I would have to have my drivers educated in English, get truck permits for the U.S., extra insurance – too many obstacles. It’s not feasible,” he said, shrugging. “This cross-border program is just politics, a pact they made without consulting anybody.”

Selling the program

In Washington, Federal Motor Carrier Safety Administration officials are struggling to prove the merits of an expanded cross-border program. Trucks crossing the border are inspected more frequently and thoroughly than trucks on U.S. roads, they say.

On this particular sunny Friday, inspectors pull Javier Gonzalez aside and tell him in Spanish that he’s violating rules.

Inspectors notice a homemade metal connector wrapped around an air hose. That tie could burst open and cause the vehicle to lose its brakes, they tell the 23-year-old driver.

They usher Mr. Gonzalez, who was carrying recyclable plastics across the border, to the center of the bridge’s inspection compound. There, they cite him for not speaking English and tell him to call his boss in Mexico City as well as a repairman.

Such incidents are proof of the quality of inspections, even with Mexican drivers like Mr. Gonzalez dropping off goods just across the U.S. border, say officials with the motor carrier administration.

“These Mexican carriers are the most scrutinized and inspected,” said John Hill, head of the motor carrier administration. “I have U.S. trucks I don’t have as good data on.”

But program opponents – notably a consortium of insurance companies and consumer safety groups known as Advocates for Highway and Auto Safety – cite the case of Trinity Industries of Mexico. The Piedras Negras-based company, which had the greatest number of Mexican trucks participating in the program until it dropped out in February, had amassed scores of violations.

Santos Pecina, the motor carrier administration’s Texas division field supervisor, says these violations were minor and tabulated only because the trucks had to undergo such extensive border inspections.

Read the entire article at Dallas Morning News

More an more, the truth about Mexican trucks is coming to light, and it is certainly not what OOIDA, The Teamsters and others have tried to convince you about. Oh, and the driver, Javier Gonzalez, who was inspected while the reporters were present? A shuttle or drayage truck. Not a line haul rig.

Four years ago, the Government got rid of a state-controlled company that lost $25 million a year turning out smoky buses and trucks that could barely climb Mexico’s mountains.

That same company, Consorcio Grupo Dina, is now operated by a team of businessmen and has an annual profit of $90 million on a new line of trucks and buses. It is one of five Mexican companies listed on the New York Stock Exchange.

Three weeks ago it announced a preliminary agreement in the United States market with the acquisition of Motor Coach Industries International of Phoenix, the largest bus manufacturer in the United States, in a stock deal worth $336.6 million.

It surprised many analysts that a Mexican company — especially one with a rocky past — made the first major cross-border acquisition in the new era of free trade among the United States, Canada and Mexico. A Precarious Position

Because Motor Coach Industries has operations in Canada, the acquisition creates one of the first new North American companies since the North American Free Trade Agreement was approved in Washington, and indicates that Mexican businesses are hardly waiting to be acquired by American companies once Nafta takes effect on Saturday.

The deal also reflects the precarious position that even strong Mexican companies face because of uncertainty over the value of the Mexican peso and the anemic performance of the Mexican economy, which in the last quarter declined 1.2 percent from the period a year earlier.

Analysts say it makes sense for a company like Dina to make major purchases now because a devaluation of the Mexican peso is possible in 1994 and would make any foreign acquisition more difficult and more costly. They also say that while diversifying across borders should be beneficial in the long run, it could weaken the company next year because it will divert resources at a time when growth in the Mexican economy — on which companies like Dina greatly rely — will continue to be restrained.

“This deal will probably hurt the short-term outlook for the company,” said Jorge Garza, an analyst with Vector, a financial services company in Mexico City. “In the long run, though, Dina is pursuing a diversification of its market that will help it avoid the kind of contraction it has suffered this year by relying only on the internal market.”

By most counts, Dina is one of the success stories of Mexico’s ambitious program to get the Government out of business. Since 1987, Mexico has sold off or shut down nearly 1,000 state-run businesses.

Diesel Nacional, the forerunner of Grupo Dina, was formed by the Government and Italian private investors in 1951, and for years was run without much attention to efficiency or service. The Mexican market was effectively closed and buyers had little choice but to take the underpowered, poorly designed trucks that Dina sold.

In 1989, a group of Mexican investors bought the company from the Government for $232 million. The package included Dina’s medium- and heavy-duty truck operations, as well as the company’s urban transit and long-distance bus plants.

Ernesto Moya Pedrola, 47, was recruited from a Mexico City financial services firm and made director general. His strategy for turning around the company had three thrusts — productivity, strategic alliances and assembly.

“There are no magic wands,” Mr. Moya said. “What we’re looking at is more volume, smaller margins, more efficiency and more competition.”

In May, the company signed a new contract with its 4,900 employees that based promotions on merit rather than seniority, and included productivity incentives of the type that the Administration of President Carlos Salinas de Gortari now proposes.

Productivity gains are obvious. In 1988, the last full year under state control, the company made and sold 2,967 trucks. With roughly the same number of employees, this year it will assemble and sell more than 12,000.

Since 1989, the company has also entered several strategic alliances. One of the most important is with Navistar, the maker of International trucks in the United States, which owns 17.5 percent of Dina’s truck operations. A Brazilian Connection Dina now sells essentially the same truck in Mexico as Navistar sells in the United States. Each company has agreed not to cross the border and sell in the other’s territory.

Dina’s bus operations have affiliated with the Brazilian manufacturer Marcopolo.

Since 1990, when the Mexican Government lifted regulations on bus fares, a new segment of the intercity bus business has opened with air-conditioned, luxury buses. Dina has a 49 percent market share of the intercity bus market and an even higher share of the new first-class segment, according to a Salomon Brothers report on Dina that was published in October.

The third arm of Dina’s strategy was to switch from manufacturing its own truck parts to buying them from suppliers — many in the United States — and becoming an assembler. Dina buys most major components for its trucks from United States companies like Cummins, Caterpillar and Detroit Diesel. Prospects Are Strong

On paper, Dina’s long-term market prospects are strong. During the economic crisis of the 1980’s, many Mexican companies could not afford to replace aging trucks in their fleets.

Roberto Swaine Bell, president of the association representing Dina’s 65 dealers, said that if the Government allowed interest rates to come down, Dina’s sales could surge in spite of Mexico’s weak economy

No, the dates are not incorrect in this story. This was published 15 years ago on December 27, 1993 in the New York Times Business section. You might ask what point does it make about the cross border program and Mexican trucks? If you read closely, you would understand. You are looking at serious business acumen on the part of Mexican businessmen, privatization of industries in Mexico which is fueling the emergence of a very strong and wealthy Mexican middle class. It shows the alliance between International Navistar and Dina, which explains why the old Dinas look suspiciously like IH Loadstars and Transtars of years past.Maybe this is what got Jimmy Hoffa up in arms. The proof that Mexican companies can compete on an equal plane as US companies and excel through ethical business practices and good labor agreements with their workers. And they can do so without the need for unions. Oh, and if you don’t recognize the name MOTOR COACH? INDUSTRIES, think GREYHOUND.

Leave it up to the opposition to take a minor point and run it up the pole until it becomes a major problem. Such is the case with the “English Proficiency Requirement” brought up by that silly little man, Byron Leslie Dorgan, in the Capitol Hill ambush of Secretary of Transportation Mary Peters. Let’s call him “Leslie”! That is such a manly and Senatorial sounding name!

CVSA Inspector guidelines state:

“In recognition of the three countries’ language differences, it is the responsibility of the driver and the motor carrier to be able to communicate in the country in which the driver/carrier is operating so that safety is not compromised. Driver is unable to communicate sufficiently to understand and respond to official inquiries and directions. Place driver out of service.”

So how do we determine the level of “proficiency” so that safety is not compromised? They leave that to the individual inspectors discretion.

What “Leslie” Dorgan tried to prevent Mary Peters from explaining about the English proficiency test is that the traffic control sign test is administered AFTER the primary English test in which the inspector asks questions in English to which the driver is expected to reply in kind.

Peters acknowledged that during border inspections, Mexican drivers are allowed to use any language that a U.S. inspector understands when answering questions to prove they recognize U.S. signs.

But she added that inspectors determine English proficiency through other questions, such as asking a driver’s name, what the truck is carrying and its destination.

“The inspector has a conversation with the driver,” Peters said.

Calvin L. Scovel III, the Transportation Department’s inspector general, told the panel that the road-sign quiz is “but one component of the English-language proficiency test.”

“This was one factor among others that the inspector could consider in determining whether a Mexican driver has English-language proficiency,” said Scovell

William Quade, associate administrator at the Federal Motor Carrier Safety Administration, said Mexican truck drivers are not asked to identify signs until they have demonstrated English proficiency.

“Our thinking was they’ve already established that they can communicate in English, and at some point in time we need to get on with the inspections,” Quade said after the hearing. “So we allow the inspection to continue in whatever language is appropriate that both the inspector and the driver understand.”

That’s simple enough and the facts that SenatorLeslie Dorgan did not want entered into the record.

So who the hell cares if they answer in English, Spanish or Spanglish? The point is that they understand the questions being posed to them in English. This shows a certain proficiency in the language.

Ever been in Laredo and heard the American “Professional” truckers, many of them OOIDA members, harassing the Mexican drivers on the CB? Do you think they don’t understand what the drivers are saying about their mamas and the suggestions they are making about their sisters? Sure they do and that is why they respond in SPANISH! That is a form of English proficiency.

Traffic signs are universal, in shape and color. It doesn’t take a rocket scientist to determine what they mean.

Like Secretary Peters, I too, have driven extensively in Mexico. My proficiency in speaking Spanish is laughable. I can read the language well and I have had absolutely no problem navigating the country whereever my wonderings take me. Common sense and logic.

But the opposition will continue to beat this horse like they beat their meat, until it’s dead or until each and every Mexican trucker who enters this country speaks perfect Oxford English, or until pigs fly.

And a little known factoid is that in Mexican schools, English is a required course from grade six on until graduation. It is not elective, it is required. People can comprehend when they want to but are embarrassed to speak it because of the fear of being made fun of. And there are no shortage of American drivers willing to make fun and ridicule them.

And consider the hundreds of thousands of Mexican tourists who legally visit this country each year. Most don’t speak English but are able to arrive at their destinations and return safely and without incident.

As Willy Shakesphere commented so many years ago when asked about the Mexican trucker, “Mucho a dodo about nada”!

Trade has become a whipping boy in this year’s electoral campaign. As the presidential contest got under way in Iowa a few short weeks ago, some candidates railed about the impact of trade on manufacturing jobs, pointing to a Maytag plant that recently closed, its jobs sent overseas.

But those jobs didn’t go overseas; they came to Ohio. Whirlpool, which bought Maytag two years ago, chose to consolidate some of its newly acquired manufacturing facilities in the Buckeye State, adding hundreds of new jobs.

Facts are stubborn things, and so it is with trade in general and the North American Free Trade Agreement in particular. Contrary to what some of the candidates are saying, Ohio is benefiting from trade and from NAFTA in extraordinary ways, and no one more than the state’s manufacturers.

To say so is not to dismiss the troubles Ohio manufacturers face; they are serious, and they have serious causes that federal and state officials must address. But the best doctor in the world can’t write a proper prescription - let alone promise a cure - without a fact-based diagnosis.

So start with the facts. According to the U.S. Department of Commerce, 55 percent of all Ohio exports go to Canada and Mexico. For the nation as a whole, just 35 percent of exports go to our NAFTA partners. In other words, Ohio depends on exports to Canada and Mexico - markets open to Ohio products thanks to NAFTA - to a far greater degree than other states. Ohio’s exports to Canada and Mexico have more than doubled since 1994, when NAFTA came into force.

The NAFTA market is especially important for Ohio manufacturers. According to the Bureau of Labor Statistics, a total of 777,000 Ohioans are employed in manufacturing. These workers produced $36.5 billion worth of exports in 2006. Exports to Canada and Mexico account for about $20 billion in Ohio’s manufacturing output.

Do the math. Ohio manufacturers are bringing in export revenue of $25,000 for every factory worker they employ. The average manufacturing worker brings home a salary of about $42,000. How could Ohio manufacturers make their payroll without their huge and growing sales to Canada and Mexico? The short answer is, they couldn’t.

Click the “News Source” to continue reading.

After the vote tallies are in from today’s primary elections in Texas and Ohio, the presidential candidates should stop talking about gutting international trade treaties.

Both Barack Obama and Hillary Clinton supported the North American Free Trade Agreement when campaigning in Texas but promised Ohio voters that they would force Canada and Mexico to renegotiate NAFTA.

The reason for two positions on the same subject can be attributed to pandering for votes in Ohio, which has lost manufacturing jobs in recent years, whereas Texas’ economy has grown significantly since Congress approved the NAFTA treaty promoted by former President Clinton.

Since the three-nation trade agreement became law in 1993, manufacturing jobs have decreased. But that number had been decreasing since 1979.

Actually, U.S. manufacturing output has increased 66 percent since the NAFTA pact was signed, due to improved productivity, mainly from high-tech automation.

Since the signing of the Permanent Normalized Trade Relations pact with China in 2000, China, with wage costs below those in Mexico, has become a worldwide manufacturing giant, along with other Asian economies and India.

Once threats are made to go back on treaties with some nations, treaties with all nations are called into question. This is not the way to win trust and friendship among nations.

While campaigning in Texas, Hillary Clinton said NAFTA has benefited Texas, along with other parts of the nation.

Obama said any talk of repealing NAFTA was unrealistic since the loss of NAFTA “would actually result in more job loss . . . than job gains.”

A few days later both candidates told Ohio voters that they would pressure Canada and Mexico to renegotiate NAFTA’s labor and environmental provisions to better favor the United States.

Understandably, these campaign promises did not sit well with officials in Canada and Mexico. Canada’s trade minister said his country might renegotiate trade agreements that control oil and natural gas coming into the United States.

Mexico could demand new terms for agricultural trade that would hurt U.S. farmers and cost American jobs.

In the 15 years since NAFTA was approved, entire industries have been established that would be wrecked by initiating a process that unravels the three-nation agreement.

NAFTA’s labor and environmental provisions were negotiated by former President Clinton and are similar to agreements included in the more recently approved U.S.-Peru Trade Promotion Agreement.

Pulling out of NAFTA would devastate the economies along the U.S.-Mexico border, make the United States an unreliable trading partner and would do nothing to bring back manufacturing jobs to Ohio.

As the presidential campaign progresses, voters can only hope for less political rhetoric about trade and more political reality.

Over recent months, the level of violence along the U.S.-Mexican border has begun to rise substantially, with some of it spilling into the United States. Several months ago, the Mexican government began military operations on its side of the border against Mexican gangs engaged in smuggling drugs into the United States. The action apparently pushed some of the gang members north into the United States in a bid for sanctuary. Low-level violence is endemic to the border region. But while not without precedent, movement of organized, armed cadres into the United States on this scale goes beyond what has become accepted practice. The dynamics in the borderland are shifting and must be understood in a broader, geopolitical context.

The U.S. border with Mexico has been intermittently turbulent since the U.S. occupation of northern Mexico. The annexation of Texas following its anti-Mexican revolution and the Mexican-American War created a borderland, an area in which the political border is clearly delineated but the cultural and economic borders are less clear and more dynamic. This is the case with many borders, including the U.S.-Canadian one, but the Mexican border has gone through periods of turbulence in the past and is going through one right now.

There always have been uncontrolled economic transactions and movements along the border. Both sides understood that the cost of controlling and monitoring these transactions outstripped the benefit. Long before NAFTA came into existence, social and economic movement in both directions — but particularly from Mexico to the United States — were fairly uncontrolled. Borderland transactions in particular, local transactions in proximity to the border region (retail shopping, agricultural transfers and so on), were uncontrolled. So was smuggling. Trade in stolen U.S. cars and parts shipped into Mexico, labor from Mexico shipped into the United States, etc., were seen as tolerable costs for an open border.

A low-friction border, one that easily could be traversed at low cost — without extended waits — was important to both sides. In 2006, the United States imported $198 billion in goods from Mexico and exported $134 billion to Mexico. This makes Mexico the third-largest trading partner of the United States and also makes it one of the more balanced major trade relationships the United States has. Loss of Mexican markets would hurt the U.S. economy substantially. The U.S. advantage in selling to Mexico is low-cost transport. Lose that through time delays at the border and the Mexican market becomes competitive for other countries. About 13 percent of all U.S. exports are bought by Mexico.

Not disrupting this trade and not raising its cost has been a fundamental principle of U.S.-Mexican relations, one long predating NAFTA. Leaving aside the contentious issue of whether illegal immigration hurts or helps the United States, the steps required to control that immigration would impede bilateral trade. The United States therefore has been loath to impose effective measures, since any measures that would be effective against population movement also would impose friction on trade.

The United States has been willing to tolerate levels of criminality along the border. The only time when the United States shifted its position was when organized groups in Mexico both established themselves north of the political border and engaged in significant violence. Thus, in 1916, when the Mexican revolutionary Pancho Villa began operations north of the border, the U.S. Army moved into Mexico to try to destroy his base of operations. This has been the line that, when crossed, motivated the United States to take action, regardless of the economic cost. The current upsurge in violence is now pushing that line.

The United States has built-in demand for a range of illegal drugs, including heroin, cocaine, methamphetamines and marijuana. Regardless of decades of efforts, the United States has not been able to eradicate or even qualitatively reduce this demand. As an advanced industrial country, the United States has a great deal of money available to satisfy the demand for illegal drugs. This makes the supply of narcotics to a large market attractive. In fact, it almost doesn’t matter how large demand is. Regardless of how it varies, the economics are such that even a fraction of the current market will attract sellers.

Even after processing, the cost of the product is quite low. What makes it an attractive product is the differential between the cost of production and the price it commands. In less-developed countries, supplying the American narcotics market creates huge income differentials. From the standpoint of a poor peasant, the differential between growing a product illegal in the United States compared with a legal product is enormous. From the standpoint of the processor, shippers and distributors, every step in the value chain creates tremendous incentives to engage in this activity over others.

There are several factors governing price. The addictive nature of the product creates an inelastic demand curve in a market with high discretionary income. People will buy at whatever the price and somehow will find the money for the purchase. Illegality suppresses competition and drives cartelization. Processing, smuggling and distributing the drugs requires a complex supply chain. Businesses not prepared to engage in high-risk illegal activities are frozen out of the market. The cost of market entry is high, since the end-to-end system (from the fields to the users) both is a relationship business (strangers are not welcome) and requires substantial expertise, particularly in covert logistics. Finally, there is a built-in cost for protecting the supply chain once created.

Because they are involved in an illegal business, drug dealers cannot take recourse to the courts or police to protect their assets. Protecting the supply chain and excluding competition are opposite sides of the same coin. Protecting assets is major cost of running a drug ring. It suppresses competition, both by killing it and by raising the cost of entry into the market. The illegality of the business requires that it be large enough to manage the supply chain and absorb the cost of protecting it. It gives high incentives to eliminate potential competitors and new entrants into the market. In the end, it creates a monopoly or small oligopoly in the business, where the comparative advantage ultimately devolves into the effectiveness of the supply chain and the efficiency of the private police force protecting it.

That means that drug organizations evolve in several predictable ways. They have huge amounts of money flowing in from the U.S. market by selling relatively low-cost products at monopolistic prices into markets with inelastic demand curves. Second, they have unique expertise in covert logistics, expertise that can be transferred to the movement of other goods. Third, they develop substantial security capabilities, which can grow over time into full-blown paramilitary forces to protect the supply chain. Fourth, they are huge capital pools, investing in the domestic economy and manipulating the political system.

Cartels can challenge — and supplant — governments. Between huge amounts of money available to bribe officials, and covert armies better equipped, trained and motivated than national police and military forces, the cartels can become the government — if in fact they didn’t originate in the government. Getting the government to deploy armed forces against the cartel can become a contradiction in terms. In their most extreme form, cartels are the government.

Drug cartels have two weaknesses. First, they can be shattered in conflicts with challengers within the oligopoly or by splits within the cartels. Second, their supply chains can be broken from the outside. U.S. policy has historically been to attack the supply chains from the fields to the street distributors. Drug cartels have proven extremely robust and resilient in modifying the supply chains under pressure. When conflict occurs within and among cartels and systematic attacks against the supply chain take place, however, specific cartels can be broken — although the long-term result is the emergence of a new cartel system.

In the 1980s, the United States manipulated various Colombian cartels into internal conflict. More important, the United States attacked the Colombian supply chain in the Caribbean as it moved from Colombia through Panama along various air and sea routes to the United States. The weakness of the Colombian cartel was its exposed supply chain from South America to the United States. U.S. military operations raised the cost so high that the route became uneconomic.

The main route to American markets shifted from the Caribbean to the U.S.-Mexican border. It began as an alliance between sophisticated Colombian cartels and still-primitive Mexican gangs, but the balance of power inevitably shifted over time. Owning the supply link into the United States, the Mexicans increased their wealth and power until they absorbed more and more of the entire supply chain. Eventually, the Colombians were minimized and the Mexicans became the decisive power.

The Americans fought the battle against the Colombians primarily in the Caribbean and southern Florida. The battle against the Mexican drug lords must be fought in the U.S.-Mexican borderland. And while the fight against the Colombians did not involve major disruptions to other economic patterns, the fight against the Mexican cartels involves potentially huge disruptions. In addition, the battle is going to be fought in a region that is already tense because of the immigration issue, and at least partly on U.S. soil.

The cartel’s supply chain is embedded in the huge legal bilateral trade between the United States and Mexico. Remember that Mexico exports $198 billion to the United States and — according to the Mexican Economy Ministry — $1.6 billion to Japan and $1.7 billion to China, its next biggest markets. Mexico is just behind Canada as a U.S. trading partner and is a huge market running both ways. Disrupting the drug trade cannot be done without disrupting this other trade. With that much trade going on, you are not going to find the drugs. It isn’t going to happen.

Police action, or action within each country’s legal procedures and protections, will not succeed. The cartels’ ability to evade, corrupt and absorb the losses is simply too great. Another solution is to allow easy access to the drug market for other producers, flooding the market, reducing the cost and eliminating the economic incentive and technical advantage of the cartel. That would mean legalizing drugs. That is simply not going to happen in the United States. It is a political impossibility.

This leaves the option of treating the issue as a military rather than police action. That would mean attacking the cartels as if they were a military force rather than a criminal group. It would mean that procedural rules would not be in place, and that the cartels would be treated as an enemy army. Leaving aside the complexities of U.S.-Mexican relations, cartels flourish by being hard to distinguish from the general population. This strategy not only would turn the cartels into a guerrilla force, it would treat northern Mexico as hostile occupied territory. Don’t even think of that possibility, absent a draft under which college-age Americans from upper-middle-class families would be sent to patrol Mexico — and be killed and wounded. The United States does not need a Gaza Strip on its southern border, so this won’t happen.

The current efforts by the Mexican government might impede the various gangs, but they won’t break the cartel system. The supply chain along the border is simply too diffuse and too plastic. It shifts too easily under pressure. The border can’t be sealed, and the level of economic activity shields smuggling too well. Farmers in Mexico can’t be persuaded to stop growing illegal drugs for the same reason that Bolivians and Afghans can’t. Market demand is too high and alternatives too bleak. The Mexican supply chain is too robust — and too profitable — to break easily.

The likely course is a multigenerational pattern of instability along the border. More important, there will be a substantial transfer of wealth from the United States to Mexico in return for an intrinsically low-cost consumable product — drugs. This will be one of the sources of capital that will build the Mexican economy, which today is 14th largest in the world. The accumulation of drug money is and will continue finding its way into the Mexican economy, creating a pool of investment capital. The children and grandchildren of the Zetas will be running banks, running for president, building art museums and telling amusing anecdotes about how grandpa made his money running blow into Nuevo Laredo.

It will also destabilize the U.S. Southwest while grandpa makes his pile. As is frequently the case, it is a problem for which there are no good solutions, or for which the solution is one without real support

George Friedman at www.stratfor.com.