Violence, Governance, and Economic Development at the US-Mexico Border: The Case of Nuevo Laredo and its Lessons

Paper to be Presented at the Puentes Consortiums 2nd Annual Symposium on US-Mexico Border Security

February 2011

Freddy Mariez Escuela de Graduados en Administracion y Politicas Publicas Instituto Tecnologico de Monterrey

Leonardo Vivas Carr Center for Human Rights Policy Harvard Kennedy School

Contents Introduction Comparative Advantage of Nuevo Laredo as a Border City Shape and Strength of Drug Traffic Organizations (DTOs): The Mexican Logic The Growing Influence of DTOs in Nuevo Laredo Like Santa Claus, Violence always shows up Sister Cities and its Impact on NLs Elite The Big Push to Modernize Local Institutions Conclusions Annexes The Michael Porter Diamond Model Maps Tables Figures Graphs References

Introduction 1 This chapter is an attempt to make sense of the impacts and responses to the current war on drugs in Nuevo Laredo, a border city with the U.S. that has been on and off at the center of the mayhem of violence confronting Mexico during the last decade. Most analyses about the narcotics wars in Mexico tend to center either on the business logic of the narcotics traffic and its corollary: the best security strategies to deal with it 2or in the daily narrative of the violence and its deadly body count 3, usually provided by journalists with enough guts to bear directly with the human tragedies it causes. Our angle is different. We look at the impacts the Drug Trafficking Organizations (DTOs) have had in Nuevo Laredo as well as the prospects for recovery in a city that, like many others in Mexico has fallen under a nefarious spell, but that for decades has been consistently building for the future. As with any other type of business, narcotics production and distribution take place in specific geographical and human locations. Though drug trafficking in Nuevo Laredo has always been part of its economic and social landscape, until only recently the role narcotics played was relatively marginal in a city whose people have mainly devoted their lives to the different facets of international trade to

Many thanks and appreciation for three great partners: Mary Hilderbrandt, Executive Director of the Mexico Program at the Harvard Kennedy School. Mary has provided ample support to complete a broader research on how Mexican border cities are responding to the impacts of the war on drugs. Jos Gerardo Pepe Rodrguez Herrera from Universidad Autnoma de Tamaulipas granted one of the authors guidance in the meanders of Nuevo Laredos life, logistic support and contacts without which most probably the study would have never taken place. Finally Federico Schaffler from the local municipality graciously handled a tight agenda and maximized contacts with very busy people. Thanks to Sylvia Longmire, who reviewed the first draft, as well as two anonymous reviewers from the organizers. 2 See for instance John Baylor and Roy Godson, Organized Crime & Democratic Governability, Mexico and the U.S.Mexican Borderline (Pittsburgh, University of Pittsburgh Press, 2000), or Robert J. Bunker, Strategic threat: narcos and narcotics overview, Small Wars & Insurgencies, Volume 21, Issue 1 March 2010 , pages 8 29. Also specialized consulting organizations have devoted extensive research efforts to analyze the changes in the narcotics industry and traffic in Mexico on more global terms. See Stratfor, http://web.stratfor.com/images/writers/MEXICAN_DRUG_CARTELS_UPDATE.pdf?fn=9616243265. Checked on January 2, 2011. 3 Perhaps the best example is the Frontera List, a follow up Google Group composed by a long list of journalists, scholars, and others about violence in Mexico.

nurture and derive advantages from their location at a strategic point in the border with the U.S. The chapter is intended as an exploration of the assets and specific circumstances both negative and positive the city and its leaders have at their disposal to overcome the narcotics spell once (and if, a huge if) the influence of the narcotics is bound to diminish. In this sense, it draws from different perspectives. One is a particular understanding of local competitiveness by tackling both economic and noneconomic factors. In this regard we explore the nature of the economic advantages, such as location and specialization but also the role of the local elite in providing leadership or the importance of sharing a common destiny with Laredo, its sister city across the border. If we were to define it in broad terms we could call it an exploration into the political economy of competitiveness in a border city. Sections one and four of the paper argue in that direction. A second angle examines the specifics of both drug trafficking organizations (DTOs) involved in Nuevo Laredo and their impact on the citys life over the last 10 to 15 years. We explore those aspects of the Mexican and the local context in three sections that allow us to understand the kind of impacts NL has been subject to, especially after President Caldern declared the current war on drugs. We shed some light on the structure of the narcotics business and its actors by looking at Colombia, in order to make sense of the overall rationale moving the narcotics business in that country and why circumstances have been different in Mexico. Though not intended as a systematic comparison, in the sense of considering a set of common factors, it seeks to understand the specific impacts the city has been experiencing with other examples in mind. In order to look at the narcotics industry both in Colombia and Mexico we draw on the Competitiveness Diamond developed by Michael Porter and used by many followers around the world to examine why some industries achieve sound growth
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in particular locations and under a given set of circumstances. As a result of examining the main DTOs involved in Nuevo Laredo we end up arguing that, for reasons that will be explored in sections 2, 3, and 4, the main difference between Nuevo Laredo and other border cities in Mexico is the way how social capital has played out. It seems that in the city focus of our analysis the positive side of social capital has been stronger than the negative one. A third and final angle of examination looks into local government as an actor. As part of the broader process of democratization in Mexico in the last 10 years, a quiet and modest revolution has been taking place throughout the nation at the local level. For reasons that are explored in the last section of the paper, Nuevo Laredo seems to be living its own peaceful revolution in government. We argue that no matter how much political will power is displayed to make things happen, the shift in governance policies taking place in NL occur against the backdrop of the narcotics drama and as a direct response to it. To what extent it will prove successful is still a pending matter and we address that and other issues in the conclusions. A short digression on method and analysis is warranted at this point. When we argue about the exploratory nature of this research, what we imply is that no given set of hypothesis are subject to testing. It is neither strictly a historical account of the impacts of the narcotics in a border city nor it is a theoretical interpretation. Given the political economy complexities of a city under the stress of violence, it brings together data about performance, as well as the peculiar commercial ethos created by international trade and its influence over both elite and government. Last but not least, it looks into the specific actions and strategies by the local government regarding decentralization, at times when Mexico has been undergoing very important political changes.

The same holds true for the use of evidence. We use an array of evidence: historical, economic and sociological, as well as that deriving from 20 interviews made to a selected group of actors (businessmen and economic organizations, government and parastatal organizations, academic both in Nuevo Laredo and Laredo, the media, religious, civil society leaders, law enforcement officers, and politicians). All interviews were made under a confidentiality agreement; thus names are not provided. As a result of this methodological choice we believe that whatever may be lost in analytical rigor gains in richness of details, which serve the purpose of making sense of the prospects of a real city and its people in turbulent times. Comparative Advantage of Nuevo Laredo as Border City Nuevo Laredo (NL) is as typically a border city as it is atypical. It is typical in the sense that everything revolves around the activities taking place at the border. Its economy, its culture, and a very acute commercial ethos stem from the citys direct involvement in the business of commercial border crossing. When examined through Latin American eyes, though, it does not fit the typical image of the border city. The visitor will not find the dirty streets, the piles of garbage everywhere, and the cloud of child beggars present in other border cities across the region. First impressions are not always accurate. But in NL this first impression seems to point to other important aspects that make the city rather special. In NL a strong sense of history combines with the awareness on the part of its economic and political elite that its location at a strategic crossroads into the US marks its life today and well into the future. The sense of history will be examined later, but the citys location clearly remains its fundamental comparative advantage. To what extent NLs elites have been able to translate those advantages into competitive ones remains to be seen.

Nuevo Laredo is part of a wider Tamaulipas strategic terrestrial system that gained full force after 1994, when NAFTAs free trade agreements began to be enforced. When considered as a part of that system, Nuevo Laredo fares well in most social and economic indicators. As Graph 1 shows, it is among the urban centers where population grows more rapidly in the state. Its population increased at 2.42 percent per year in 2007, having doubled its population in the last 37 years, from 152,253 inhabitants in 1970 to more than 355,827 in 2005. In terms of education and health provision Nuevo Laredo ranks among the five better performing municipalities, as well as regarding other basic services such as electricity and paved roads, according to a regional study conducted in 2007. 4 It is in water provision and related services where NLs results are weaker. 3.1 percent of the population lack water services, and 8.4 percent lack sewage and storm drainage. 5 These deficits in social service provision are relevant when in a later section we look into the actions of the local government. In terms of per capita income NL enjoys the highest income in the state, with $10,888 per person in 2005, closely followed by Matamoros and Reynosa ($10,128 and $9,980 per capita, respectively). 6 This favorable situation occurs at a time when the economy of the state as a whole has had a higher growth rate than the nations average (4th in the federal rank), though this has not translated into a parallel contribution to the nations GDPits ranking dropped from 6th in 1970 to 12th in 2004.7 Paradoxically, there has also been a widening gap between the states growth rate with that of the nation, which can be explained by the proximity to the U.S. at a time when Mexico opened up to trade with its northern neighbor.

Programa Universitario de Estudios sobre la Ciudad (PUEC), PREDUST, Programa Estratgico de Desarrollo Urbano Sustentable de Tamaulipas, UNAM/Instituto Tamaulipeco de Vivienda y Urbanismo, 2007, p.41. 5 Ibid, p.49 6 Ibid, p.46 7 Ibid, ps. 51-52
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Only in 2006 Tamaulipas grew at 7.9 percent while on average Mexico had a growth rate of 4.2 percent. 8 As part of this wider regional context, Nuevo Laredo has been taking advantage of its location in the border with the U.S. As documented by the municipal governments economic unit, Nuevo Laredo is the land port with the highest movement of merchandise in the world and carries out the highest number of international trade operations in the continent. It has specialized in truck wholesale trade, providing the entire chain of services, including cargo, customs logistics, and warehousing so that merchandise can cross the border more rapidly and more efficiently there than at through any other border crossing. 9 In terms of location, on the Mexican side NL is connected with 80 percent of Mexican consumers, directly covering the northern, central, and western regions by the National Highway. In the U.S., Laredo is easily connected with around 80 percent of US consumers through Interstate Highway 35 and its many interconnections. In Texas only Nuevo Laredo is directly connected to San Antonio (138 mi), Houston (303 mi), and Dallas (390 mi). 10 Map 1 provides a more graphic image of the main transport route from NL to the rest of Mexico and to the U.S. With the rest of the world, NL is connected to South East Asia through the Pacific via of the Lazaro Cardenas Manzanillo Port, and with Europe through the Atlantic from the ports of Tampico Madero/Altamira. 11 From a territorial perspective, however, Nuevo Laredo, like Tamaulipas more generally, belongs to the Monterrey/Nuevo Leon economic pole, Mexicos industrial hub, which for the last few decades has also operated as a source of cultural and intellectual leadership.

8 9

Ibid, p.54 Institute for Competitiveness and International Commerce of Nuevo Laredo (ICCE), Nuevo Laredos Competitive Advantages, June 2010 ; http:/www.iccedenuevolaredo.org 10 ICCE, Ibid, no page number 11 Ibid

Given the circumstances described above, NL has become the most attractive border crossing with the U.S. in terms of logistics, infrastructure, human capital, and intensive use of telecommunications and information technologies. Thirty-nine percent of Mexicos total international trade activity is mobilized through Nuevo Laredo. 12 After NAFTA was implemented, border trade between Mexico and the U.S. more than doubled, from $106 billion in 1994 to $252.5 billion in 2004. When Nuevo Laredos World Trade Bridge was opened in year 2000, the areas strategic value was confirmed as the greatest and most important land port for international trade in the American continent. With the bridge, the Laredo region obtained the much-needed infrastructure to assure strong growth for the coming decades. This can be measured by vehicle crossings. In the first semester of 2010 vehicle crossings through NL experienced growth of around 23 percent as compared to the same period in 2009. 13 However, this strategic location has not played equally well for all sectors. In the case of maquiladoras for example, while NL counts with several well-established industrial parks, the number of companies locating in the city over the years has stagnated. Still, the role of manufacturing is very important, accounting as it does for around 30 percent of local employment generation. 14 Several interviewees pointed out that growth in output and employment generation has not been based on an increase in the number of firms but rather on the expansion of the 53 maquiladoras already established. 15 They also argued that compared to other locations such as Reynosa in Tamaulipas or Juarez and Tijuana, NLs main advantage in terms of labor relations is a minimal level of industrial conflicts and a low turnover of the labor force. These two factors added to the location advantage; however, they
12 13

Ibid Ibid 14 Ibid 15 Mentioned in interviews by government officials.

have not been sufficient to attract many new manufacturing companies. Rather, the trend is of those already established to either expand capacity or to establish new plants oriented to new products. 16 Apart from the disincentives created by growing violence, the stagnation of manufacturing in Nuevo Laredo, which also applies to other sectors as big supermarkets, mall construction, and even tourism, may also be associated to Tamaulipas overall competitiveness scores. These have been recently measured by the Monterrey Institute of Technology in a study comparing Mexican states on the basis of three clusters of factors, which are evaluated in terms of the advantages or disadvantages they provide any given state. 17 The four clusters studied are economic performance, business environment, infrastructure, and government efficiency. When ranked with the rest of Mexican states, Tamaulipas shows a polarized structure of advantages and disadvantages. The state consistently scores high in economic performance and government efficiency whereas the business environment and infrastructure scores tend to be consistently low. This is shown in figure 1. This observation, however, may not be as true in NL as it is for the rest of the state, at least regarding transportation infrastructure. As mentioned before, the city has been very active in partnering with Laredo in the U.S. to modernize transportation infrastructure, as was the case of the 2000 bridge. Economic indicators in the city are consistent with this picture. According to the data and to the testimony of local government officials, economic performance has been higher than in other cities, with unemployment showing lower levels than the national and state average during the crisis years (6.5 percent in 2010). 18 Also

16 17

At least 4 interviewees both from government and businessmen mentioned this issue. EGAP, La Competitividad de los Estados Mexicanos: Fortalezas ante la crisis, Tecnologico de Monterrey, Monterrey, 2010 18 ICCE, Ibid

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vehicle crossings across Nuevo Laredos World Trade Bridge increased steadily during 2010, from 17.31 percent in January to 26.84 percent in May. 19 What is true for the 2010 picture holds also true for the trend in the last ten years. During the last decade, Tamaulipas has improved its scores in the annotated favorable factors (economic performance and government efficiency) while it deteriorated over time in those factors ranking unfavorably in 2010, according to the same exercise by ITESM (Figure 3). In sum, Nuevo Laredo counts with important comparative location advantages that have solidified over time, adding selectively competitive advantages in the transportation and international trade sector, thus granting the city a better economic performance despite both the economic downturn and the impact of drug-related violence. Shape and Strength of Drug Trafficking Organizations (DTOs): The Mexican Logic Nuevo Laredos location has been a doubled edged sword. The advantages described above have also played out in the special consideration DTOs have given to the city in the last decade, during which a turf war for the control of drug traffic across the border has tainted daily life and the citys future. The prospects of Nuevo Laredos international commercial role have been greatly affected by the wave of violence derived from the drug wars. But the extent and characteristics of that impact, as well as the evolution and role of DTOs in NL today, may not become fully clear to the reader without at least a glance of the greater picture of the narcotics business in Mexico and the vast institutional threats it poses to Mexican society. In addition to that it is useful to compare, albeit summarily, the evolution of Mexicos drug

19

Ibid

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business to that of other countries like Colombia where it has also had a deep impact on society, business and politics. This section provides such an overview. In Mexico, both journalist-oriented books as well as recent fiction commonly portray the narcotics business as having direct links with political power. A good example is the account provided by Diego Enrique Osorio, journalist of Milenio, a media conglomerate originated in Monterrey, who narrates how different politicians and businessmen in Nuevo Len, Mexicos industrial hub, were until very recently connected to reputed narcotics barons on very familiar terms. 20 He also shows how this trend goes back to the specific history of the Sinaloa cartel, showing how since the early 20th century both the elite of the state of Sinaloa and the criminal groups became closely intertwined. A more rigorous analytical perspective, perhaps the most detailed account of this connection between power and narcotics business is found in the work of Luis Astorga. A sociologist and historian, Astorga traces the long evolution of the drug business and the criminal organizations in Mexico during the 20th century and how they have become the current DTOs. 21 The main contention of his work is that the centralized nature of Mexicos political regime during the 20th century served as a powerful regulating force in determining who would be a player in the drug production and trafficking business.

20 21

Diego Enrique Osorio, El cartel de Sinaloa, Una historia del uso poltico del narco. Grijalbo, Mxico, 2009. Luis Astorga, Seguridad, traficantes y militares. El poder y la sombra, Tusquets, Spain, 2007 for a long

historic narrative. A more recent work is Luis Astorga and David A. Shirk, Drug Trafficking Organizations and Counter-Drug Strategies in the U.S.-Mexican Contrext, Working Paper Series on U.S.-Mexico Security Cooperation, Woodrow Wilson Center and the Trans-Border Institute at the University of San Diego, April 2010.

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The richness of detail of the convoluted story provided by Astorga is helpful to characterize the shape and dynamics of the Mexican narcotics industry, as well as to trace a contrast with Colombia, its most important predecessor in the illegal drug business in Latin America. In order to provide a graphic description of the business structure and factors we use Michael Porters scheme characterizing competitiveness of a given industry or sector. Using Porters model serves two purposes: one, it helps to portray the complexities of factors intervening in the success of the narcotics industry; two, it allows us to compare with Colombia, a different case in its nature. For a brief description of the Porter model see Annex 1. The Colombian narcotics industry developed following a classic industrial organization evolution. The structure and strength of the industry were essentially shaped by market forces, both from the factors and the demand side, with a relatively important influence of related industries from which experience and know-how was acquired. 22 Conversely, the role of government in shaping both the structure and factors of the industry was very mild, if only because the Colombian central state has been historically weak. During most of Colombias history though less so today the central state has had limited control or leverage over many regions of the country. 23 Until recently, the scant presence of the government in granting minimum security conditions in vast portions of the territory led bandits, insurgents or paramilitaries to fill the void, especially in regions where mountain ranges and jungle predominate. In other words, for long periods of time in Colombia the monopoly of force in the hands of the state has been close to fiction. As a consequence, the growth of DTOs evolved taking advantage of factor endowments such as low accessibility to

A good part of the inputs informing our Porter-based scheme are taken from Francisco Thoumi, Political Economy and Illegal Drugs in Colombia, Boulder, L-Rienner, 1995. 23 David Bushnell, The Making of Modern Colombia, A Nation In Spite of Itself (Berkeley, Univ. of California Press, 1993).

22

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the regions where cultivation of coca adapts perfectly, or the high level of violence plaguing the country after 1948. In contrast, Mexicos picture was starkly different. According to Astorga the growth and structure of the narcotics business in Mexico during the 20th century were directly tied to the Mexican political system. Over time this involvement switched from the states to the federal level and back, with different institutions performing a leading role in regulating the narcotics market. During the long era of the Partido Revolucionario Institucional (PRI), the centralized state held almost absolute control over the regional location of production and traffic of narcotics. 24 Figure 3 compares the industrial organization of the narcotics industry in Mexico with that of Colombia following Michael Porters competitive diamond. The strong centralization around the executive branch helped to exercise tight control over the states, both by appointing governors and overseeing most of other typical government functions. As a result, the illegal drug business did not emerge in Mexico separated from the political system of the party-state. An example of this is a reference made by Jorge Castaeda, Mexicos former Foreign Affairs Secretary under Vicente Fox, regarding remarks made by a high U.S. official during the De la Madrid administration (1982-1988) pointing openly to the connections of Mexican governors and other high officials with drug barons. 25 The same kind of allegations have been made about the Salinas de Gortari administration (1988-1994), whose brother was killed allegedly due to his connections to organized crime. 26 As soon as the transition to full democratization gained force, the traditional social alliances underlying the workings of the narcotics industry also started to break down. At both the national and the state level, the capacity of the Mexican state to mediate and, at best,
24 25

Luis Astorga, Ibid, no page Rubn Aguilar V. and Jorge Castaeda, El Narco: La guerra fallida, Santillana, Mxico, 2009. 26 This was a recurrent theme in many of the interviews, especially with members of the press.

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to control who would be main players in the narcotics business was undermined. As opposition forces strengthened and the PRI lost important pillars of power, the mediation role of specific federal agencies or local influential leaders in the drug business diluted. 27 From the year 2000 onwards, the structure of the business changed dramatically as a consequence of the breakdown of the brokerage system functioning around the Mexican state. After the hegemony of the PRI crumbled and a more competitive democratic system emerged, the structure of the narcotics business fragmented, becoming more market oriented like Colombia, with less systemic connections between specific political actors and illegal drugs groups. However, part of the old logic of the system remains, though mainly the political connections are now concentrated at to the state and local level. This is especially true in border provinces, inasmuch as they remain the last commercial link with the U.S. market. Thus, for competing DTOs cities such as Ciudad Jurez and Nuevo Laredo have become key locations in their turf wars. This explains the acute levels of violence in Jurez and the growing trend to target local and state politicians and other officials in Tamaulipas during 2010 and 2011. The violence associated with the narcotics traffic increased dramatically after 2007 when President Caldern declared an open war on drugs. Whatever the rationale behind this decision, 28 it was made despite the absence in Mexico of solid institutional and legal mechanisms to effectively enforce the law in a highly murky market and with so many incoherent law enforcement branches 29 This has led to a cycle of violence that then calls for

Ibid Interpretations range from the need to reclaiming a shaky legitimacy after winning a highly contested election to a strategic step to clean up the prospects for Mexico entering the ranks of promising BRICs in a global world. 29 The school of Government and Public Policy (EGAP) from the Tecnolgico de Monterrey has prepared a set of systemic proposals to overhaul the legal and prosecution system in Mexico. See EGAP, Informe de avance de las Propuestas del Tecnolgico de Monterrey para mejorar la Seguridad Pblica en Mxico, October 2010
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27

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militarization in those regions where open war breaks out, which in turn brings about more intense levels of violence. The spiraling of violence in recent years is shown in Graph 3. Since 2007 the number of violent actions deriving one way or another from narcotics production and traffic has shot up from over 25 per cent to more than 42 percent nationwide. A consequence of this, reported daily by the media, is that in the last few years violence has spread up to regions believed to be unreachable by the narcotics wars, as is the case of tourism-rich areas like Acapulco or in Monterrey, the main industrial hub in Nuevo Leon. The Growing Influence of DTOs in Nuevo Laredo When the current phase of violence associated with drug trafficking exploded in Mexico in the early years of the 21st century, one of the first locations to show dramatic bursts of violence was Nuevo Laredo. Those were the times when the first grave territorial disputes over NL began. The emergence of the Gulf Cartel openly challenged two local groups, the Chachos and the Texas that until then had dominated the narcotics traffic. The usual narrative about the emergence of DTOs in Nuevo Laredo locates the shift from domestic groupsfirst the Reyes Pruneda, then the competition between the Texas and the Chachos around 2002 when the Gulf Cartel decided to control the drug flow through the city. 30 Prior to that date, for many years the two local groups were part of the relatively peaceful times of drug trafficking in Mexico. Most interviewees described the market as a local duopoly. As a matter of tradition, the influence of the two groups in the city grew along a division created at Avenida Reforma, one of the citys main streets, where their control over trafficking in the

30

Drug gangs extort money from Nuevo Laredo business owners, The Dallas Morning News, Wednesday, October 17, 2007.

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city split, with one drug group controlling the eastern part and the other the western side of NL. 31 Another sign of times gone by was the relative social acceptance of those groups as part of the social landscape. As one interviewee reported, the children of the Chachos chief would go to the same school of the elites children. He was the chief mechanic of our familys trucks, he mentioned. Even if the local families avoided establishing intense social contacts, they were not rejected. Inasmuch as they only cared about their business and did not interfere with ours, they were tolerated. Nuevo Laredo society accepted the local drug dealers just as, historically, it had accepted pateros or polleros, the people mobilizing Mexicans across the border or others involved in smuggling. Those peaceful times lasted until first, the revenues from drugs dropped, 32 and second, when the Gulf Cartel/Zetas alliance took hold of the city. The drop in revenues from the traffic led to an acute competition between the two local groups, which expanded to other lines of criminal activities, such as extortion and racketeering. Later, when the corporate logic dominating Mexicos contemporary illegal drug business started to dominate the scene, the two local groups were essentially wiped out and the nature of narcotics trafficking and other criminal activities changed dramatically. The expansion of the Gulf Cartel in Tamaulipas took place by subcontracting the Zetas, a paramilitary group with highly sophisticated capabilities, in order to secure the drug trafficking activities and assets. At least according to the account of most local interviewees the transition from a locally controlled to a cartel controlled drug business led to a higher level of violence than the city had experienced up to then.

Mentioned by one businessman interviewed. This aspect is mentioned by Viridiana Rios in a recent article. See Viridiana Rios, Why violence has increased in Mexico and what can we do about it, Unpublished Manuscript.
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Since then the open disputes between the Gulf Cartel and its former ally, the Zetas, has characterized the evolution of the narcotics business in Tamaulipas, particularly in Nuevo Laredo. For a number of years their alliance worked on stable terms, but over time it began to wane, ending in open confrontation. A first event affecting the alliance occurred in 2003 when the top leader of the Gulf Cartel, Osiel Cardenas-Guilln was captured by the federal police, leaving their paramilitary allies isolated from mainstream decisions. It took some time for the Zetas to rebuild their relations with the Gulf Cartel, but in the meantime their business portfolio in NL had grown in complexity. It evolved from what was initially a bodyguard roleno matter how sophisticated to a more independent strategy to become a criminal organization DTO on its own terms. Following a strategy akin to the development of the mafia and other historical examples like Colombia, 33 they branched out into other activities such as kidnapping, several types of extortion, as well as in the sicariato, an important criminal activity typical of the heyday of Colombian organized crime. 34 Until recently, however, the Zetas had not become a drugs cartel in their own right. They were, essentially a cooperative of violence. 35 After the relationship of the Zetas with the Gulf cartel regained force reestablished, the former group was in better shape; they had expanded territorially and had made important inroads into other states. In consequence, they wanted a greater share of the pie. At this point in time the Zetas had become a player in the

Carlos Resa Nestares, Los Zetas: de narcos a mafiosos, Notas de Investigacin Hiring hit men to settle scores, the sicariato became in Medelln, Colombia, both a prosperous industry and a way of life for many rooted out adolescents for whom the world of crime was the best option. For many years, in the Colombian criminal world it was praised as a way to achieve respect. A famous novel by Colombian novelist, Fernando Vallejo, La Virgen de los Sicarios (Our Lady of the Assassins) turned movie, depicts the ethos of the life of pre-adolescents entering criminal life.
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33

Many reasons account for this trend, but those more commonly mentioned are a) that they lacked the networking advantages across the border of traditional drug trafficking, b) they also lacked the specific knowhow required, and c) because their logistics and organization was essentially military and clandestine, whereas most cartel groups tend to enmesh one way or another with local society. Resa Nestares, Ibid, p. 2-4.

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drug business, disputing the influence of the Gulf cartel. This corporate friction led to a total break, which became evident at the beginning of 2010, with the consequence that the state of Tamaulipas was put under the negative spell of this turf war. Currently the Zetas dispute the influence of the Gulf cartel in Tamaulipas and in Nuevo Leon, which is an important commercial corridor in the flow of the cocaine trade, but have also expanded their area of influence to Central America, where they operate as midwife between the cocaine traffic from Colombia into Mexico. However, they are currently under pressure from both an alliance of cartels called The Federation comprising the Sinaloa Cartel, la Familia Michoacana and the Gulf Cartel. 36 The latter group, as well as the army and the Federal Police, tend to agree that the Zetas are the worst deadliest of the criminal groups. 37 After a number of rather quiet years, during 2010 and 2011 there have been important spurts of violence in Tamaulipas. So far, however, Nuevo Laredo has not taken the worst part of it. The intensity and the toll in terms of human lives has been more prominent in other Tamaulipas cities like Reynosa and Matamoros, or even Victoria, the capital of the state, where the cartels have targeted local and state politicians to challenge political power directly. However, in February 2011 a confusing event led to the assassination of the newly appointed chief of police in Nuevo Laredo. 38 Despite these spikes in violence, one could always argue that Nuevo Laredo has been relatively spared from the worst levels of violence. The reason for this relatively benign circumstance may lie in the contrast with other border cities. Historically in places like Ciudad Jurez DTOs have had a greater grip over local

The Economist, http://www.economist.com/node/16281317?story_id=16281317 Ibid. 38 As described in press accounts, General Manuel Farln Carriola, chief of police of Nuevo Laredo, who had been in charge for thirty two days, was killed with all his bodyguards after leaving a restaurant by an army patrol that apparently got the wrong information. As always happens when different official branches of the police or the military are involved, the investigation of the incident has been kept in great secrecy. See Milenio, Thursday 3 February, 2011
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social networks. The extent to which these networks of neighborhood groups evolve into criminal activities and play their acts across the border has been widely documented. 39 The common element of these complex social networks is what Moreno Rubio has called perverse social capital in the Colombian context, or a set of networks, incentives, and local cultures, from which organized crime profits in order to build its organizations and endure. 40 This negative version of social capital seems to have operated in places such as Jurez (and in Tamaulipas in Reynosa and Matamoros) for a long time, leading to drug war zones. 41 Conversely, in Nuevo Laredo, rather than the natural evolution of these networks into a robust local organization with potential for expansion, the DTO established in the city resulted from a takeover of the drug-related criminal activities, probably including its share of imported leaders and managers to run the plaza. As a result of this difference in the evolution of DTOs, the impacts on the city have not been as dramatic when compared to other border cities, especially Ciudad Jurez. Consider two indicators: massive emigration and number of orphans. Though many of those interviewed mentioned the outflow of middle class and business families from Nuevo Laredo after 2003/2004, the total number is nowhere near the devastation suffered by Ciudad Jurez, where the estimation by mid-2010 was that in the last two years around a quarter of a million people had fled the city. 42 Regarding orphans resulting from the turf wars, the number since 2006 has been estimated to be in 30,000 in Mexico overall. Only in Jurez the number is

In Ciudad Jurez a very good account is that of Howard Campbell in Drug War Zone, Frontline Dispatches from the Streets of El Paso and Jurez, Austin, University of Texas Press, 2009. 40 Mauricio Rubio, Perverse social capital, some evidence from Colombia, JOURNAL OF ECONOMIC ISSUES Vol. XX No. 3 September 1997 41 Howard Campbell, Drug War Zone: Frontline Dispatches from the Streets of El Paso and Jurez, Austin, University of Texas Press, 2009 42 Se han ido 230 mil de Jurez por la violencia, El Diario.mx, 08/26/2010. This report was based on a joint research from the Centro de Investigaciones Sociales (CIS), from the Universidad Autnoma de Ciudad Jurez and the Observatorio de Seguridad y Convivencia Ciudadana, which estimated that around 230,000 people left Jurez in 2009, leaving behind more than 32,700 homes abandoned.

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around 20,000. 43 The absence of this trend in Nuevo Laredo can be deducted from the priorities chosen by the municipality for its social plans: during the years 2007 to 2010 the issue of orphans was not even considered. Violence, however, is unpredictable. It erupts at the most unexpected times, as happened in July 2010, when a confrontation allegedly between the army and the Zetas left thirteen corpses in only one day of violence. The confrontation continued for the rest of the week. In the event it diminished almost completely until November when another outburst exacerbated the uneasiness about when the next time will be. The apparent reason why violence has caught Nuevo Laredo once more is that in the turf war of Tamaulipas the Zetas have had a long list of defeats, 44 which has led them to retreat to Nuevo Laredo from other lucrative places like Reynosa, in the far eastern border of Tamaulipas with the U.S. Like Santa Claus, Violence always shows up However, apparently violence arrived in Nuevo Laredo to stay. Tamaulipas is among the three more violent states in Mexico today, along with Chihuahua and Sinaloa. The reports on drug violence in Mexico, by the Trans-Border Institute in the University of San Diego, 45 classifies the different types of violent actions according to their relation with drug trafficking, grading the states of Mexico according to the level of drug-related violence. As map 2 shows, Tamaulipas is among a second-tier group of states with levels of drug-related assassinations between 251 and 2,000 murders per year, along with other like Sinaloa, Durango, Baja California, Nuevo Leon, the state of Mexico, Guerrero, and others. The

Guerra del narco habra dejado 30 mil hurfanos desde 2006, La Jornada, 25 de julio, 2010 The Economist, Ibid. 45 Viridiana Rios & David Shirk, Drug Violence in Mexico, Data & Analysis Through 2010. Trans-Border Institute, University of San Diego, February 2011
44

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number of murders mentioned in an earlier Trans-Border report taking place in selected states until the summer of 2010 is shown in table 1. In Tamaulipas it was 348, up from 89 in 2007, 110 in 2008, and 49 in 2009. Until 2010 Nuevo Laredo had been relatively spared from the worst outbursts of violence. Whereas in other parts of Tamaulipas during 2010 the DTOs have targeted mayors, candidates from all the political spectrum, a frontrunner to the Governor post, and perpetrated a massacre against a large group of immigrants purportedly on their way to the U.S., in Nuevo Laredo recent violence seems to have been confined to confrontations between cartels and the armed forces as well as other forms of mafia-like violence. Even if the killings have been less than in other parts of the state, other criminal activities have diversified, reportedly difficult to keep under control. This transpires from one of the most explicit interviews, provided by a local religious leader. Today in many the towns of this area and nearby counties fear reigns It has become increasingly difficult to distinguish illegal from legal activities: kidnappings and extortions abound In places like Ciudad Guerrero, life is overPolice vehicles are cloned to facilitate illegal operations It even happened to me one day I was going to fill up my cars tank; I was followed and asked by fake policemen where I was heading. A couple of weeks later I was informed that the lady that owned the gas station had been forced to close down because the group runs another gas station nearby They even took over an oil well in Nueva Ciudad Guerrero and they allegedly own other 5 oil wells too They have taken over activities like casinos and in a house right in the middle of town convoys enter every day with armed people. It must be an operations center In El Cerezo you have two authorities, a legitimate and the parallel one What can we expect if the frontrunner candidate for governor was killed? This direct account shows how daily life in Nuevo Laredo and its surroundings is beset by the various criminal activities emerging
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around to narcotics trafficking, to the point that they are sometimes worse than the criminal activities directly related to the core drugs business, which in most cases do not affect normal citizens. It also illustrates how greater numbers of young people are being recruited to perform these spillover activities. Despite the differences between Nuevo Laredo and other cities and towns in Tamaulipas, as a whole the trend in the state is worrisome, especially now that the state advanced from 5th in the number of drug-related-assassinations until mid-2010 to 3rd by the end of the year. More detail of this argument is found when the date is analyzed over the years. Table 1 shows Tamaulipas behaving in a cyclical fashion, with a medium level during 2008, a lower level in 2009 (only 0.7 percent of the national total), shooting up in 2010 to higher absolute levels and very close to 6% of the national total. 46 In Nuevo Laredo crime-related data did not seem remarkably negative until year 2010. Table 2 depicting different types of crimes committed in the city from 2006 to 2009 may have given the local authorities the impression that the worst of crime was over. It reports homicides going down from a peak of 165 in 2006 to a low of 24 in 2009, as well as kidnappings diminishing from 5 to 1 from 2006 to 2009. But as remarked above, things changed dramatically. Without doubt, 2010 has been the year when violence grasped the state by the neck. With the exception of Jurez, this upward/downward trend has been typical of other Mexican cities currently experiencing turf wars. In the case of NL, interviewees attributed this cyclical behavior to different reasons. One was a certain degree of monopoly of organized crime in the city by one of the groups. Allegedly, the Zetas have more control of
46

The fact that only the first semester of 2010 was considered indicates that the jump in the cycle was higher by the end of the year.

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the drug route going through Nuevo Laredo than is the case in other parts of Tamaulipas, where they are in a continuous confrontation with the Gulf cartel. Another explanation is the lower presenceor use thereofof negative social capital mentioned in an earlier section. Despite the long history of drug trafficking in the city, apparently the Zetas (or the Gulf cartel for that matter) did not build their control by assimilating or buying out the human networks left behind by the Chachos and the Texas. They rather took over the location with their own personnel, leaving behind the traditional web of petty crime and even family ties upon which the former drug organizations had operated for decades. But the preferred explanation was that Nuevo Laredo, by concentrating around 40 per cent of the road commerce with the U.S., is regarded as the crown jewel station for narcotics to cross the border. 47 Altering the security situation to an extreme degree could prove too risky for the drug business overall. So extreme violence only takes place either when the army is up to something important, orfar less frequentlywhen other groups decide to enter enemy territory. Sister Cities and Their Impact on NLs Elite One important advantage of Nuevo Laredo is heritage. The city is historically part of a wider tradition that includes Laredo, its sister city on the U.S. side of the border. For more than century and a half, the two cities have grown to become highly integrated economically, socially, and culturally. As happens in many cities along the US-Mexico border, many families make their lives on both sides of the border, crossing it to work, to visit relatives, to

Most accounts mention that the average number of trucks crossing the border every month is around 100,000, and the capacity of the customs office to check content of merchandise is only 10 per cent of that number. Hence, it can be easily incorporated into the fixed costs of sending illegal substances with no huge cost impact. Even if it were 10 per cent across the board which is not the case, given that not all trucks carry illegal drugs it does not represent a huge financial burden.

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attend church, or to shop. They may also have very tight common historical roots. 48 In the case of the two Laredos, however, apart from most of those listed above, the relationship is sustained on the powerful bonds generated by international trade. The people from both cities used to live in Laredo until the Treaty of Guadalupe-Hidalgo, signed at the end of the 1846 Mexican-American War, established the border between Mexico and the US at the Rio Grande. The classic narrative about the citys history is at the time of the partition families had to decide in which side of the border they stayed on. 49 This cultural and social bond remained for most of the 20th century, becoming more integrated over time, in terms of policy making by officials on both sides of the border and in the level of shared communication between them. A mid-1970s article about the Two Laredos already made reference to the close ties in communication and trust built between the two cities. Around half of the officials surveyed were members of social or civic groups including people from both sides of the border. Also approximately 2/3 of officials declared that they kept trace of government activities from the other side of the border. 50 The degree of social integration is also illustrated by other typical interactions between the sister cities, like a shared minor league baseball team in the 1950s and 1960s, or by the long established tradition of holding an annual ceremony at Bridge #1 in which two children selected from each city embrace to signal the will to remain united as

See Milo Kearney and Anthony Knopp, Border Cuates , A History of the U.S Mexican Twin Cities, Austin, Texas, Eakind Press, 1995 49 John C. Kilburn Jr, Dae-Hoon Kwak, and Claudia San Miguel, Fear of Crime Splitting the Sister Cities: The Case of Laredo/Nuevo Laredo Border, Mimeo, Department of Behavioral Sciences, Texas A&M International University, N/D 50 John W. Sloan & Jonathan P. West, Community Integration and Policies among Elites in Two Border Cities, Los dos Laredo, Journal of Interamerican Studies and World Affairs, Vol 18 No. 4, Nov 1976

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communities, 51 or celebrating significant dates of both countries, such as George Washingtons birthday and Mexicos Independence Day. 52 It is worth noticing that, as far back as 1979 officials from both countries attributed high marks in the vulnerability of both cities to the lack of understanding from policy makers, both in Washington D.C. and Mexico City of the uniqueness of the border and the shared sense of community. 53 Even today, many of the interviewees in our study noted the strength of family ties. Laredos links with Mexico are quite unusual for a Texan city: according to the U.S. Census Bureau, 2009, 94.3 percent of the population of Laredo is of Latino ethnicity, 52.5 percent of the population admits speaking Spanish very well while around 24 percent recognize speaking Spanish well. 54 For all the importance of family and cultural ties between the two cities, it has been the economic drive derived from handling powerful international trade activities across the border that has made Nuevo Laredos elite what it is today. Nuevo Laredo has become highly integrated with its sister city in all the value-chain components of the international trade business. 55 The most consistent feature emerging from our interviews and conversations is the continuous presence and influence of the customs business and its leaders in the citys daily life. 56 Most leaders of the city have either been part of the international trade chain of activities or have been members of its powerful business chamber, or are one way or another subject to its influence.

Kilburn, Kwak and San Miguel, p.2 Sloan & West, Ibid, 461 53 Ibid, p. 463 54 Kilburn, Kwak & San Miguel, p.2 55 This level of family ties in the business across the border was pointed out to me in a conversation with scholars and staff from TAMIU. It will require empirical substantiation in order to hold effectively true. 56 According to figures of the Competitiveness and International Trade Institute, the city counts with 222 customs brokers, out of 464 in the entire country. ICCE, Nuevo Laredos Competitive Advantages, Ibid.
52

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During the second half of the 20th century, when international trade was becoming the centerpiece of the economy of the sister cities, families in Nuevo Laredo used to send selected members to live in Laredo in order to operate the U.S. part of the business. After the War on Drugs began to wreak havoc on the border economy, especially in the middle of the current decade, a significant portion of the Nuevo Laredo elite moved to Laredo for safety reasons. As reported by several of the officials interviewed, at a certain point in time in the current decade, 1,500 families from Nuevo Laredo left the city per month, moving to the sister city on the Northern side. The effect was that the business on both sides of the border became far more integrated. One of the most decisive impacts of this business influence on running the city has been a powerful drive or ethos that has permeated to most other professions or activities, like government, civil society organizations or academia. The corpus of the Municipal government in place at the time of the field work is a case in point: the President of the Municipal Government, a member of the PRI, had been an influential customs operator before entering politics. That was also the case of a good part of his inner circle. The same was true of his successor of the main opposition party leaders, or of many of those officers in charge of government or of parastatal or civil society-led institutions. As one interviewee put it, Here in Nuevo Laredo we are dominated by a strong logic of time. In the business of international trade you have to be precise, on time, the cargo has to be loaded and then transported at a given time, and this is reflected in many other activities in the city. There may be differences in approaches or political styles, but this ethos has been reflected in the political leadership. The President of the Committee for the oversight of government activities on behalf of civil society, for instance, is a businessman from the maquiladoras whose family has been in the customs industry; other influential member of the inner circle of
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the Municipal government, holds doctoral studies in political science in Spain, and had experience in the customs business and a third, who wrote several books about the history of the city was a recognized historian of the customs industry and editor of the magazine of the customs chamber. This ethos is not simply a drive toward more efficient government. It is directed toward improving the natural advantages of the city. As Ramon Garza Barrios President of the Municipal Government at the time mentioned in his interview, as early as the 1970s the business leadership of the city recognized that if Nuevo Laredo was to take advantage of its strategic location as a transit post to the U.S, it had to build another bridge to increase the cross-border transportation of merchandise. So they reached an agreement with the U.S. government and with the Mexican Federal government to build a new bridge. As it happens, the Mexican Federal government did not release the funds promised, but the Municipal Government went on with the project of the World Trade Bridge, which has allowed Nuevo Laredo to channel a greater level of cargo than before through the city bridges, which then became a strategic condition when NAFTA came into fruition. Whatever impact the drug wars have had, they have not checked the drive to change and modernize the city. For many of those commuting members of the elite, moving to Laredo did not mean abandoning Nuevo Laredo altogether. On the contrary, many of them still work and make their living in Mexico but commute daily to Laredo. This explains the trail of abandoned houses in Nuevo Laredo reported by several interviewees. Given that for Mexican citizens living on both sides of the border it is requisite that the individuals main household must be located in the country, many families living in Laredo still declare their properties in Nuevo Laredo as main homes, even if they remain deserted. This trend has also

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limited the development of the housing market, because many houses are neither inhabited nor put on the market for sale. The Big Push to Modernize Local Government When these turbulent times are analyzed with the benefit of hindsight, it may well be that the effort to transform local government and opening it up to civil society will remain as the greatest achievement of the local elite. This is no negligible outcome in a country like Mexico that, as one longtime student of Mexico put it, has been quite reluctant to decentralize given its long history of presidentialism and centralization. 57 Though not explicitly conceived as a survival strategy, it is clear that NLs elite needed a new societal goal in order to reignite the self esteem characterizing Nuevo Laredonians but at a low ebb at the time. Most conversations showed a wide consensus among interviewees that both the sources and consequences of the violence surrounding narcotics-related organized crime could not be tempered by tougher security policy only. In general terms, the mood transpiring from government officials, businessmen, and members of civil society was that of a city caught in the crossfire from increasing violence derived from the drug cartels turf wars and the inability of the myriad Mexican law enforcement agencies to tackle narcotics-related crimes effectively. 58 Even if important changes were introduced in the way local police forces conducted themselves as part of a city under constant movement of people and goods

Merilee S. Grindle, Going Local: Decentralization, Democratization, and the Promise of Good Governance, New Jersey, Princeton University Press, 2007 58 There is a wide consensus in most studies and specialists regarding law enforcement in Mexico today about the disconnection between the wide range of existing institutions to tackle with narcotics-related violence, both at the national, state, and local level. Although there is legislation seeking to bring together the three levels of government in fighting crime (national, state, and municipal), the lack of cohesion has become a great burden in the war against drugs. See EGAP (Tecnolgico de Monterrey), Informe de avance de las Propuestas del Tecnolgico de Monterrey para mejorar la Seguridad Pblica en Mxico, Monterrey, October 2010.

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to cross the border, there would always remain inconsistencies in the way law is enforced when it comes to narcotics-related crimes. The modernizing strategy of the 2007-2010 local administration goes back to the time when the President of the Municipal Government, Ramn Garza Barrios was representative in the state legislature. At the time he pushed for approval a legislation supporting the organization of civil society both at the state and municipal level. 59 In 2007, after his election these ideas and plans became more realistic as a formula for action, which for politicians is like blood to the body. Against the backdrop of a deadly eruption of drug-related violence, the new team began to enforce the new law in Nuevo Laredo. The President of the municipality and his team 60 claim having changed a traditionally government-led system of ruling to a more citizen-oriented type of government. The high level of narcotics-led violence during 2004 up to 2006 had eroded public confidence in local government to historic lows. In taking office, the teams assessment was that the main consequence of bad communication with society and the absence of support for civil society organizations was a very low confidence in government. The government had become isolated from its constituents. Therefore the core of the new strategy was to restore confidence through promoting civil society participation. Only a new relationship with society would restore the governments authority, cracked at its foundations by the explosion of organized crime. The models Nuevo Laredo chose to build on were four. A first was the Italian experience of Leoluca Orlando in Palermo, Sicily, against the Mafia, based on the notion that

LEY DE FOMENTO A LAS ACTIVIDADES DE LAS ORGANIZACIONES DE LA SOCIEDAD CIVIL EN EL ESTADO DE TAMAULIPAS, D E C R E T O No. LIX-938, 31 de mayo del ao 2000 60 In July 2010, when the field work took place, a new President of the Nuevo Laredo Municipal Government had been elected to be the successor of Ramn Garza Barrios. We interviewed both incumbent and elected mayors.
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in the battle against organized crime not only weapons count. 61 Secondly, the experience of Medelln, the capital of narcotics business for more than two decades in Colombia, put into effect by former Mayor Sergio Fajardo, inspired by the motto: The most beautiful buildings for the poor. 62 Thirdly, the importance Chilean post-Pinochet governments have given to civil society organizations in rebuilding democratic governance. Fourth, how the political combat of Spanish society against ETA was possible only when the Spanish people were fed up. 63 Arguably, however, in order to advance any new government strategy Nuevo Laredo like any other government in its place required more than will power. The location advantages described in earlier sections have put the city in a good financial position to try the waters of open government. Table 3 provides income per capita data from a sample of municipalities from Tamaulipas. Of all cities in Tamaulipas, Nuevo Laredo holds the highest per capita income, 3,513.70 pesos per person in 2005, compared with the states average 2,018.46 pesos per capita, or with other high income municipalities such as Matamoros (1,913.09 pesos), a small city like Altamira (2,807 pesos per person), or that of another border city like Reynosa (1,474 pesos per person). Other sources, such as the study by PUEC quoted above, agree with this privileged position of NL. In dollar terms Nuevo Laredo was, by 2004, the municipality with the highest per capita rank in Tamaulipas ($10,888), followed by Matamoros and Reynosa ($10,128 and $9,980 respectively). 64

Leoluca Orlando, Mayor of Palermo led a battle against crime that paid off handsomely. See his experience in Leoluca Orlando, Fighting the Mafia and Renewing Sicilian Culture, San Francisco, Encounter Books, 2001. 62 Simn Romero, Medellns Nonconformist Mayor Turns Blight to Beauty. The New York Times, July 15, 2007. 63 These concepts came out of a discussion with the mayor and his closest advisors. 64 Puec, Ibid, p 46.

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Most importantly, compared to other cities in Tamaulipas, Nuevo Laredo derives most of its income not from income tax or other forms of direct taxation, but from other sources, in this case the share accruing from customs and border crossing fares, which is shown in Table 3. This explains why, when compared to other border cities, Nuevo Laredos level of taxation-derived income of local government revenue is far lower than other border municipalities such as Juarez, Mexicali, Piedras Negras or Reynosa. This is shown in Table 4. In sum, Nuevo Laredos location and infrastructure have granted the city and its elites an edge in terms of revenue allowing the kind of public investment needed for a citizenparticipation strategy. What has been the orientation of the citizen-led government in Nuevo Laredo? What have been its main achievements? In 2007, after intense consultations with representatives of local society, the local government launched a Municipal Development Plan 2008-2010. One of the Plans milestones was the creation of a government with high citizen participation. 65 The four main objectives for local participation were: FIRST, help civil society organizations upgrade their capabilities in order to act as better partners in assuming tasks previously in governments hands. SECOND, promote the creation of new civil society organizations. THIRD, bring social leaders, business representatives, and other social actors to participate in public policy design and supervision. FOURTH, translate civil society participation and action into institutions, by way of creating institutes to perform an array of tasks, from urban planning and development to promoting gender equality. 66

Nuevo Laredo, Ciudad con valor, citys website: http://www.nlaredo.net/index.php?option=com_content&view=article&id=93:nato-restoreties&catid=42:rokstories 66 Figure 3 in Annex portrays a working model followed by the municipality to implement the new relationship with civil society.

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Local participation has been an important clue for action in several areas. One case in point is the battle against poverty. The policies targeted marginalized population substantially underserved in health services and living in dwellings with dirt floors or with no sanitation facilities. The rationale was to integrate the population of poor colonias. After meetings with local leaders, the government selected five colonias to cover alternatively electricity provision, cement floors and latrines, as well as promoting a first clean water contract. The process involved direct participation of recipient families in advancing the changes. In total around 1,000 persons benefitted from participating in the project. The program also included a subprogram of temporary jobs, targeting 500 jobs for cleaning public areas. Another project or subprogram targeted 6 colonias with 7,500 people with no access to primary health care, who participated in a self-construction project for a dispensario or primary health care facility. The same applied to housing for one colonia with 1,148 inhabitants, which began with a pilot project targeting 10 families the first year. 67 Another interesting program, with international recognition from the UN, is coinvestment, which seeks direct participation of civil society organizations in advancing projects. The logic followed has the municipal government allocating part of the funding while the organization in question are responsible for the remaining part, either with own funds or through participation of third parties. It covers a wide range of projects (a total of 42 were projected to have occurred by mid-2010). They included actions for the elderly, primary health care, violence against women, retraining for the unemployed, sterilization of abandoned animals, mental health, and others. Co-investment involved equipment acquisition, workshops, software, food supply, public campaigns, supplies for families

Taken from Gobierno Municipal de Tamaulipas, Plan De Accin para el Combate a la Pobreza Extrema, Seguimiento y Avance, Presentation, June 2009.

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affected by houses set on fire, and many others. In 2010 the municipal government allocated $8,889,124.01 for co-investment projects, which was matched with $2,489,353.4 by civil society organizations. 68 Naturally, when compared with annual expenditure of the municipality, it still remains a small proportion of the total (3.65 percent of the part of the budget destined to subventions and subsidies, see Table 6.) The main instrument to grant the effective participation of civil society has been the creation of the Society/Government Council, 69 an aggregate of different actors, such as legally-registered nonprofits, business and professional organizations, representatives from the municipal government (including its president), and other individual members from civil society. By design, the municipal government has a minority of members in the Society/Government Councils board of directors. The council runs two committees, one for evaluation and another for technical/consulting functions. One important role of the Council is promoting new civil society organizations. In order to register, civil society organizations have to fulfill certain requirements, such as having structured bylaws, for which the council provides advice. To procure funds, the council suggests co-investment strategies, including potential donors. The council also provides ways for upgrading managerial capabilities of new and old organizations. In sum, the rationale is to create strong organizations as partners, which may then be able to assume tasks more efficiently than the government on its own.

Proyectos Aprobados, Programa de Coinversin Social, 2010, Nuevo Laredo, Ciudad con valor, citys website: http://www.nlaredo.net/index.php?option=com_joomdoc&view=docman&gid=55&task=cat_view&Itemid=12 9
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See Figure 3.

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Another major change has been to promote greater transparency and accountability. This takes place through several measures. In the council, the evaluation committee follows through decisions and achievements regarding ongoing projects. All recommendations of the committee are binding. But also the diffusion of expenditures and consultations over where/ and to whom public funds were destined. Merilee Grindle has argued that from the perspective of local societies, decentralization in Mexico has occurred by taken advantage of four possible opportunities: Political competition, state entrepreneurship, public sector modernization, and civil society activism. 70 Viewed through these analytical glasses, it is clear that political competition played a very small role in influencing the move toward more open government. Tamaulipas has been historically a highly PRI-controlled state, so the incentives from local competition were absent. It may have had an impact internally in the PRI, but that remains to be substantiated. The above discussion suggests that the two dominant factors in NLs process of opening up local government to civil society have been essentially state entrepreneurship and civil society activism. The municipal government has also advanced other important actions, in particular streamlining the government organization in order to upgrade it to meet international standards 71 and its effort to bring law enforcement more in tune with societal needs. Specialized branches of police have been created, like industrial, school, and tourist police, which has included special recruitment, training/retraining, and equipment/vehicles to pursue their new roles. At the same time, there have been efforts to upgrade the typical profile of law enforcers more in line with changes in Tamaulipas overall, as well to seek measures to

70 71

Grindle, Ibid ps 10-12. In particular the use of ISO 9000 and other total quality techniques to eliminate waste and boost efficacy.

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increase indirect compensation, such as scholarships for policemen children or participation in broader health plans. 72 Conclusions In this chapter we have sought to explore broadly the prospects of Nuevo Laredos economic development, as it struggles with the impacts of illegal drugs-related criminal activities and the consequences of the war on drugs launched in the country after 2006. The main results can be summarized in five theses. The first relates to the political economy of NL as a border city under an open drug war: the outbursts of violence over the last five to ten years, no matter how irregular they may have been, have created deep uncertainty. This in turn blurs the distinction between the short, the medium and the long term, with negative consequences for both economic and government decision making; hence the title of one of the sections likening violence to Santa Claus. Though the city shows no dramatic economic slowdown, even faring well in Tamaulipas as far as employment is concerned, investment in manufacturing has been scant, as well as in other sectors such as mall construction and housing. As a consequence, NL has been sticking to its primary economic function of managing international trade as a result of its privileged location on the U.S. border. Under the current circumstances, stagnation of other sources of dynamism may hinder the possibilities of a stronger NL, inasmuch as Mexico advances toward a greater integration with the U.S. Thus, the city should consider tackling additional advantages that play out with its main commercial role, such as the development of human capital in logistics, robotics, computer science, and software.

72

Interview with a security officer from the municipality.

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A second thesis concerns the specifics of drug-related violence in NL. Tamaulipas in general and NL in particular have increasingly become violence-ridden places, where the open rift between a long established DTO (the Gulf Cartel) and its recent competitor (the Zetas) has wrought havoc throughout the state. Violence has concentrated, though not exclusively, along the border. The fact that other sub-regions have not been spared is illustrated by the assassination in July 2010 of governor-to-be candidate. It seems, however, that the build up to the current levels has followed a different path in NL than in places such as Ciudad Jurez. In the latter, the structure of the illegal drug business reveals an evolution of initially non-sophisticated drug dealer groups to the full-blown Jurez cartel. The dramatic impacts suffered by Jurez, such as the high number of orphans and the near to a quarter million people that have fled the city are consistent with local drug traffickers evolving into mature DTOs as they take advantage of existing negative social capital. Conversely, in NL the initial groups were wiped out from the city and most probably substituted by cadres from the Zetas in the name of the Gulf Cartel until the current war between the latter two came to the open. This thesis requires further substantiation, especially regarding the genesis of the DTOs currently controlling traffic in NL and to what extent they were built or not on the organization and manpower left behind by the Chachos and the Texas. Though we have illustrated the case of Nuevo Laredo by comparing it with Ciudad Jurez, we do think that the positive vs. negative social capital notion can be fruitfully applied to other cities in order to examine the potential for both survival and the rejection of what could be called the syndrome of surrender to narcotics takeover. A third thesis points to the importance of the local elite in creating and strengthening both strategies (survival, rejection of syndrome). In the Nuevo Laredo case the elite happens to be very cohesive, to the extent that it originated, has expanded and been nurtured around
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the international trade business, which appears to have generated an ethos of efficiency, achievement, and stubbornness when facing difficulties. This cultural factor, transpiring from the history of the city and from the customs business organization, came out eloquently from most interviews. It is one of the main citys assets and has led to solid elite building that has transpired into other aspects of social life: business, government, and academia. Again, it can be a methodological tool for other locations and could be explored in greater depth using more sophisticated analyses. The fourth thesis derives from the role of open government both in quelling the impacts of drug-related violence and in improving governance. Despite the slow motion of decentralization in Mexico, which advanced against the very strong presidential and centralizing tradition of the PRI era, NL has been able to promote a quiet revolution in the form of opening the municipal government to the participation of civil society. Based on the social ethos mentioned in the third thesis, the current generation of leaders has attempted an ambitious plan to grant myriad NGOs both voice in decision making and in running many programs formerly in the exclusive hands of the local government. Though not always spelled out explicitly as a strategy to counter the impacts of drug-related violence, it has been designed to achieve greater confidence in government. The extent to which this major gain in governance will endure in successive administrations is still an open question, despite continuous pledges by government officials that the institutional infrastructure created in the last four years would grant it. Last but not least, the fifth thesis points to the importance of NL as part of a larger border aggregate in conjunction with its sister city, Laredo in Texas. Though the phenomenon is not restricted to these two cities, applying as it does to a long list of US/Mexico twin cities, NL and Laredo have become integrated to a greater extent than other examples due to their
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intimate economic relationship, built as a result of intense international trade. Hence, its family ties have grown in complexity with capital reaching both sides and in some cases diversifying into other sectors. Given the open relationship both governments enjoy, it would seem that a greater integration in security policy and in infrastructure for the future is of more importance than in other twin cities, especially if we consider that the time when customs disappear entirely is not so distant in the future.

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Annex 1. The Michael Porter Diamond Model

The Porter model is a synthesis of how different elements play out in the working of a given industry (city or region). See Figure below for a better description. The upper box describes the main composition and characteristics of the industry: its structure, if oligopolistic or openly competitive, the dominant strategy characterizing the firms, and how the extent to which rivalry is present. The factors box at the left indicates the dominant resource endowments, such as cost of labor, geography determining location patterns, etc. The box to the right shows the main dynamics of the market in terms of demand, if it is segmented or undifferentiated and so on. Related and supporting industries at the bottom refer to the cluster nature of competitiveness in a given industry, in the sense of not being isolated from other connected industries from which it gains value, knowledge, or a network of support. Finally accessory haphazard factors can play a role and there is also a place for the role of government when (and if) it occurs. For a full description see, Michael Porter

The Porter Diamond

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Annex 2: Maps
Map 1. Routes Into and From Nuevo Laredo

Source: ICCE-Nuevo Laredos Competitive Advantages, June 2010

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Map 2. Organized Crime Killings in 2010, by State

Source: Viridiana Rios & David Shirk, Drug Violence in Mexico, Data & Analysis Through 2010. Trans-Border Institute, University of San Diego, February 2011

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Annex 3. Tables

Table 1. Evolution of Drug-Related Murders Over Time (Selected States)

Absolute Number of Drug-Related Killings Identified (by six month increments) Jan08Jun08 587 112 134 43 247 55 Jul08Dec08 1062 156 153 35 433 55 Jan09Jun09 896 343 313 29 294 26 Jul09Dec09 1186 294 325 70 473 23 Jan10Jun10 1491 471 434 279 1127 338 Proportion Of National Total All 2009 31.6% 9.7% 9.7% 1.5% 11.6% 0.7% Jan10Jun10 25.8% 8.2% 7.5% 4.8% 19.5% 5.9% Rate Per 100,000 Inhabitants Jan09Jan10Jun09 Jun10 28.66 43.9 22.7 10.73 0.81 11.69 0.85 30.37 13.81 6.27 42.48 10.58

CHH DUR GRO NLE SIN TAM

Source: Duran, Hazard & Rios, 2010 Mid-Year Report on Drug Violence in Mexico

Table 2. Crime Statistics in Nuevo Laredo.

Crime Kidnappings Homicides Thefts/Shops Thefts/Vehicles Thefts/Other Source: ICCE, Ibid 2006 5 165 19 1,653 1,409 2007 8 49 21 1,520 1,889 2008 2 34 16 1,280 1,269 2009 1 24 6 1,022 1,354 Comparative (%) 87.50 85.45 71.42 29.32 38.17

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Table 3. Gross Income of Selected Tamaulipas Municipalities

Gross Income 2005 6 104 329 785 776 820 026 1 250 269 538 567 546 227 884 151 838 448 282 819 380 234 421 456 555 995 183 677 946 176 738 725 Tax Derived Income 2005 456 245 627 136 469 028 60 029 842 57 097 150 54 183 787 32 658 610 26 353 672 25 731 971 13 891 577 11 226 051 Population 3,024,238 526,888 355,827 303,924 462,157 293,044 193,045 162,628 106,842 112,061 Per capita Income 2018.46 1,474.35 3,513.70 1,867.38 1,913.09 1,529.74 1,969.66 2,807.36 1,719.15 1517.16

TAMAULIPAS Reynosa Nuevo Laredo Tampico Matamoros Victoria Ciudad Madero Altamira Ro Bravo Mante, El

Source: Sistema Municipal de Base de Datos, INEGI, Finanzas Pblicas; Authors own calculations.

Table 4. Tax Derived Income Border Municipalities Compared (2005)

Jurez Mexicali Nogales Nuevo Laredo Piedras Negras Reynosa Tijuana Source: Ibid 590 891 992 352 270 595 41 734 314 60 029 842 35 427 087 136 469 028 556 014 130

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Table 5. Annual Per Capita Income in Border Municipalities (2000 and 2005 in US dollars)
2000 Nuevo Laredo Mexicali Piedras Negras Reynosa Tijuana Nogales 10.530 12.633 11.820 9,651 14.017 6.896 2005 11.667 12 512 8.548 12.720 16.148 8.085

Source: ndice de desarrollo humano municipal en Mxico 2000-2005 UNDP, 2008

Table 6. Expenditure of Nuevo Laredo Municipality 2008-2009

(In Pesos)
2008 Subsidies & Subventions Public Works Municipal Services Debt 300 901 052.6 574 346 579.6 399 949 080.7 86 730 900,8 2009* 243 202 678. 24 754 049 887. 26 333 050 677. 20 244 375 105. 51

*Until November Source: Estado de Ingreso/ Egresos, Municipio de Nuevo Laredo (2008,2009).

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Annex 4: Figures
Figure 1. Global and Factor Competitiveness for Tamaulipas

Source: EGAP, ITESM, La Competitividad de los Estados Mexicanos, 2010

Figure 2. Structure of Colombian and Mexican Narcotics Industry Compared

Source: Authors drawings

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Figure 3. Working Model of the Citizens Government

Source: Nuevo Laredo Government Website http://www.nlaredo.net/index.php?option=com_content&view=article&id=93:nato-restoreties&catid=42:rokstories

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Annex 5: Graphs

Graph 1. Population Growth in Tamaulipas, 1950-2005; Main Urban Centers

Source: PUEC-UNAM

Graph 2. Evolution of Tamaulipas Global and Factor Competitiveness

Source: EGAP, ITESM, 2010

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Graph 3. Percentage of Violence Attributable to Drugs Traffic, 2007 2009

Source: Duran, Hazard & Rios, Ibid

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