A special guest post by Global Security Consultant and Political Risk Expert, Paul Crespo. This is the fifth post in the series.
Mexico is a top Latin American location for American business operations. A vast market with close proximity, Mexico represents the United States’s second largest export market and its third largest source of imports.
Recently however, the battle against, and between, powerful drug cartels has given Mexico a black eye. Roughly 70,000 people have been killed in drug-related violence since 2006. Constant reports of gruesome and escalating violence have dominated headlines for the past few years, making some American businesses wary of Mexico.
Mexico’s new President Enrique Peña Nieto, has vowed to reduce the violence by tackling crimes like extortion and kidnapping rather than focusing on hunting down drug bosses. The security situation however, remains problematic. Some parts of the country are still in virtual lock down and kidnapping in particular is becoming rampant.
U.S. Businesses Feeling More Secure?
Despite all this, some believe the security situation for U.S. businesses in Mexico may actually be stable or improving – or at least that may be the perception. In a recent survey conducted by the American Chamber of Commerce of Mexico (AmCham Mexico), more than 80% of respondents said their companies were either as secure, or more secure, than they were last year. Looking forward, 19 percent of companies surveyed said they expected the situation to improve by the end of the year, while 46 percent expected an improvement within the next five years.
Eight of the ten security categories in the survey showed improvement over 2012. The biggest exception was that of extortion by organized crime groups. More than a third of respondents (36%) said they’d suffered from extortion this year, more than double the 16% response from the prior year.
More from AmCham-Mexico Survey:
- The biggest security issue noted by these companies was threats or aggression against their employees — 41% of the participants had been on the receiving end of some sort of aggression or threat.
- This 41% was a significant improvement though from last year, when 58% of the respondents reported the same thing.
- A third of the companies said they had faced security-related losses of up to $1 million, while 4 percent lost between $1 million and $5 million.
- Most companies surveyed said they spent between 2 and 4 percent of their budgets on security.
- The most dangerous areas in Mexico were the northern states of Nuevo Leon and Tamaulipas, followed by Mexico City.
- The central state of Queretaro was one of the safest places in Mexico to do business.
Corruption a Huge Problem
A risk not highlighted in the AmCham survey is corruption. Despite some perceived improvements in physical security for American businesses in Mexico, the country remains a high-risk corruption environment. A separate 2012 Latin American Corruption Survey found Mexico to be one of the four most corrupt countries in the region.
This is is an especially important reminder for Foreign Corrupt Practices Act (FCPA) compliance officers. Thorough due diligence, training, audits, and risk assessments are especially vital in Mexico.
Respondents to the 2012 Latin American Corruption Survey also perceived significant corruption among the police in Mexico, more than they did among the police in all other countries. Companies doing business in Mexico should develop plans for dealing with such corruption, and should provide employees with training and resources.
On a positive note, the Mexican government introduced a new anti-corruption bill in 2012. This law prohibits bribery and other unlawful activities when pursuing public contracts with the Mexican federal government. While not as thorough or far reaching as the U.S. FCPA, the hope is that this new law may begin to reduce corruption and help create a better environment for doing business in the country.
Mexico presents unique and significant security challenges to U.S. businesses. Physical security is always a serious issue, but concerns may be lessening slightly. Extortion however is on the rise and public corruption is an ever present problem. The corruption issue may improve with increased legal focus by the Mexican government; only time will tell. As always though, when in Mexico be wary of the local police. Just because things may seem relatively secure, is never a good justification for complacency.
Be sure to read the other posts in this series:
Brazil’s Mega Events: Risks for International Businesses during the World Cup and Olympics
Surviving a Kidnapping: How Your International Business Should Respond
11 Ways to Avoid Getting Kidnapped While on Business Overseas
Political Risk Insurance: Why Your International Business Must Have It
Paul Crespo is a global security and political risk expert. A Senior Consultant with Trident Crisis Management Group, he has appeared on Fox News, CNN and other major TV news venues. He has varied experience in corporate security, kidnap and ransom negotiations, intelligence and diplomacy as well as military operations in hotspots from the Balkans to the Persian Gulf. A former officer in the US Marine Corps he was also assigned to the Defense Intelligence Agency (DIA) as a military attaché and posted to several US embassies overseas. Paul graduated from the Georgetown University School of Foreign Service, and has a Masters degree in War Studies from Kings College, University of London, and a Masters degree in International Relations from Cambridge University in the UK. Paul Crespo can be reached at firstname.lastname@example.org