Mexico's Continual Implosion

Today's WSJ ran a frightful article, "Mexico Under Siege," by Nicholas Casey on the latest narco-terror conditions plaguing Mexico's wealthiest city, Monterrey, and threatening the near-term political and economic stability of the Mexican state. This is nothing new conceptually, yet with each passing day, Mexico takes one step closer to totally collapse and collapse and failure. Conditions on the ground level have deteriorated to the point where residents are communicating to the government via newspaper advertising!

"Residents opened their newspapers Wednesday morning to find the ads taken out by Mexican business leaders, begging the government to send more military into the city. "Enough already," said the notice that ran in national and local papers, criticizing what it said was a slow response of police against "criminal bands that in every act look to establish a new boundary of terror."

The Mexican government is either impotent, deaf, or incapable of dealing with the cartel pandemic. Taking out a newspaper ad is akin to sending smoke signals of distress in the days western frontier yore, it doesn't get an flipping' worse. Yet, policy makers in Washington, DC, and leading media analysts seem uninterested in these alarming trends at best and woefully ignorant at worst. Are they distracting, unaware, or just playing the role of the coy ostrich and hoping that embedding your head in the sand will to the problem magically evaporating. Today, we silently celebrated the withdrawal of our last combat brigade from Iraq, are floundering in a confused and ill-defined mission in Afghanistan, and are expressing total indifference to Iran's upcoming membership in the nuclear. All of the aforementioned, while important, is also half-a-globe away. The only news we regularly read about Mexico is how pissed off certain liberals and left-wing Mexicans are about Arizona's legislative experiment in legitimate border control and sovereignty preservation. (Mixed feelings on the Arizona law itself, but a deep appreciation for the spirit driving it on this end) It boggles the mind given what is at stake should Mexico descend into a state paralyzed anarchy, especially given the porous nature of the United States-Mexico border, the size of legitimate trade and commercial activity ob both sides of the border, and the potential for extensive spill-over into the United States proper should things go any further south, south of the border. When it comes to governmental authority and respect for the rule of law, here's what the drug cartels think.

"The body of Edelmiro Cavazos, mayor of the Monterrey suburb of Santiago, was found beside a highway. Mr. Cavazos had been abducted Sunday night, the latest in a string of attacks against politicians in Mexico's north."

These cartel goons are afraid of nothing. Whacking government officials like they are playing Grand Theft Auto with no sense of recourse is unreal. Does Calderon's authority not extend beyond the walls of the presidential residence? How long before madness like that infiltrates El Paso, Tucson, Phoenix, and San Diego? It has been roughly a century since the United States had to dispatch General Pershing to deal with Pancho Villa's cross-border incursions. As much as history repeats itself on some levels, the stakes are much different should we start playing games of cat-and-mouse with well-financed and utterly ruthless drug cartels who know no limits, decency, or honor. If the implications weren't so dire and threat so real, the foundation of this tragedy would actually be fascinating to watch and follow.

Blood letting in the "Rainbow Nation"

Eugene Terreblance, South Africa's vile neo-fascist and white supremacist made famous by his fringe political activity and theatrical antics as the leader of the separatist AWB (Afrikaner Resistance League), was murdered on his farm last week. While he won't be missed by any stretch of the imagination, his murder seems to have been racially motivated and it jolted South Africa into acknowledging the growing trend of race based violence against white farmers. Since this conflict of whites being victimized by blacks doesn't play to the traditional notion of victim and perpetrator in the liberal paradigm, this awful and tragic trend hasn't been getting the attention it merits. Despite the legacy of institutional segregation that benefited South Africa's native white minority during the second half of the 20th century, some of the challenges for South African society moving forwarding include avoiding the Zimbabwe effect of deliberately destroying civic institutions, eroding democratic standards, ethnically cleansing whites; while also continuing to foster a civil-society that values all racial and ethnic groups, but realizes how precarious the situation can be for the key minorities. Post-colonial Africa seems to have it out for minority groups. One need look no farther than Rwanda, Uganda, Kenya, Zimbabwe, and Nigeria to name a few places. Since South Africa transitioned into majority rule in 1994, over 3,000 white farmers have been murdered by blacks. There are other internal crime statistics that are alarming, and it is no secret that South Africa has a plethora of issues it needs to tend to to continue to break the norm and survive as a non-basket case African nation, yet given the extreme sensibilities, the economic repercussions, and the tragic cycle of violence that has claimed so many other African societies, Jacob Zuma and the ANC need to step up and lock horns with this problem.

Some of the best analysis and  insight on the matter can be found here at an excellent blog called Cauthen's Commentary. (Full disclosure, the werewolf was a student of Cauthen's during his undergraduate years at Emory University) Here is a great excerpt offering in-depth analysis of the issue and how music has played a role in the ethnic violence.

"The death of Eugene Terreblanche has trained the world’s attention on the state of race relations in the so-called “Rainbow Nation” of South Africa as well as on a recent ruling of that country’s high court in Johannesburg. Terreblanche – founder of the neo-fascist and khaki-clad paramilitary organization, the Afrikaner Resistance League (known by its Afrikaans acronym, the AWB) – was until recently perhaps South Africa’s most vociferous and violent white separatist who agitated for a racially-exclusive homeland for the Afrikaner ethnic minority. Yet, the news reports of the past few days have focused less on his notorious career and more on his being the latest statistic; indeed, according to the BBC, more than three thousand white farmers have been killed since the inauguration of the new, multiracial South Africa in 1994. Although Terreblanche’s murder does not seem to be politically motivated, but, rather the action of disgruntled farm workers who claim that he cheated them, some of his cohorts in the AWB insist that his demise was the inevitable result of an anti-apartheid anthem and its repetitive lyric of “shoot the Boer.” The historic and controversial ditty had been recently revived and appropriated as a theme song of sorts by the fiery president of the ANC Youth League Julius Malema.  And, after Malema belted out the song at a political rally last month a high court judge, who is white, ruled that its lyrics were unconstitutional as they incited violence against whites and cautioned Malema against any further performances. The ruling ANC was quite dismayed over the verdict as it regards the song as cultural icon of the liberation struggle and sought to have the judge’s decision reversed in a higher court.

Although to some the claim that Terreblanche’s murder was incited by the song may appear far-fetched, in ethnically-riven societies, the catalytic agency of chauvinistic and provocative music to foment individual and collective acts of violence cannot be underestimated. In the lead-up to the genocide in Rwanda in 1994, the Hutu Power regime regularly broadcast songs on the radio which dehumanized the Tutses and justified their extermination. In this regard, I am particularly reminded of a song by Hutu pop composer Simon Bikindi with a similarly repetitive lyric – that of “I hate these Hutus.” In it, Bikindi was not slamming the rival Tutsi but those fellow Hutus whom he regarded as not being sufficiently anti-Tutsi. And, of course, large numbers of moderate Hutus were murdered alongside the Tutses by hard-line Hutus. Bikindi was ultimately indicted by the International Criminal Tribunal for Rwanda on the grounds that he utilized his music to incite genocide – although he was eventually convicted on a different charge."

Political Risk Forecasting.

Peter Apps, the political risk correspondent for Thompson-Reuters wrote this article attempting to paint a portrait of what to expect in 2010. The werewolf, being a political risk junkie of sorts, enjoys such things and found several points worthy of mention.

"In Britain, Labour Prime Minister Gordon Brown looks likely to lose parliamentary elections, which must be called before June, to David Cameron's Conservative Party. But markets worry about the prospect of a hung parliament with no outright majority."

This is particularly interesting because unlike the European parliamentary governments, where coalitions are a way of life, the werewolf can't think of time, in recent memory at least, where the British government was ruled by an effective coalition government? Labour, under the tutelage of the eternally frumpy, tragically attired, and woefully bland Gordon Brown has dithered and atrophied. The largest beneficiary of this seems to have been the strange Liberal-Democrats, while the Conservatives have gained some traction as well. The Conservatives, the primary opposition party in the U.K, have a young turk like leader in David Cameron, whom, despite a slight disposition to the conservatives, the werewolf doesn't like. Anyhow, it would be fascinating and bizarre to see how the Brits manage forming a coalition government, given that the conservatives are likely to capture the largest share of the vote, yet, have no natural common-ground with the Liberal-Democrats or Labor. Also, the Liberal-Democrats, and Labor have stark contrasts as well, making them unlikely bed fellows. There are a raft of smaller third parties scattered throughout England, yet, their numbers barely register, and methinks they are unlikely to add to any coalition. This is all speculation, and despite some business and currency concerns, this risk is marginal, because the stakes aren't that high other than making our Anglo-cousins look silly and strange.

While the article is content rich, the werewolf thinks several items were overlooked. Here are a few.

Look for more civil violence in South Africa targeted at various immigrant ethnic groups (Zimbabweans, Congolese, Mozambicans, Nigerians), especially in light of the pending 2010 World Cup games. This is a chance for South Africa to shine, yet its internal dynamic had been getting shakier over the last few years. This will also be a major test for the Presidency of Jacob Zuma.

Zimbabwe will be entering its first full year of a "unity government." However, leopards never change their spots, and Mugabe will work to discredit the MDC and its parliamentarians. Look for petty spats aimed at the MDC, resignations by MDC officials, and low level violence. Also, South Africa will likely start applying some pressure on the Zimbos to control their boarders better.

Mexican instability. Things will get worse, before they get better in Mexico. The cartels will boldly try and re-assert themselves against Calderon. Spike in violence, shocking in scale, along with a raft of increased business risks to investors. Including K&R and business interruption.

Venezuela will pull a stunt. It may be lame at heart(like all things Chavez), but something grand, yet pathetic seems looming. Strongman Chavez has driven the oil industry, along with all other productive segments of the economy, into the ground. He is fast running out of things to nationalize and expropriate. I would expect him to either engage in border skirmish with the Colombians(extreme case), or perhaps just become more meddlesome in regional affairs. Still, since his domestic problems are mounting, I'd expect a move to focus attention elsewhere.

Dubai won't get the level of bail-out it is expecting from Abu-Dhabi. The wounds inflicted from its bad holdings are deeper than people think.

Ethnic violence in China. Watch the western parts for spikes in Uighur led violence and discontent. Plus, the slow-down in economic growth will further strain the divide between rural and urban China causing the Beijing several unexpected headaches.

The aforementioned are just speculations. Please be mindful that the werewolf's slogan is ""often wrong, but never in doubt."

Add a BRIC to your portfolio?

So says this NYTimes peice. For those of you that don't know, BRIC stands for the primary emerging markets of Brazil, Russia, India, and China. The werewolf thinks Brazil would be the safest bet based on the graph featured at the start of the article. Watch out for the Russians. It screams of a bubble to my amateur eyes. Just look at the sharp drop during the second half of 2008. Russia is heavily reliant on its state controlled energy sector for its cash flow. Russia may be a decent short term play, but for the long run, get the hell out. I don't trust the Putin/Medvedev axis, am skeptical of the nascent Czarist nationalism, and think their willingness to expropriate assets, and bully neighbors are all troubling signs.

People have had prolonged investment erections for China and India. India, like Brazil, seems ripe for growth, and their is no doubt in my mind that China still represents opportunity and will grow to rival the United States economically. However, I get the impression that before this comes about, China will have some serious growing pains to deal with in terms of rooting out internal corruption, updating their infrastructure, resolving the differences with their disenfranchised, violent separatist minorities, and managing expectations via the rural urban divide. There is also the touchy subject of how much U.S. debt the Chinese have purchased.

My hedge fund friend keeps raving about Sri Lanka and Colombia. Hell, most things look good from exile.