Why Mexico's drug violence doesn't deter foreign direct investment
Recent reports indicate foreign companies are not feeling the effects of the violence in Mexico and Central America, likely due to the difficulty of extorting multinational corporations.
(Page 2 of 2)
All of this suggests that despite the terror caused by drug violence, foreign investment continues to pour into the region. While Latin American governments would like to chalk this up to increased security measures for foreign companies, it is more likely due to the difficulties associated with extorting large multinational corporations. As InSight Crime has documented, extortion of local grocers, restaurants, and bus drivers is a fairly common phenomenon in Latin America. However, forcing a large, foreign company that is headquartered outside of the region to pay “protection fees” is a different business entirely. Extortion depends on the ability to demonstrate the negative consequences of not paying, and because foreign multinationals generally hire contractors, the necessary leverage is often simply not there.Skip to next paragraph
In surprise landslide, Jamaican opposition wins back power
Parading back to Rio de Janeiro: the bookish and brainy
After dramatic 2011 in Cuba, will US-Cuban policy shift in 2012?
Boom goes the churro: Chilean court upholds damages for exploding sweets
Why did Hugo Chavez spam Venezuelans on Christmas?
Subscribe Today to the Monitor
Unfortunately, this can sometimes result in the "outsourcing" of risk to these contractors. In Colombia, for example, the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia - FARC) have recently stepped up kidnapping of oil workers in the country. In August, oil contractors registered three targets against energy employees, all allegedly carried out because of a failure to pay extortion fees. Alarmingly, the number of oil workers kidnapped so far this year in the country stands at 38, a testament to rebels' heightened campaign.
That foreign investment continues to pour into Mexico and Colombia, where large tracts of territory cannot be considered properly secured by the state, is one indication of the value of each country's resources. This includes oil, African palm, and gold in Colombia; and industrial (read: cheap) labor in Mexico. If security conditions reach the point that multinational operations are significantly impacted, the inevitable response will be the government's reprioritization of security goals. This is already happening somewhat in Colombia, where the state has made oil-rich departments like Meta the prime receivers of US aid, at the expense of other crime-addled areas like the Pacific coast.
In some ways it is unfortunate that foreign investment is used as a prime indicator for just how "bad" things are inside a country, security-wise. The real question is whether Latin America can continue to integrate with the world economy, and at the same time improve security for all citizens, not just those in economic hotspots.
--- Geoffrey Ramsey is a writer for Insight – Organized Crime in the Americas, which provides research, analysis, and investigation of the criminal world throughout the region. Find all of his research here.
The Christian Science Monitor has assembled a diverse group of Latin America bloggers. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here.