Mexico & Nafta - August 2011

Richard Lugar (R, Indiana), the ranking Republican on the US Senate Foreign Relations Committee, recently underlined how close some key players in Washington are to equating Mexico with Guatemala. In his opening statement on 20 July to the committee to review the nomination of Earl Anthony Wayne as the next US ambassador to Mexico, Lugar drew several parallels between Mexico and Guatemala. Furthermore, the committee itself held Wayne’s hearing simultaneously with that for Arnold Chacon, the nominee as US ambassador to Guatemala.

The US followed up the nomination hearings with the announcement on 25 July   by William J. Burns, the State Department’s Under Secretary for Political Affairs, of a Strategy to Combat Organized Transnational Crime. Significantly, Burns argued that US aid to Colombia over the past 10 years had freed “large parts of Colombia [which] were controlled by terrorist and criminal organizations. But through collective action by the US and Colombia, the Colombian people reclaimed their territory, their security and their future. Today, Colombia’s police train other forces across the region and around the world. And through the Mérida Initiative, the US is partnering with Mexico to strengthen its law enforcement, judiciary and correctional institutions and bring security to communities south of our own border.”

Burns’s linking of Plan Colombia to the Mérida Initiative is the clearest evidence yet that the US sees the problems in Mexico as similar (or even identical) to those in Colombia a decade ago. Several long standing Colombia watchers, including one former British ambassador, disagree with elements of the US analysis, arguing that the US has misunderstood what happened in Colombia. Their argument is that political terrorists such as the Fuerzas Armadas Revolucionarias de Colombia (Farc) would have been completely defeated by now but for the revenues they derive from the international drug trade. So these Colombia watchers argue that if drugs such as cocaine were legalised, these terrorist groups would lose their revenues and wither away as other insurrectionist groups in Central America did, after agreeing peace deals.

The problem in Mexico is the reverse. There are growing signs that the purely criminal drug gangs are developing political interests and ambitions as well as moving into other criminal activities such as people trafficking, arms trafficking, money laundering and kidnapping.

It is curious that the US did not immediately comment on the strange fact that a federal Mexican police operation against a people smuggling group in Tamaulipas on 23 July picked up an Iranian, along with four Hondurans, three Brazilians, three Salvadoreans and a Nicaraguan. The 12 people, apparently being trafficked into the US, had been kidnapped two months earlier in Chiapas. They were found and freed by federal Mexican policemen in Reynosa, Tamaulipas. Five of the six kidnappers were Guatemalan; the other was a Honduran. In the Strategy to Combat Organized Transnational Crime, the US specifically warned that people trafficking networks could be used by terrorists to get agents into the US.

The Strategy to Combat Organized Transnational Crime only briefly commented on what was going on in Mexco and indeed the Western Hemisphere. The starting point of the strategy was that transnational crime threatened US borders. The main elements of the strategy are executive orders that President Obama can use to go after the assets of criminal gangs and drug traffickers, offering federal rewards for information leading to arrests and measures to seize property belonging to gangs.

On 25 July the US Treasury moved to prevent a Mexican gang, Los Zetas, from using the US financial system, by banning US financial companies from having any dealings with them. Any US citizen that has any dealing with a Los Zetas gang member is now committing a criminal offence. Lawyers, presumably, are exempt because of the constitutional right of accused persons to legal advice.

The threat of US federal sanctions is likely to drive money launderers further away from the US and into less supervised jurisdictions.  The big question is whether the gangs have hidden their assets in the US well enough to avoid detection. The Strategy is designed to attack this by proposing legislation to congress that would make it a criminal offence for a new company to conceal its real owners.

In the senate
Senator Lugar did sugar his linking of Mexico to Guatemala by pointing out that the US was more fortunate than most “Great Powers” to have Mexico and Canada as neighbours, which both historically have provided regional stability. Lugar indicated, however, there were now questions about Mexico’s stability. The three senators who asked most of the questions during Wayne’s two-hour session were: Lugar; Marco Rubio (R, Florida); and Robert Menéndez (D, New Jersey). It seems almost certain that the Senate will approve of Wayne’s nomination before the summer recess, which is likely to be delayed until 6 August because of current difficulties in extending the US debt ceiling.

Wayne is a career member of the state department. He has served as ambassador to Argentina (2006-2009) and his last job was as deputy head of mission in Afghanistan.

Wayne promised, as Lugar advocated, to support the Mérida Initiative, which has channelled US money into combating the drug trade in Mexico and Central America. Wayne said that despite criticisms of the Mérida Initiative, he expected it to continue beyond the 2012 elections. In 2012, both the US and Mexico will hold presidential and congressional elections. Wayne also firmly backed President Felipe Calderón’s ‘war’ on organised crime, which has led to over 34,000 violent deaths in Mexico since Calderón declared it on 1 December 2006. In response to a question from Menéndez, Wayne admitted that there had been criticism of the violence in Mexico, but said that he did not see any alternative to Calderón’s use of the military against the drug trafficking gangs and claimed that there was a “strong consensus” among political leaders in Mexico that the war had to continue.

Wayne stressed his intention to work with both US and Mexican officials for faster disbursement of the funds from the Mérida Initiative. To date (as of end June 2011), only US$465m has been disbursed of the US$1.3bn authorised since the programme was launched in 2008, but the administration hopes that US$900m will have been disbursed by “the end of the year”. It is not clear whether by end year the US is referring to the current fiscal year (30 September 2011) or the calendar year.

Wayne implied that thanks to the Mérida Initiative, Mexico had taken out of circulation (i.e. killed or arrested) around 30 leading gang members. He noted that many of the operations against these gangsters were the result of information sharing between Mexico and the US. He also noted that the US has supplied Mexico with 11 helicopters and has provided training for over 13,000 Mexican law enforcement personnel under the Initiative.

While Wayne was speaking, elsewhere on Capitol Hill the House of Representatives’ foreign relations committee, which is controlled by the Republicans, was in fact trimming US aid delivered under the Mérida Initiative. A proposal from Michael McCaul (R, TX) to halve the cost of training aid provided under the Mérida Initiative in the 2012 financial year (which starts on 1 October), was passed and will now go to the full House and then the Senate.

Fast & Furious
More controversially, Wayne said that if confirmed as ambassador he would do all he could to ensure that covert operations such as ‘Fast & Furious’ – in which the US Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF) encouraged Mexican gangs in a sting operation to buy high powered weapons in the US, in an effort to uncover the networks which armed the gangs – “never took place” again. In fact, what happened was that the ATF tracking scheme failed and over 1,200 of the 1,800 guns that had been sold to known associates of gangsters were lost. At least one was later used to kill a US Border Patrol officer.

The Republicans in both the House of Representatives and the Senate are alleging that the government of President Barack Obama is covering up a major scandal by concealing information on ‘Fast & Furious’. Senator Charles Grassley (R, IA), the senior Republican on the Judicial committee, and Representative Darrell Issa, (R, CA), who is also chairman of the House  Oversight & Government Reform Committee, are heading the Republican investigation into ‘Fast & Furious’, holding a series of hearings. Both politicians have sent letters to Robert Mueller, the head of the Federal Bureau of Investigation (FBI), and Michelle Leonhart, the head of the Drug Enforcement Administration (DEA), to ask them what they knew about the operation.

In early July, the legislators wrote to Eric Holder, the attorney general, after the acting head of the ATF, Kenneth Melson, told them in a closed session that the Department of Justice had instructed him not to give testimony in public. The letter published tracts of Melson’s testimony in which he described attempts by the Department of Justice to conceal evidence.

On 25 July it emerged that ATF agents had lobbied the District Attorney in Arizona to close the programme down in March 2010, when information emerged that the weapons in the programme had got though to Mexican gangs. This evidence came from Democrat congressmen, who are trying to minimise the political damage a cover-up could cause to the Obama administration.

The Democrats point out that in confidential testimony, the interim deputy director of the ATF, William Hoover, ordered the agents running the ‘Fast & Furious’ operation to close it after 90 days, so that charges could be brought against the traffickers. According to Hoover and other ATF agents, this order was overruled by Dennis Burke, the federal attorney for the district of Arizona. Federal attorneys routinely monitor and supervise federal criminal investigations. Burke, apparently, ordered ‘Fast & Furious’ to continue to until January 2011.

Hoover said he flew to Phoenix, Arizona in July 2010 to discuss ‘Fast & Furious’ with officials in Burke’s office. The outcome of this meeting was a decision that it should continue. (It had started in 2009). Hoover and other agents involved testified that they knew of no orders from either senior management at the ATF or the Department of Justice authorising ‘Fast & Furious’.

The scandal of ‘Fast & Furious’ was revealed by a CBS documentary broadcast in March 2011. The congressional investigation continues on 26 July with another hearing by Issa’s Oversight & Government Reform committee. This hearing is entitled The Other Side of the Border and will take evidence from ATF officials who were deployed in Mexico. These officials are likely to say that they were kept out of the loop over ‘Fast & Furious’.

On 26 July the New York Times (NYT) reported that a preliminary report for Issa’s and Grassley’s committees had identified that 122 weapons trafficked under ‘Fast & Furious’ have been recovered at crime scenes in Mexico. The report is likely to be published on 26 July. According to the NYT, the report lists 48 occasions between November 2009 and February 2011 in which Mexican authorities found one or more such weapons. The information in the report is based on internal ATF e-mails, whose Phoenix office set up the operation.

Operation ‘Fast & Furious’ was an investigation by the ATF’s Phoenix office into a suspected network of “straw” gun buyers, who were acquiring weapons, including a variant of the AK-47 assault rifle, from weapons dealers in the US, for use by drug cartels based in Mexico, where it is illegal to sell such guns. It ran from around late 2009 to early 2011 and to date 20 people have been charged in connection with it.

The Justice Department has told Congress that the ATF “was not aware of the majority of these purchases at the time they actually occurred.” It also said that about 600 of the 2,000 guns were purchased before the agency identified the buyer as a suspected straw purchaser. It is not clear how many guns bought by the straw buyers got through to the Mexican gangs. One ATF report in December 2010 talks of 241 weapons as having been recovered from Mexico; the 26 July report for the congressional committees puts the figure at 122.  A now-retired ATF attaché to Mexico, Darren Gil, is on record as saying that by October 2010 700 of the nearly 2,000 weapons sold under ‘Fast & Furious’ got through to the Mexican gangs.

The Issa and Grassley report describes, according to the NYT, how ATF officials in Mexico noticed, starting in late 2009, that a disproportionate number of the guns being recovered at Mexican crime scenes were linked to Phoenix stores. It portrays them as raising questions, and later alarms, about what was happening, only to be told that it was “under control.”