Cablegate: Mexico: Michoacan Faces Trifecta of Economic,

Published: Mon 21 Sep 2009 01:12 PM
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1. (SBU) Summary: Poloff traveled to Morelia, Michoacan
August 18-21 to assess the political, economic, and security
environment in the state with a number of officials from the
major political parties, the state government, non-government
organizations, and the academic world. Michoacan is
emblematic of the dilemma facing many of the states in
Mexico: institutional weaknesses, political infighting and a
lack of fiscal stability hamper the state governments'
ability to make headway on poverty, unemployment, and
insecurity. Failure to foster a local environment with
promising prospects for investment and employment feeds
security and migration problems which in turn increases the
state economy's reliance on remittances and encourages local
corruption. Recent mid-term elections left Michoacan's
political leaders unchanged, barely touched by a spat of
recent corruption scandals that scarred the state's
reputation (reftel) but left the local way of doing business
largely unaffected. Greater cooperation among local officials
and with the federal government will be crucial to realizing
better success in meeting the state's challenges in the
future. End Summary.
Political Landscape Leaves Problems Festering...
2. (SBU) Political power in the state is equally divided
between the three leading Mexican political parties with the
left-leaning Democratic Revolutionary Party (PRD) enjoying a
small plurality in the state legislature (14 of 40 seats),
President Calderon's own National Action Party (PAN) close
behind with 12 seats, and the nationally re-ascendant
Institutional Revolutionary Party (PRI) controlling 10 seats.
Smaller parties -- Convergence, the Green Party of Mexico
(PVEM), the Workers' Party of Mexico (PT), and the New
Alliance (PANAL) -- are bit players with their one seat each
not enough to give them any real bargaining power. The mayor
of the capital city, Morelia, is Fausto Vallejo Figueroa,
from the PRI. The distribution of political power puts a
premium on consensus-building and coalition politics but PRD
Governor Leonel Godoy has been unable to forge any effective
cross-party alliances. More often than not personal
rivalries and corruption have led to a political stalemate
reflected in the local government's inability to address
serious problems. Local elections will take place in November
2011 for the governor, state legislature, and municipalities.
3. (SBU) The balance among Mexico's three leading parties
stems from several factors. PRD State President Fabiola
Alanis attributed PRD's traditional strength in Michoacan to
the fact that the party was founded there and maintains an
effective and organized presence throughout the state. Had it
not been for the May 26 arrests by federal agents of 28 high
ranking officials on narcotics charges (reftel), the majority
of whom were from the PRD, Alanis maintained PRD would have
even won two more districts. Meanwhile PAN's influence has
been boosted by President Felipe Calderon's status as a
native of Michoacan and the corresponding resources from the
federal government that flow through national programs and
help raise the PAN's local visibility. Even though the PRI
won big in the midterm elections nationally and in other
states, it did not win any seats assigned to Michoacan in the
Federal Chamber of Deputies. Instead, the elections produced
an identical distribution of seats with PRD securing eight
and PAN winning the remaining four.
4. (SBU) As is the case in Mexican politics at the national
level, the differences between the parties is less an issue
of ideological divide, and more a result of local
personalities and party organization. Green Party State
Congressman Arturo Guzman explained that the PRD emphasizes
grass roots movements, whereas the PAN is more traditional in
its approach regarding the importance of consensus building.
Officials told Poloff that the PRI is known for its
chameleon-like behavior and often forms alliances with the
PAN in the state. Representatives from local human rights
NGOs complain that the PAN operates much like the PRI in
terms of clientelism and believe the state will need a new
generation of leaders willing to work together to confront
the problems of the state.
And Complicates Economic Development...
5. Godoy and his advisors in the state government repeatedly
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stressed their commitment to improve the economy
notwithstanding political obstacles. Erick Lopez,
Coordinator for Development and Planning, told Poloff that
the government's first priority is to increase production and
exports of fruits and vegetables in rural areas, taking steps
as appropriate to improve infrastructure. Officials told
Poloff that Michoacan already harvests more fruit than any
other part of the country. The government's second priority,
according to Lopez, is to consolidate and expand Michoacan's
tourism industry, which has taken a hit due to economic and
security crises in the state. He said the third priority is
the continued development of the port of Lazaro Cardenas,
which is the largest port in the country and has not/not been
affected by the worsening security environment. This
includes business expansion, railroad investment, and highway
6. Migration to the U.S. is another challenge for Michoacan.
The local Secretary of Economic Development estimates that
2.5 million people from Michoacan already live in the U.S.
with most migrants hailing from the countryside. State
Secretary of Government Fidel Calderon told Poloff that the
governor wanted to target marginalized rural populations for
assistance and development, which could potentially help stem
the flow of young, able men to the U.S. To this end, the
governor reportedly has increased the budget for programs in
the countryside by 138 percent over the previous
administration. It is not clear what impact this increase
will make as the money still is being allocated.
7. (SBU) Calderon complained about the lack of a stable
funding base for the state, a weakness stemming in part from
an institutional problem in Mexico's federal structure. Only
20 percent of federal taxes are returned to the states and of
that 20 percent, only 20 percent go to the municipalities.
The states have very few sources of independent funding,
deepening it reliance on flows from the federal government.
Remittances from the U.S. boost the local economy but are
unpredictable and closely tied to U.S. economic conditions.
Michoacan led all Mexican states with nearly USD 2.5 billion
in remittances in 2006 but recipients generally use these
funds for basic necessities. Both PAN and PRD leaders
stressed the importance of greater investment in the state in
order to ease the historic overreliance on remittances.
8. PRD Secretary of Economic Development Ruiz thought
NAFTA-generated investment from the U.S. was the best way to
cut through existing red tape. He believes that the best way
to increase investment and economic development in the state
is to promote the Lazaro Cardenas--Kansas City Railway
Corridor facilitating the transport of containers from the
Far East to the U.S. by way of Mexico. PAN State Congressman
Sergio Solis lamented the low industrialization rate in the
state, attributing it to historical factors and the current
economic recession. He opined that the ejido system
(agricultural land that the federal government expropriated
from large private holdings during the Mexican Revolution and
redistributed to communal farms) makes the purchase and sale
of property difficult, seriously limiting new investment.
University of Michoacan Professor Benjamin Revuelta told
Poloff that what Mexico really needs is a program of
assistance from the U.S. on the scale of European Union aid
to its poorer members.
As Does Security Spending
9. (SBU) We heard a consensus among state administration
officials on the need for the state to forge economic
solutions to the security crises confronting Michoacan.
State Secretary Calderon maintained that jobs and education
would contribute more long-term to the state's overall
security than funds dedicated exclusively to security
measures. PRD Party Secretary Alanis complained that the six
million pesos a day spent on the military mobilization of
10,000 troops in Michoacan were draining resources from
important social programs. She further asserted that human
rights complaints had increased six fold over the last two
years due to the mobilization.
10. (SBU) Local human rights NGOs echoed the charges,
recounting numerous human rights violations by the military
in the countryside, including collateral killings,
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unauthorized entry, arbitrary detention, torture, rape, and
robbery. They cited the case of people attending a church
service in Apatzingan, whom soldiers held for hours while
they searched for a suspect. They also maintained that
federal forces seemed disproportionately focused on going
after Michoacan's principal cartel, La Familia, as opposed to
the Zetas. Some even offered La Familia praise for providing
many benefits to rural communities but conceded that it would
be better if the cartel did not exist. While the State Human
Rights Commission President Victor Manuel Serrato faulted the
military for failings, he said that the situation had
improved over recent months as the military became sensitive
to its human rights record. The primary problem, he said, was
that the military lacked good intelligence. He also opined
that authorities should be combating kidnapping and
extortion, at least as much as narcotrafficking, as they are
more serious crimes in his view and have become more
prevalent in Michoacan.
11. (SBU) Notwithstanding disagreement between state and
federal officials on security matters, local officials remain
committed to strengthening their security apparatus. On July
21, the state passed a new public security law to improve the
professionalization of prosecutors and police. State
Secretary of Security Minerva Bautista said that the new law
would be implemented in the next five to six months to
strengthen entry requirements, increase police vetting
including regular polygraphs, provide regular human rights
training, and implement programs in human development
including physical and mental health. She also mentioned
that the state was improving intelligence gathering and
coordination, including with other states and citizen
participation. Officials at the State Prosecutor's Office
(PGJ), however, told Poloff that Michoacan had a long way to
go before implementing the 2008 judicial reforms signaling a
preference to see oral trails piloted first at the federal
State and Local Corruption: Look the Other Way
12. (SBU) Local government officials did not see any
inconsistency between the May arrest of ten local mayors by
federal authorities and their call for more cooperation and
transparency between federal and local law enforcement
efforts. State Secretary of Government Calderon complained
that the federal government should have demonstrated greater
respect for the state's autonomy by sharing more information
about its operation with local authorities. Calderon
registered a similar complaint about the arrests of leading
members of La Familia cartel, suggesting state officials
needed information in advance to guard against possible
retaliation. State officials did not comment on well-known
concerns from federal authorities that sensitive information
shared with local officials would leak to the subjects of
their operations. At the same time, however, recent charges
against the governor's brother for his alleged involvement in
narcotics trafficking is fostering rumors from the political
opposition that the governor himself may be involved in
Comment: Only One Way Forward
13. (SBU) Michoacan faces a well-known Mexican trifecta that
stems from serious economic, security and migration problems
that are inseparable. New private investment, better sharing
of tax revenues with the Federal government and a decrease in
corruption would help stabilize Michoacan's economy and
reduce its overreliance on unpredictable federal government
handouts and remittances from abroad. But for now, political
disfunctionality and increased spending on security is
undermining the creation of a business climate that could
support economic growth and greater job prospects. Only
greater coordination and cooperation among the state's
political parties and between state and federal forces will
allow the kind of comprehensive approach that is needed to
address Michoacan's serious problems.
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