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Stephens: The Paradoxes of Felipe Calderón

The Mexican president who fought the drug war leaves behind a growing economy and says the U.S. should consider 'market alternatives.'

New York

Felipe Calderón arrives 15 minutes early for his meeting with the editors of The Wall Street Journal, as if he wants to put to rest the old stereotype about his countrymen living on "Mexican time." It isn't the only stereotype the Mexican president means to bury as he wraps up his six consequential (and term-limited) years in office. Consider a few examples:

Labor-force skills: "There are 113,000 new engineers graduating in Mexico every single year, which means more engineers in Mexico graduating than in Germany or Canada or Brazil," he says in serviceable English. "And if you establish some kind of rate of engineers per 100,000 people, it's almost twice the American rate."

Lest readers assume these are somehow second-rate engineers, the president notes that "Mexican engineers are designing the new engine for GE—the engine for Airbus 380" jumbo jet, and that Mexico will soon begin to manufacture planes for Canada's Bombardier and helicopters for Eurocopter. "We are investing in people," Mr. Calderón says. "China has a lot of engineers, I know, but we are not looking for cheap labor. . . . I am looking for talent factors."

Immigration: "The net rate of migration of Mexican workers toward the United States," the president notes, "became zero in 2010 and it repeated zero in 2011 and probably it will be zero or less than zero this year."

Numbers from the Pew Research Center back Mr. Calderón's point, showing that annual Mexican immigration to the U.S. peaked around a decade ago at 770,000 and dropped to 140,000 in 2010—while 1.4 million Mexicans living in the U.S. returned to Mexico between 2005 and 2010, the vast majority of them voluntarily.


Terry Shoffner

"But let me go to the good reasons," he quickly adds, citing 13 consecutive quarters of economic growth and job creation that clocked in at 700,000 "formal sector" jobs last year and will likely match that number this year. Since the financial crisis hit in mid-2009, Mexico's unemployment rate has declined to just under 5%, while U.S. unemployment remains stubbornly above 8%. Mexico also exports $1 billion of goods a day.

Border security: Americans are familiar with the name Brian Terry, the U.S. border agent killed in Arizona in 2010 by Mexican criminals using guns obtained through the "Fast and Furious" program.




At the time of his election, Mr. Calderón's biggest challenge seemed merely to establish his constitutional authority, which AMLO refused to recognize by naming himself the "legitimate president" and trying to bring Mexico City to a standstill through a series of mass rallies. But Mr. Calderón had the sense to let those rallies burn themselves out. Instead, within days of taking office he mobilized the Mexican military for an all-out war against the drug cartels.



As evidence, the president points to increased infighting within the cartels, as well as a drop in the rate of homicides between last year and this. But he's very far from claiming victory. Mexican commandos have killed or arrested one drug lord after another—this week came news that Zetas kingpin Ivan Velazquez Caballero (nicknamed "El Taliban") had been nabbed in the city of San Luis Potosí—without yet turning a definite corner in the war. Efforts to improve the caliber and integrity of Mexico's federal police forces have also had mixed results, despite training assistance from Canadian Mounties and even the Israeli Mossad.

Mr. Calderón cites a number of obstacles, one of them being constraints that Mexico's federalist system puts on his presidential powers. "The director of the national police of Colombia could remove any single officer," he says, pointing to a country often compared with Mexico. "However, if I, as president, see there is a cop in the corner getting bribes, if I do not have enough judicial evidence, I do not have the capability to remove him."

The larger problem is the flow of money going from the wallets of (primarily American) drug users to the safe boxes of the drug lords. "As long as we are not able to stop the flow of money to the criminals," he says, "this narco business will be a never-ending story."

So does that mean Mr. Calderón advocates drug legalization? "This society," he says, referring to America, "has the responsibility . . . to explore all the alternatives, including the market alternatives, in order to reduce the amazing amount of money coming from the black market in drugs."


Which brings him to his conclusion: "If the price goes up [thanks largely to interdiction efforts] and the demand is the same, you will increase profits so you are creating more incentives for participants in the market. And it's clearly a textbook case of an unstable economic system in which the more successful you are, the more criminals you are creating."



Perhaps it's ironic that the man who has waged that war more fiercely than any of his predecessors would reach this conclusion. But Mr. Calderón is at pains to stress that the war against the cartels isn't ultimately about drugs at all. It's about what he calls the "difficult and painful effort to make Mexico a rule of law state." Drug profits may be turbocharging the cartels. But barring unlikely changes in U.S. law, Mr. Calderón and his successors will have to deal with the hand they're dealt.

That means improving the effectiveness of legal institutions, broadening the avenues of educational and economic opportunity, taking better advantage of Mexico's chronically mismanaged energy resources (including potentially vast deposits of shale gas) and securing the monetary foundations of a country that has suffered too often from devastating peso devaluations. On that last point, he strikes a skeptical note about the current fashion of trying to stimulate the economy through measures like the U.S. Federal Reserve's rounds of quantitative easing:

"The paradox is that with a monetary measure [taken] in order to expand the economy, you are provoking some kind of increase in [the price] of commodities. So you are getting a recessionary measure." Hear that, Ben Bernanke?

Finally, there is the question of the future of Mexico's democracy. Mr. Calderón is the son of the co-founder of the National Action Party, or PAN, which 12 years ago broke the 70-year grip on the presidency by the Institutional Revolutionary Party, or PRI. But the PRI was the big winner—and the PAN the big loser—in July's election, and it's an open question whether the PRI of the future will pick up Mr. Calderón's reformist agenda, or return to its antediluvian past.

The outgoing president of Mexico can only watch and hope: "Mexico needs a lot of work to do," he says, sounding wistful. "We are in the middle of the rebirth."



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