Mexico's Democracy Under Attack by Narcotics Gangs as Voters Head to Polls

Mexicans will go to the polls in fourteen states this weekend after mounting drug-related violence made this campaign the bloodiest since 1994, posing a threat to the country’s democracy and adding to investor risk.

Citizens will vote July 4 for 12 state governors and dozens of mayors only six days after gunmen killed Rodolfo Torre Cantu, a gubernatorial candidate in Tamaulipas state who was leading polls after campaigning on an anti-violence platform. Last month, a mayoral candidate was shot dead. This week, a headless body was found outside the home of another mayoral hopeful.

Drug gangs are seeking more influence over local politics as they battle troops deployed by President Felipe Calderon and fight each other for routes to ship cocaine, marijuana and heroin to the U.S., said Vanda Felbab-Brown, a senior fellow at the Brookings Institution. That imperils civil liberties in a country that ended one-party rule 10 years ago, she said.

“Democratic processes are threatened by the very fact that security has deteriorated to this point,” Felbab-Brown, who writes about Mexico’s drug war, said in an interview from Washington. “What lies at the heart of democracy -- the ability of people to associate, the life on the street -- all of that becomes eviscerated by violence.”

Low Voter Turnout

The cost of protecting Mexican debt against non-payment for five years with credit-default swaps has risen 12 basis points to 139.13 since Torre Cantu was killed June 28, according to data compiled by CMA DataVision.

Mexico’s peso fell 2.8 percent to 13.0090 this week through 5 p.m. New York time yesterday. The currency has risen 0.6 percent this year.

Voter turnout may fall to as low as 33 percent from between 44 percent and 60 percent in previous midterm elections, according to estimates by Tony Payan, a political scientist at the University of Texas in El Paso.

Payan and students from the Juarez Autonomous University conducted a study of about 5,000 homes in the border city of Juarez in February and found that a quarter of them had been abandoned by former occupants who fear drug-gang violence.

Carlos Borruel, the National Action Party candidate for governor in Chihuahua state, which includes Juarez, said electoral officials told candidates to stay away from at least five municipalities known for attacks by organized crime.

“I know what I face,” Borruel, 46, said in a telephone interview. “Chihuahua is a paradise for delinquents. The organized crime situation has generated a climate of impunity.”

PRI Favored

The Institutional Revolutionary Party, which ruled the country for 71 years until 2000 and is known as the PRI, is favored to win 10 of 12 governorships up for grabs, according to surveys by pollsters Consulta Mitofsky and newspaper Reforma.

“The PRI will have a good day,” said Daniel Lund, head of Mexico City-based consulting group Mund Americas.

The PRI currently governs 19 of Mexico’s 31 states plus the federal district compared with seven for Calderon’s National Actional Party, or PAN. Of the 12 states up for grabs, the party currently governs nine.

If the PRI increases its control over state governments, the new governors may help rally their constituents to allow the PRI to back the presidency, according to Jorge Chabat, a political science professor at the Center for Economic Research and Teaching in Mexico City.

“The governors are key in mobilizing votes in the 2012 elections,” he said.

2012 Elections

State of Mexico Governor Enrique Pena Nieto, a PRI member, is the leading candidate for the presidency ahead of the July 2012 vote, according to a poll released June 14 by Mitofsky. Pena Nieto has 25 percent support of those surveyed compared with 6 percent for former presidential candidate Andres Manuel Lopez Obrador, his closest rival.

Torre Cantu, a member of the PRI, was a two-to-one favorite in Tamaulipas before he was killed, according to a Mitofsky poll. Egidio Torre, the deceased candidate’s brother, is running in his place.

The violence sweeping parts of Mexico, especially the border states, may increase the risk for short-term investors in the currency or credit-default swaps, said Jimena Zuniga, an economist at Barclays Capital in New York. Still, the lawlessness doesn’t threaten economic stability, she said.

‘Cautious’ Investors

“The problem is becoming more visible of late and the news flow is worsening,” Zuniga said in a telephone interview. “Shorter-term investors ahead of Sunday are a little more cautious in their positions.”

Mexican Economy Minister Gerardo Ruiz Mateos said the killing of Torre Cantu won’t stop foreign direct investment from growing.

“Investors are watching a country with a very important future and they’re investing in the country,” Ruiz Mateos said in a June 29 interview at Bloomberg’s Mexico City offices.

Mexico’s economy, the second-biggest in Latin America, is forecast by the central bank to grow between 4 percent and 5 percent this year after a 6.5 percent contraction in 2009.

Torre Cantu, who made fighting violence a pillar of his campaign, was the highest-level politician to be assassinated since presidential candidate Luis Donaldo Colosio was killed in 1994.

Calderon said the nation’s institutions were under threat from criminals and vowed to capture the suspected drug traffickers behind the candidate’s death.

Violence Under Calderon

Mexico has turned increasingly violent since Calderon came to office in December 2006 vowing to fight traffickers. More than 22,000 people have been killed in Mexico by organized crime since the crackdown began, according to the U.S. State Department.

In Valle Hermoso, Tamaulipas, Calderon’s National Action Party mayoral candidate Jose Mario Guajardo was murdered last month. The party couldn’t find anyone willing to risk running for mayor in the cities of Mier and Nuevo Progreso, and the candidate in Camargo quit the race after threats, said Francisco Javier Garza, the state party president.

The drug cartels are growing more brazen as they seek political influence, said Armand Peschard-Sverdrup, founder and chief executive of a political and business consulting firm based in Washington and a senior associate of the Center for Strategic and International Studies.

“There’s no question that organized crime poses a challenge for electoral democracy in Mexico,” he said.

To contact the reporters on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net; Jonathan Levin in Mexico City at jlevin20@bloomberg.net

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