Drug-Gang Expansion Demands Central American Action Plan, Presidents Say

Mexico’s drug-fueled violence is flooding across Central America as cartels deepen roots in a region that needs more aid from the U.S. to counter organized crime, the presidents of Panama and Costa Rica said.

Costa Rica’s reputation as a peaceful haven in Latin America is at risk even as the country weighs boosting security spending by $360 million over four years to confront drug gangs, President Laura Chinchilla said in an interview. Central American nations need a coordinated regional response backed by greater U.S. support to fight traffickers, Panama President Ricardo Martinelli said.

“The conflict is spilling over all Central America because there is too much money involved,” Martinelli, 58, said in an interview yesterday in the office of the Panama Mission to the United Nations in New York. “The U.S. is helping the region, but it isn’t helping enough.”

Drug cartels are spreading as Mexican President Felipe Calderon’s crackdown on traffickers since 2006 claims more than 28,000 lives, said Howard Campbell, an anthropology professor at the University of Texas at El Paso and author of the book “Drug War Zone.” Guatemala, Honduras and El Salvador, just south of Mexico, are at greatest risk, Chinchilla said in a Sept. 20 interview at Bloomberg’s headquarters in New York.

“The three countries in the northern part of Central America are suffering a very crude violence,” Chinchilla, 51, said. “We have to act preventatively in order to face the situation.”

‘Important Role’

Colombian President Juan Manuel Santos said in New York last night that his country is ready to use its experience fighting drug traffickers to help stem violence in the region.

“They are trying to take over countries in Central America and the Caribbean,” he told a group of investors and business leaders. “I think we can play a very important role in the region.”

Santos said Colombia is providing assistance to Mexico, Guatemala and Costa Rica, “but much more has to be done, because we have an increasing problem.” Colombian forces killed the second-in-command this week of the nation’s biggest rebel group.

“We have learned, we have accumulated a tremendous amount of knowledge, of experience we want to share, we are starting to share with these countries,” Santos said in a speech today at the Council of Foreign Relations in New York.

Jamaica

Jamaica’s Prime Minister Bruce Golding echoed concerns of neighbors, saying his country is being forced to use “scarce resources” and that a “coordinated effort” is needed.

“We need help,” he said in an interview at Bloomberg’s headquarters in New York today. Major countries including the U.S. also need to place “as much emphasis on the demand side as they do on the supply side,” Golding said.

More than 50 percent of the crimes in Panama are drug- related, Martinelli said. The government plans to increase its security budget to $420 million in 2011, from $276 million in 2009, he said. During the next four years, Panama will spend an additional $500 million on equipment such as helicopters, radars and naval bases to help curb drug trafficking and illegal immigration in the region, he said.

Smuggling Ring

Drug-related shootings that plague Mexico’s northern cities have surfaced in Guatemala as rival gangs battle for turf, Campbell said. Entire Guatemalan townships are under the control of Mexican gangs that prey on weak law enforcement, according to a U.S. State Department report released in March.

Costa Rican authorities uncovered a drug smuggling ring that included suspected members of the Sinaloa cartel last year when traffickers crashed a cocaine-filled helicopter into a cloud-covered mountain. The country, which has no army, was listed for the first time this year by the U.S. as one of 20 major illicit drug transit or producing nations, along with Honduras and Nicaragua, according to a Sept. 15 White House memorandum. Guatemala and Panama had already been on the list.

While Costa Rica has the lowest violent crime rate in Central America, homicides rose 37 percent in 2008 from the year before, according to a UN report.

“People on the street are very concerned about the security issue,” Chinchilla, who was elected on vows to reduce crime, said. “When you compare Costa Rica now with the country we had 20 years ago, we have experienced a deterioration.”

‘Regional Challenge’

Hard-to-control borders have made Panama a transit point for shipping cocaine from South America, the State Department report said. Homicides in Panama jumped 19 percent in 2009 from the year before, according to the public minister’s office.

Ninety percent of cocaine destined for the U.S. was smuggled through Mexico or Central America in 2008, according to the U.S. Drug Enforcement Administration.

“Drug violence is absolutely a regional challenge and must involve a regional solution,” Philip J. Crowley, a U.S. State Department spokesman, said in a statement. “International criminal enterprises are operating across many borders and it will take the region as a whole to defeat them.”

Even as the violence grows, Panama’s benchmark stock index is up 10 percent this year. Panama will grow around 7 percent in 2010, Martinelli said. Costa Rica’s $29 billion economy will expand “a little more than” 4 percent from 2009, Chinchilla said.

Growth Forecasts

Mexico’s Finance Minister Ernesto Cordero said March 18 that drug violence costs the country 1 percentage point of gross domestic product each year. Mexico’s economy expanded 7.6 percent in the second quarter from a year earlier, the fastest since 1998. The central bank forecasts it will grow as much as 5 percent this year, after contracting 6.5 percent last year.

Mexican stocks are outperforming peers in the U.S. and Brazil, with Mexico’s IPC benchmark stock index gaining 3 percent this year, after a 44 percent jump in 2009, the biggest in three years. Brazil’s Bovespa index rose 0.3 percent so far this year, and the S&P 500 is up 0.9 percent.

U.S. Secretary of State Hillary Clinton this month compared Mexican drug cartels to an “insurgency” and vowed a greater U.S. presence in Central America to help governments combat traffickers as they expand operations throughout the region.

Drug Trafficking

The world drug market totals $400 billion per year, Dominican Republic President Leonel Fernandez said today in a speech in the Council of the Americas. “It is the main threat to security in Latin America and in the world in the 21st century,” he said.

Efforts to combat drug trafficking should focus not only on the supply but also on the demand side, Fernandez said. “This should be looked upon in a very comprehensive and broad way,” he said. “You cannot control drug traffic if you only look at supply.”

Under the Merida Initiative, a three-year, $1.6 billion U.S. program to combat drug trafficking in Mexico, Central America and the Caribbean, less than $275 million has been allocated to Central America, Haiti and the Dominican Republic, according to a State Department report.

Only 9 percent of the money promised under the initiative has been spent, and U.S. officials have no reliable way to determine whether it is making a difference in the drug war, according to a July report by the U.S. Government Accountability Office.

Costa Rica and Panama’s presidents said drug trafficking is the kind of crime that doesn’t respect borders and advocate a regional solution.

“The six countries of Central America, we need to sit down and have a business plan of what we want to do, where we are and how we are going to do it,” Martinelli said. “It has to be a joint effort of all countries.”

To contact the reporters on this story: Fabiola Moura in New York at fdemoura@bloomberg.net; Blake Schmidt in Granada, Nicaragua at Bschmidt16@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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