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Mexican Security Unnerves Executives as El Chapo Seen Not Enough

Little has improved in Mexico’s security since President Enrique Pena Nieto took office in 2012, even with the arrest of the nation’s biggest drug kingpin and a government committed to improving the rule-of-law, some Mexican executives say.

Rogelio Velez, chief operating officer at railroad operator Ferrocarril Mexicano SA, said his company has spent 2.2 percent of its income in 2012 and 2013 to protect the company. Samantha Ricciardi, Mexico’s country head at BlackRock Inc. (BLK), the world’s largest asset manager, agreed that violence has remained at elevated levels and investors in the automotive hub of Queretaro state are concerned about safety.

Pena Nieto in his 2012 inaugural address vowed to reduce crime in Latin America’s second-biggest economy and shift Mexico’s focus away from the drug violence that has left more than 92,000 people dead or missing since 2006. While he captured drug cartel leaders including Joaquin “El Chapo” Guzman, the world’s most-wanted criminal, kidnappings and extortions have increased under his watch.

“Basically we’re in the same place as before,” Ferromex’s Velez said today at the Bloomberg Mexico Economic Summit in Mexico City. “We haven’t been able to see in our numbers a security improvement.”

Killings, Extortion

Statistics on violence nationwide paint a mixed picture. While the number of killings fell 16 percent in 2013 from the previous year, kidnapping rose 21 percent and extortion climbed 11 percent, according to Mexico’s Interior Ministry.

Interior Minister Miguel Angel Osorio Chong said March 11 that coordination among security forces has increased under Pena Nieto, and safety improved in some violent states such as Durango. In July, Mexico arrested Miguel Angel Trevino, the leader of the Zetas cartel and earlier this month gunned down Nazario Moreno Gonzalez, a top cartel leader in Michoacan who had been reported dead in 2010.

Vicente Fox, who served as Mexico’s president from 2000 to 2006, said at the Bloomberg summit that the nation has succeeded at reducing the attention paid internationally to violence in Mexico. Using the military to fight drug cartels has been a failed strategy as the U.S. hasn’t done enough to capture drug traffickers, and Mexico should spearhead efforts to legalize drugs, Fox said.

Mexico’s benchmark IPC index has fallen 7.3 percent this year and the peso has depreciated 1.7 percent.

The capture of cartel members and reduction in killings has given the impression to foreign investors that Mexico is gaining the upper hand in the drug war, said Frank Holder, Latin America chairman at FTI Consulting, a global business advisory firm.

“The perception and reality don’t coincide,” Holder said at the Bloomberg summit. “For our clients, things are a bit worse than before, because merchandise theft, extortion and kidnappings perhaps more directly impact them than other violent crimes.”

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Robert Jameson, Bradley Keoun

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