WHY MEXICO IS THE MISSING BRIC

How does it feel to be Joaquin "El Chapo" (Shorty) Guzman? Last year
Forbes magazine listed him as the 701st-richest man in the world. But
unlike other billionaires, Mr Guzman cannot enjoy his fortune by
spending time on yachts or in fancy restaurants. As Mexico's leading
drugs baron, he has the country's army on his tail - and so has to
hide out in a mountainous region of 60,000 square kilometres.

The fate of Mr Guzman and the other Mexican drugs criminals is more
than just a crime story. It has global political ramifications.
Countries that were once classified as mere "emerging markets" are
now being re-classified as "rising powers". Brazil, India and China -
together with Russia - have been famously tagged as the "Brics", and
are now global political players.

With a population of more than 112m people, a per capita income that
is more than double that of China and privileged access to the US
market, Mexico should be in this group of rising powers. But the
drugs problem is blighting its future.

The figures are horrifying. Last year, the death toll in Mexico's
drugs war was more than 6,500. By comparison, over the same period
the conflict in Afghanistan claimed the lives of some 2,400
civilians. Drug-related violence killed 238 Mexicans in the first 10
days of this year alone. In late 2008, a Pentagon study notoriously
suggested that Mexico was on its way to becoming a "failed state".
Since then drugs violence has only intensified.

Fortunately, you need only spend five minutes in the country to
realise that any comparison between Mexico and a truly failing state,
such as Afghanistan, is silly. Mexico City, the capital, is a vast,
bustling and fairly wealthy city. The drugs violence is dreadful -
but it largely lacks the random quality that truly terrorises a
country. About 90 per cent of victims are said to be members of
warring drugs cartels. Most violence is confined to three relatively
small regions - above all, the benighted border city of Ciudad
Juarez, where more than 2,500 people were murdered last year.

But the drugs war is still severely damaging Mexico. Ciudad Juarez is
not some dusty, desert outpost - it is a major base for
manufacturers, aiming at the US market. Across Mexico, local
businessmen worry about extortion and kidnapping - while foreign
investors hesitate.

Mexico might be able to cope better with the drugs issue if it were
not also suffering from other ailments. But 2009 was an economic
disaster for the country. While China and India grew strongly and
Brazil barely lost ground, the Mexican economy tanked, shrinking by
almost 7 per cent.

Everything seemed to conspire against the country last year. The US,
which takes 80 per cent of its exports, was in recession. The oil
price slumped. An outbreak of swine flu devastated tourism. All that
seemed to be missing was a plague of locusts.

But even when Mexico's run of bad luck ends it will still face
serious economic problems. China's manufacturing miracle has helped
Brazil, which is a major exporter of commodities, but it has been a
big headache for Mexico - which has based its economic strategy
around manufacturing for the US market.

Economic underperformance has been matched by diplomatic
underperformance. As a member of the newly influential G20 group of
leading economies, the Mexicans should be well placed. Instead,
Brazil has been anointed as the unofficial leader of Latin America.
Felipe Calderon, Mexico's president, is serious and hard-working, but
he lacks the charisma and high profile of Brazil's President Luiz
Inacio Lula da Silva. Brazil's voice matters a lot in world trade
talks and in global climate change negotiations, while Mexico's views
barely feature.

What can Mexico do to turn this situation around? The country will
host the next United Nations climate summit in December although that
might prove to be something of a poisoned chalice. Some public
intellectuals in Mexico are beginning to argue that Mr Calderon
should make a quiet accommodation with the drugs gangs, to restore
social peace. That would surely be a mistake. A situation in which
criminals are permanently ceded control of parts of the country - and
can continue to buy influence and power unmolested in the rest of the
nation - cannot be a basis for stability. Police reform, social
programmes and improved intelligence co-operation with the US are
better options.

But as well as battling on in the struggle against the illegal drugs
cartels, the Mexican government needs to take on the legal business
cartels. Oddly enough, it is not a good sign that the current holder
of the unofficial title of the "world's richest man" is a Mexican
Carlos Slim. Mr Slim is a gifted businessmen who has built up a
telecommunications empire across Latin America. But his vast wealth
testifies to the uncompetitive nature of the Mexican telecoms market
in which he built his initial fortune. It is widely acknowledged in
Mexico that the country would make huge gains if it allowed more
competition in everything from energy to construction and retailing.

There is, however, one positive side to the inefficiency of the
Mexican economy. It means that the country still has huge untapped
resources. The year 2010 - which marks the 200th anniversary of
Mexican independence and the 100th anniversary of the Mexican
revolution - would be a fitting year in which to unleash that potential.