The region that separated the heart of Texas from the heart of Mexico was a barrier for military movement that undermined Mexico's ability to hold its northern territory. The geographic weakness of Mexico -- this hostile region coupled with long and difficult-to-defend coastlines and no navy -- extended west to the Pacific. It created a borderland that had two characteristics. It was of little economic value, and it was inherently difficult to police due to the terrain. It separated the two countries, but it became a low-level friction point throughout history, with smuggling and banditry on both sides at various times. It was a perfect border in the sense that it created a buffer, but it was an ongoing problem because it could not be easily controlled.
The defeat in Texas and during the Mexican-American War cost Mexico its northern territories. It created a permanent political issue between the two countries, one that Mexico could not effectively remedy. The defeat in the wars continued to destabilize Mexico. Although the northern territories were not central to Mexico's national interest, their loss created a crisis of confidence in successive regimes that further irritated the core social problem of massive inequality. For the past century and a half, Mexico has lived with an ongoing inferiority complex toward and resentment of the United States.
The war created another reality between the two countries: a borderland that was a unique entity, part of both countries and part of neither country. The borderland's geography had defeated the Mexican army. It now became a frontier that neither side could control. During the ongoing unrest surrounding the Mexican Revolution, it became a refuge for figures such as Pancho Villa, pursued by U.S. Gen. John J. Pershing after Villa raided American towns. It would not be fair to call it a no-man's-land. It was an every-man's-land, with its own rules, frequently violent, never suppressed.
The drug trade has replaced the cattle rustling of the 19th century, but the essential principle remains the same. Cocaine, marijuana and a number of other drugs are being shipped to the United States. All are imported or produced in Mexico at a low cost and then re-exported or exported into the United States. The price in the United States, where the products are illegal and in great demand, is substantially higher than in Mexico. That means that the price differential between drugs in Mexico and drugs in the United States creates an attractive market. This typically happens when one country prohibits a widely desired product readily available in a neighboring country.
This creates a substantial inflow of wealth into Mexico, though the precise size of this inflow is difficult to gauge. The precise amount of cross-border trade is uncertain, but one number frequently used is $40 billion a year. This would mean narcotic sales represent an 11.4 percent addition to total exports. But this underestimates the importance of narcotics, because profit margins would tend to be much higher on drugs than on industrial products. Assuming that the profit margin on legal exports is 10 percent (a very high estimate), legal exports would generate about $35 billion a year in profits. Assuming the margin on drugs is 80 percent, then the profit on them is $32 billion a year, almost matching profits on legal exports.
