These numbers are all guesses, of course. The amount of money returned to Mexico as opposed to kept in U.S. or other banks is unknown. The precise amount of the trade is uncertain and profit margins are difficult to calculate. What can be known is that the trade is likely an off-the-books stimulant to the Mexican economy, generated by the price differential created by drug prohibition.
The advantage to Mexico also creates a strategic problem for Mexico. Given the money at stake and that the legal system is unable to suppress or regulate the trade, the borderland has again become -- perhaps now more than ever -- a region of ongoing warfare between groups competing to control the movement of narcotics into the United States. To a great extent, the Mexicans have lost control of this borderland.
From the Mexican point of view, this is a manageable situation. The borderland is distinct from the Mexican heartland. So long as the violence does not overwhelm the heartland, it is tolerable. The inflow of money does not offend the Mexican government. More precisely, the Mexican government has limited resources to suppress the trade and violence, and there are financial benefits to its existence. The Mexican strategy is to try to block the spread of lawlessness into Mexico proper but to accept the lawlessness in a region that historically has been lawless.
The American position is to demand that the Mexicans deploy forces to suppress the trade. But neither side has sufficient force to control the border, and the demand is more one of gestures than significant actions or threats. The Mexicans have already weakened their military by trying to come to grips with the problem, but they are not going to break their military by trying to control a region that broke them in the past. The United States is not going to provide a force sufficient to control the border, since the cost would be staggering. Each will thus live with the violence. The Mexicans argue the problem is that the United States can't suppress demand and is unwilling to destroy incentives by lowering prices through legalization. The Americans say the Mexicans must root out the corruption among Mexican officials and law enforcement. Both have interesting arguments, but neither argument has anything to do with reality. Controlling that terrain is impossible with reasonable effort, and no one is prepared to make an unreasonable effort.
Another aspect is the movement of migrants. For Mexicans, the movement of migrants has been part of their social policy: It shifts the poor out of Mexico and generates remittances. For the United States, this has provided a consistent source of low-cost labor. The borderland has been the uncontrollable venue through which the migrants pass. The Mexicans don't want to stop it, and neither, in the end, do the Americans.
Dueling rhetoric between the United States and Mexico hides the underlying facts. Mexico is now one of the largest economies in the world and a major economic partner with the United States. The inequality in the relationship comes from military inequality. The U.S. military dominates North America, and the Mexicans are in no position to challenge this. The borderland poses problems and some benefits for each, but neither is in a position to control the region regardless of rhetoric.
Mexico still has to deal with its core issue, which is maintaining its internal social stability. It is, however, beginning to develop foreign policy issues beyond the United States. In particular, it is developing an interest in managing Central America, possibly in collaboration with Colombia. Its purpose, ironically, is the control of illegal immigrants and drug smuggling. These are not trivial moves. Were it not for the United States, Mexico would be a great regional power. Given the United States, it must manage that relationship before any other.
Given Mexico's dramatic economic growth and given time, this equation will change. Over time, we expect there will be two significant powers in North America. But in the short run, the traditional strategic problems of Mexico remain: how to deal with the United States, how to contain the northern borderland and how to maintain national unity in the face of potential social unrest.
