None of this discounts the huge economic and financial problems that come part and parcel with the drug violence. The Justice Ministry counts 22,700 people killed in the fighting since President Felipe Calderon took office in 2006.
Kidnappings, which have risen three-fold since 2004, also increase the cost of doing business in Mexico and discourages inward investment.
Companies complain that they not only need to protect their senior executives but also middle management. Some business people and politicians, frustrated by the seemingly intractable nature of the problem, have even accused the Mexican government of ambivalence.
The drug trade generates approximately $17.2 billion a year into the country, making it Mexico's third largest source of foreign exchange after oil and remittances from Mexicans working in the United States.
Regardless of the money the drug trade brings in, the negatives for the economy are that much greater-a fact the government in Mexico City knows well.
Finance Minister Ernesto Cordero estimates that the violence costs Mexico at least one percentage point a year in real gross domestic product (GDP).
The government is well aware, though, that it could become much worse, especially if the violence were to threaten the country's critical tourist trade, worth $11.3 billion. So far the violence seems to have had no effect on tourism, but that could change quickly if an incident were to occur in a popular destination, like Cancun.
Despite this terrible burden, the economy has come back to life from the 2008-09 crisis. After shrinking 6.5% in 2009, the economy has benefited from gains in almost all sectors. Oil exports in particular (Mexico's most important source of foreign exchange) have enjoyed increasing volumes and price increases averaging 40% to 50%. The country's auto sector recorded nominal gains of 30% just in the spring quarter.
The production of cars and light trucks has increased about 70% during the past year, while manufacturing output in general has expanded almost 10%. Industrial production, which adds mining and utilities output to manufacturing, has risen almost 8%, and retail sales, which stumbled in May, have recovered.
Because most of this growth links to the recovery in the U.S. economy-which accounts for more than 70% of Mexican exports-most forecasters, including the central banks of both countries, expect the pace of advance to decelerate going forward with a slowing U.S. economy. But if (as is likely) the United States avoids a second recessionary dip, even slow growth can carry the Mexican economy upward.
Mexico's central bank, the Banco de Mexico, expects 5% overall real GDP growth this year and a 6% advance in industrial production.
Longer term, the Organization for Economic Cooperation and Development (OECD) projects a 4.5% expansion in Mexico's real GDP, significantly above the 2.5% to 3% projection it has for the fully developed economies, including the United States. Mexico has already created jobs more promptly than the United States-some 400,000 so far this year. In fact, Mexican unemployment has already fallen well below 6%. As such, the growth promises to become self-sustaining, at least to the extent Mexico is capable, given the size and influence of its northern neighbor.
The sticking point in this picture of improvement is the continued shortfall in remittances from Mexicans working in the United States. Some 10% of Mexico's population of 105 million live north of the border, and the money they send home is, as mentioned, second only to oil and as an earner of foreign exchange.
Since this important flow of funds goes primarily to poorer areas of the country, the government in Mexico City has an understandably passionate interest in U.S. immigration policy, besides, of course, its natural desire to protect its citizens. But even if immigration issues were resolved immediately it would take a long time to reestablish the flow of remittances that once prevailed.
Mexicans in the United States depend heavily on employment in construction, and the level of homebuilding in the United States will take a long time to return to former levels.
Still, even as the U.S. recovery proceeds at a sluggish pace, construction and other U.S. jobs will return for Mexican nationals, albeit gradually. As they do, the remittance funds flow will add marginally to the force of Mexico's recovery.
