What Mexico’s Drug War Means For Its Economy And ETF

The crackdown on the drug cartels by Mexico’s government has tourists wary of the ongoing violence, and the instability may spill over to affect the country’s economy  and related exchange traded fund (ETF).

In a matter of days after Calderón’s term started, he dispatched the military to deal with drug-related crime, reports Chris Hawley for USA Today. But now, the citizens are weary of the ensuing violence. The military offensive has created a power vacuum, which has created heated infighting amongst the cartels.

There is a renewed interest to enact the death penalty and the left-leaning Democratic Revolutionary Party has put up billboards and posters that proclaim “The Death Penalty for Killers and Kidnappers.” This also touches upon the bruised image of Mexico as being a haven for kidnapping organizations.

The drug-running industry seems to be quite lucrative and Forbes magazine recently put Mexico’s most-wanted criminal, billionaire Joaquin Guzman, into the 701st rank in the recently published billionaire club list, remarks Charlotte Cardingham for Money. Guzman is said to be the head of one of the most powerful drug cartels and authorities say he is mostly responsible for the widespread violence.

The violence is shifting the focus of U.S. border policy from illegal immigration to the flow of cash and weapons, reports Carolyn Lochhead for The San Francisco Chronicle. We could be gearing up for a trade war after Mexico has put $2.4 billion in tariffs on American items after the Obama administration stopped some Mexican long-haul trucks from coming into the country.

In an attempt to draw more travelers, airliners are offering good deals, like the $66 round trip promotional deal by Volaris, that will continue throughout the spring season for flights to locales like La Paz and the Los Cabos region in Mexico, writes Pete Thomas for The Los Angeles Times. But tourism is down and many blame the U.S. media for its portrayal of the the drug war, which have many thinking Mexico is full of guns blazing and bullets flying overhead.

• iShares MSCI Mexico (EWW): up 17.3% in the last week; up 1% in the last month; down 20.1% in the last three months

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