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I spy… an accounting error

6 December 2018

It’s like something I’d expect in a John Le Carre novel.  While the details are not forthcoming, the Mexican media reported yesterday on one victim of the new austerity push… what appears to have been an off-the-books spy operation here in Mexico City.

As part of the promised crack-down on fraud, some local accounts receivable clerk in the Mexico City government noticed rental payments for a house in the city without any indication of what the rental was for.  Checking further, the accountants found invoices (facturas) for the house rent from “Sterling Investments”.  A quick check of vendors to the government didn’t show any company by that name, nor does “Sterling Investments” appear to have any papers of incorporation, a website, or … well, any presence beyond facturas for this one rental.

So… the Public Minister sent someone down to check out the rental house.  Which had been hastily abandoned, leaving behind about 50 computer stations, and various electronic eavesdropping equipment.  What’s up with that?

All anyone is saying for now is that yes, people were being spied upon (and have been notified that they were under surveillance) but by whom, and for what purpose, still has not been disclosed.  Best guess is that this was that the previous administration was tracking potential political opponents, though whether this was just politicians, or “social activists” and journalists … or maybe, it was on behalf of the developers who wanted to track opponents to the mega-projects that have proven so problematic over the last administration… or… well, who knows?

Attn: spies.  Pay more attention to the paperwork next time.  Even George Smiley had to turn in his receipts.


Gods, Gachupines, and Gringos…

2 December 2018

Mexican history, as I said in my book, is like the Aztec Calendar, cyclical but changing form with every cycle… only  sometimes converging.  As yesterday, when we invoked the



as the




looked on, mere observers in the turning cycle!


¡Viva la 4° Transformation!

Reefer Logic

30 November 2018

(Originally published in the Presidio (TX) International)

Mark Twain said “Travel is fatal to prejudice”, but he might have added, expatriation creates new prejudices. My vice being coffee, legal marijuana was the furthest thing from my mind when I first started living in Mexico. At least by education, or by trade… giving private English lessons to those with the income to pay a private tutor… I’ve picked up the prejudices of the Mexican middle class. I may have grown up in the era when Mexico and marijuana were pretty much synonyms, but was soon disabused of the notion that it was an acceptable habit, but rather something indulged in by “nacos” (the kind of people dismissed in the U.S. As “trailer trash”) or shady types like gringos and the decadent rich.

I was greatly amused when I first lived in Mexico City by my landlady, a European countess in self-imposed exile, who went out of her way to live up to the decadent rich image. And even she kept her two or three joints locked up in her safe. Several years later, renting a duplex, my college kid neighbors were going to ridiculous lengths, to hide the occasional whiff of a few tokes. And today, in a news report from Tijuana, a woman was protesting the arrival of Central American migrants, because “they are smoking marijuana”, So it is a surprise that within a month or so, marijuana for not just medical use, but for personal consumption will be legal, and that the new law has broad public support.

Attitudes haven’t changed, but the landscape has. The U.S. Sponsored “drug war” was never particularly popular, and the appalling death toll has been too much, even for social conservatives to swallow. The incoming president campaigned not just on lowering the impact of the drug war, but on agricultural reform as well. It is hard to say that another export crop, and the families that depend on growing exports are a social problem. Economic conservatives, like ex-President Vicente Fox — whose family fortune rests on agricultural exports — and his first foreign minister, Jorge Casteñada (a regular commentator in the US media) — both made the argument that Lopez Obrador’s incoming administration makes, that marijuana is just another export crop, and

When conservative, former president Vicente Fox (whose family fortune rests on agricultural exports ,to begin with) openly proposed legal sales, he was pilloried in the press, and the social media had a field day producing memes showing Fox as a hippie stoner. At a lecture I attended about eight years ago, Jorge Castañeda, Fox’s foreign secretary and a regular figure on US news shows, asked the audience about legalizing marijuana, only to be shouted down. And that was in Sinaloa, ground zero of the marijuana region.

Joining the social conservatives were human rights activists. The legal case for personal use came from prominent human rights workers, all of whom were quick to they had no intention of actually using marijuana (after all, they were respectable lawyers and academics) but wanted to test the Mexican constitutional guarantee of the right to “personal development”. The court had already ruled on the medical use issue, although marijuana based medication had to be imported, and was subject to very strict licensing by COPRIFIS, Mexico’s equivalent of the FDA.

The court rulings were largely the handiwork of justice Olga Sánchez Cordero. Term limited (Mexican judges do not have lifetime appointments) at 70, Cordero’s career is far from finished. A distinguished jurist and feminist, she was something of a surprise when Lopez Obrador announced she would be his choice for Interior Minister… an office with no equivalent in the United States, but the second most powerful office in the federal government, the second in line to the president, as well as Chief of Staff, liaison to congress, and overseeing the department that coordinates domestic policy.

While waiting to be appointed, she also successfully ran for the Senate. Whether she can hold both offices at the same time might still be an issue, but for now, with Congress having taken office in September, while the new President doesn’t assume his position until the end of this month, there was an ample opportunity for the “sausage making” of legislation, crafting a bill that will allay the fears of the socially conservative middle class that legalization will lead to rampant use, while providing an alternative to a militarized and destructive “drug war” and bring the “exporters” into the legitimate marketplace.

The July election swept away the traditional parties, leaving the reformist Morena party in an almost absolute majority in Congress. Some compromises with a few small parties and individuals within the three traditional parties, will guarantee passage of some form of legalization: Morena’s proposal would allow (under license) growing up to five plants and producing up to 480 grams per year. Sales and distribution would be regulated by COPRAFIS, and would probably be though licensed pharmacists.

So… Big Benders. How this will affect your “importers”, I can’t say. In theory, the existing exporters will have to change their market strategy (Canada, which legalized marijuana earlier this year, is bandied about as a new major market, as well as several European pharmaceutical manufacturers) and their own supply chain. And, in theory, we’ll be seeing a lot less “collateral damage” from the drug war. What we don’t foresee are more stoned gringos sitting on the beach. Maybe.

Deciphering AMLO.

30 November 2018

David Brooks, in yesterday’s Jornada:

(New York) Shortly before he assumes power, investors, analysts and politicians in the United States have sought to define who and what President Andrés Manuel López Obrador will be like.  For now, there is no consensus – he remains an enigma.

However, what is most worrying for many regarding bilateral relationship between the United States and Mexico is not so much what the new Mexican government will do but the erratic and provocative policy of the Donald Trump regime, which already laid the groundwork for the crisis López Obrador must face.

Media reports here say AMLO is scaring investors (Wall Street Journal), while others offer a more positive outlook for investors, calculating that fears are exaggerated (Bloomberg) while still others are alarmed that a possible “enemy” is of democracy is coming(Financial Times).  All this, along with the usual claim that AMLO is “unpredictable, temperamental “and you do not know” which version “of him will govern” (New York Times).  And still others fall  back on the word of the day, the increasingly ambiguous term ” populist “(one headline sought to merge everything and call him “a pragmatic populist “).

Meanwhile, experts and former diplomats (including former ambassadors in Mexico) predict “a difficult path” and possibly even “explosive” between the two leaders — based on their personalities, or their divergent policies. They offer lists of recommendations of what the new government should do, from economic, energy and security policy center on anti-drug cooperation with the United States.

The first crisis

Almost all indicate that the first bilateral crisis of the new president is already more than announced: asylum seekers in the border. In fact, perhaps as early as 24 hours after AMLO takes office, his chancellor Marcelo Ebrard is scheduled to fly to Washington to meet with Secretary of State Mike Pompeo and Secretary of Homeland Security Kirstjen Nielsen to continue to address the issue.

Ebrard had already begun discreet negotiations with Pompeo in Houston a few days ago. News reports reported that an agreement had been reached, but that was denied, and Ebrard insisted that all that exists is a conversation for now on how to deal with the situation.

But Trump’s position does not leave much room. While talks were going on between the Americans and the elected government last week, Trump tweeted that asylum seekers would not be allowed into the United States until a court approves their petitions and that “everyone will remain in Mexico. If for any reason it becomes necessary, we will CLOSE our Southern Border. “

In part, what is at stake are principals governing the relationship between the incoming Mexican government and the Trump regime.  The US government’s position is that Mexico should be a staging ground in the process of evaluating asylum requests, something that can last for months and even years.

According to José Pertierra, an expert lawyer in migration and asylum in Washington, what Trump asks is nothing less than that “Mexico become an accomplice in violating the international law on refugees” and violating the United States’ own asylum laws. that establish that anyone has the right to enter US territory to request it.

“What Trump is doing is dismantling the entire asylum system,” by increasingly restricting entry into the country and, with his former attorney Jeff Sessions, reducing  reasons for granting asylum until they are almost non-existent — for example, nullifying claims for asylum based on domestic violence, or gender violence, or criminal violence as he  explained in an interview with La Jornada.

“But for this to work, he (Trump) needs Mexico to accept and house all those people in its own territory, where the applicants do not know anyone or have access to the support infrastructure on the US side. Many come [to the United States] because they know someone here, “he explained. Therefore, Pertierra reiterated, Mexico is in danger of being subordinated to Trump’s anti-immigrant strategy.

In the coming days, the first impressions and reactions will spring up about the new president in the neighboring country, including among the Mexicans and Latin Americans living in the United States who await AMLO’s response to the persecution they suffer from this regime and its allies.

When crime doesn’t pay… Gofundme!

29 November 2018

Guillermo Padrés Elias, the former governor of Sonora, managed somehow to walk off with 8.8 million dollars, proceeds of a career of “organized crime, fraud, and investments with illicitly obtained funds”.  About par for a really crooked governor. He’s been in jail for two years awaiting trial, so, a kindly judge let him out, on a mere 40 million peso bail (about 2 million US dollars).  However, another 100 million pesos is still needed if he’s to stay out of the slammer… owed to various creditors which would settle some criminal complaints, though his trial on several charges would still be pending.

Padrés claims he just doesn’t have the money… his good friend state PAN party chair Ernesto Munro Palacio — who just happened to be Secretary of Security during Padrés tenure — is asking for donations.  Don’t let a crook sit in jail, just because he claims to have lost his loot.

Weird way to die… or maybe not

29 November 2018

One of the more useful government agencies in Mexico is INAI.. The National Institute for Transparency, Information Access and Data Protection.  It’s an “autonomous organ”, meaning it is guaranteed funding by the Federal Government, but is outside the control of the executive, legislative, and judicial system.  There are seven commissioners, appointed by Congress, but their mission is to not just make ordinary bureaucratic information and data available to the public, but to dig into government records and present the facts on some of our murkier and less than adequately explained recent past.

Carlos Alberto Bonnin Erales was putting together information on a few of these more sensitive murky incidents — public spending on recovery efforts after the 19 September 2017 earthquake; the “Odebrecht case” (involving alleged payoffs to PEMEX and other government officials in return for favorable contracts); the often under-regulated IMSS (National Health and Social Security Institute) day care centers; and the assassination of Luis Donaldo Collesio, the PRI party reformist presidential candidate, murdered in 1994).

Was.. until this last Monday, when he either had a heart attack and fell five stories, or fell five stories and had a heart attack, or just fell (somehow) from his office those five stories… or…

There’s a story… or five… that isn’t as transparent as it should be.


Under-mining the market?

28 November 2018

From his aerie in the Andes, the Inka keeps his eagle-eye on Latin American mining, and is quick to swoop down on those nervous investor news letters that panic before they should.

The new panorama for mining in Mexico is not wholesale militancy against the industry and the driving away of companies or new investment. What it is, however, are new deals that will see more of the cash generated go to its workforce. Or else. Therefore, what this means to investments in the country is that the sharp selling we saw last week is almost certainly overdone. However, I don’t think the nerves are going to abate in a matter of hours or days and none of the affected stocks are my idea of a rebound quickflip-trade. We may get more selling in the days ahead, but above all I doubt we’re going to get enough money sloshing back in to push price back in the very-near-term. On the other hand, we may eventually see the companies that weren’t hit hard last week as the bigger losers. As an example (and it’s probably unfair just to pick on one), Fortuna Silver at San Jose in Oaxaca has fought hard to keep its mine non-unionized or keep the union influence over its operations to a minimum. With the new strength of Napito and worker emancipation on the menu, they are an example (I repeat, there are others) of a smaller company that could see its operating costs rise meaningfully in dollar terms as workers demand a better remuneration package.

The bottom line is that I am less worried about the future of mining in Mexico than the panic sellers of last week. I’m also highly suspicious of the lack of depth shown by sell side analysts on the subject, especially those in the larger firms (Morgan Stanley and Citi are two of the large entities that helped spread the unalloyed fear last week) who should have the depth of knowledge to advise their clients better. However, I am not a knee-jerk buyer of the beaten-down stocks because a) the fear-mongering could go on for a while and b) even though the worst of the law project is unlikely to make it into law there is plenty of evidence to show that the Napito-driven (“Napito” is Napoleón Gómez Urrutia, the president of the independent miner’s union, who returned from exile in Canada after his election to the Senate from the new ruling party, MORENA) mining scene in Mexico is going to see changes, first and foremost in better pay deals for workers. That means higher costs for the companies. And a final point; aside from the passive exposure via Sandstorm (SAND) ( which is something I am happy to take, the IKN Weekly ‘Stocks to Follow’ list has had no Mexico exposure for quite some time. That is not a coincidence, but in 2019 that may change once the new rules are established.

The entire report here;