Mexico Survey Reveals Extent of Criminal Attacks on Businesses

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A new report from Mexico’s government sheds light on the degree to which the nation?s businesses struggle to navigate the criminal landscape and the impact of organized crime on the country’s economy.

According to the results of the National Survey on Business Victimization (known as ENVE, for its initials in Spanish), the nation?s businesses suffer losses from a wide range of criminal attacks. The most prominent is armed robbery, which affects 23 percent of the businesses polled. Theft by employees was next on the list, with 18 percent of those responding reporting losses stemming, while extortion rounds out the top three, with 16 percent of the businesses reporting having been extorted.

Each of these crimes has some degree of overlap with organized crime. Though once rare, criminal groups around the country have taken advantage of fraying police agencies and grown reliant on extortion as a supplemental form of income. Businesses operating in valuable natural resources in particular are vulnerable to their employees colluding with criminal groups to divert their merchandise.

Businesses spend an average of 30,450 pesos annually on crime prevention, which converts to only a bit more than US$2,000. While even sums far greater than that are an easy expense for big firms, such a quantity can be a significant expense for the small and micro-businesses that are most vulnerable to organized crime.  

Only 15 percent of the crimes against businesses are reported to the authorities, according to the survey. This is both a sign of the lack of faith in the official response as well as a powerful driver of additional crime as the unlikelihood of even being reported to the police, much less suffering prosecution or imprisonment, acts as an incentive to future crime.

MexStatsGraphic

InSight Crime Analysis

The ENVE survey offers clues as to the intersection of organized crime with the crimes reported by businessess in its analysis of the geographic distribution of the crimes, and the types of businesses most likely to be targeted. According to the 2014 survey, in four states extortion is the most common crime affecting business. Not surprisingly, three of these — Guerrero, Tamaulipas, and Nuevo Leon — are states that have long struggled to coexist with powerful criminal groups.

Furthermore, in each of these three states, not only do powerful criminal groups operate, there are also longstanding criminal rivalries that often spill over into bloodshed such as the Zetas fighting the Gulf Cartel in Tamaulipas and Nuevo Leon, and a myriad of different competing groups in Guerrero. This suggests that criminal groups are far more likely resort to extortion when they are in a hostile environment, whether because of the need to stamp their authority on society at large or to fund their struggle in the face of lost income from declining revenues from drug trafficking.

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The 2014 ENVE also indicates that in some areas and business realms, corruption is the biggest problem businesses face. Industrial firms listed being harassed by corrupt officials as the chief source of criminal losses, while the same crime topped the list of worries for all businesses in the states of Hidalgo and Tlaxcala. Corruption was actually an even greater worry in the 2012 ENVE, where it was the most commonly mentioned problem among all companies nationally, as well as for industrial firms, services firms, and small and micro-sized businesses.

While all businesses are potentially targets for illicit activity, the phenomenon of sophisticated criminal groups systematically targeting successful enterprises has grown common in Mexico. It has affected both small businesses and major international corporations. In 2012, for instance, members of the Knights Templar were believed to be behind an attack on facilities owned by a local subsidiary of Pepsico. The following year, the same gang was thought to be behind the murder of a local executive of ArcelorMittal, a multinational steel producer operating in Michoacan.

In 2013, the wave of extortions led three of the most important Mexican-owned firms — ICA, Grupo Carso, and Cemex — to write an open letter to President Peña Nieto, complaining of extortion and of criminal groups inserting themselves into government-funded public works projects.

Collectively, this has had a pernicious multiplier effect on society at large. Normal business activity is, of course, a staple of a free society, and extortion and other crimes serve to limit and distort it in a number of ways. This is true both in the direct costs of crime targeting businesses, such as the extortion payments or stolen goods, and the indirect costs, such as investment in security.

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