Given the tragic events in Greece and the financial contamination of other eurozone peripheral countries, most people now recognize that sovereign risk matters and it matters a great deal. Unfortunately, the recognition lag has already caused significant damage, including forcing the current approach to European integration to an historical juncture.
What is less well understood at this stage is that the externalities, negative and positive, are not limited to Europe. It is only a matter of time when this issue, too, becomes a driver of policies and market valuations and correlations.
The general context is critical here, and should never be forgotten. As argued in my March 11 FT commentary, the sovereign debt explosion in industrial countries involves a regime shift with consequential long-lasting effects. And what is happening in Europe is yet another illustration how, in our highly interconnected world, previously unthinkable phenomena can become reality in a surprising and highly disruptive manner.
Rather than just observe, other countries are well advised to understand the debt dynamics at play. They should draw the appropriate policy implications given their own debt burdens, maturity profiles and funding sources.
They must also go well beyond this.
Daily Archives: May 12, 2010
Murder City: Ciudad Juarez and the Global Economy’s New Killing Fields
It’s hard to wrap your brain around the numbers, to make sense of what they portend. Mexico, home to the world’s richest man, has had more than 10,000 people killed — often horrifically — since January 2007, just a month after President Felipe Calderon declared a literal war on drugs in his country.
Calderon has flooded the country with nearly 50,000 soldiers and federal police to combat the various regional cartels — Juarez, Sinaloa, Gulf and Zetas — mostly in the northern and northwest parts of Mexico. The United States, through the Merida Initiative, has committed $1.4 billion to fund the effort. The results have been less than stellar.
According to the Los Angeles Times (the only major U.S. newspaper that has been extensively covering this political and social calamity), not only has the military racked up more than 3,400 alleged violations with Mexico’s human rights commission, but in Juarez, the bloodiest of this war’s battlefields — if you can call a city of about 1.2 million people a battlefield — the army’s presence coincided with an increase in slayings. Since 2008, more than 4,000 people have been killed there, though Juarez was being patrolled by about 10,000 troops and federal police. In 2007, there were about 2,300 drug-related killings — in the entire country.
I visited Juarez 26 years ago…. during a trip into Mexico. The people were wonderful to a stranger.