Another major Mexican company is shutting down some of its operations amid record levels of violence

  • Violence continues to rise in Mexico, setting several homicide records in recent months.
  • Growing insecurity has started to take a toll on local commercial operations.
  • Some businesses are electing to pull out of parts of the country.

Grupo Lala, one of Mexico’s 20 largest private companies, shut down operations at a distribution center in southern Tamaulipas state at the beginning of May due to security conditions the firm said “were not adequate to continue operating.”

The company, which controls almost 50% of the milk market in Mexico, offered few details, saying it was working with authorities to “restart activities as soon as possible.”

The distribution center in Ciudad Mante, near Tamaulipas’ border with Veracruz, was shuttered on May 3, a day after one of the company’s trucks was torched in a nearby locality.

Tamaulipas has long been one of Mexico’s most violent states, driven mainly by fighting between and within the Gulf and Zetas cartels. It recorded 321 homicide cases in the first four months of 2018 – 78% more than same period in 2017.

The total number of homicide cases in the state rose 35% between 2016 and 2017, and over that same period, the homicide rate rose from 16.6 per 100,000 people to 22.19.

Northern Tamaulipas seen much of this violence. In Reynosa, across the border from McAllen, Texas, a bus carrying assembly-plant workers was caught in the crossfire of two rival gangs on Wednesday – 13 people were wounded, two seriously.

Violence in Ciudad Mante has been attributed to clashes between the Northeast cartel and the Old School Zetas, both of which are Zetas factions. The homicide rate there is 24.8 per 100,000 people, triple the national rate.

The state prosecutor said his office was investigating extortion complaints from Lala and another company, Sello Rojo. That company, along with Dominos Pizza, Pepsi, and others, has also stopped operations in Ciudad Mante.

Lala’s decision comes two months after Coca-Cola Femsa, the largest Coke bottler and the Mexico’s third-largest company by revenue, shut down operations a town in northern Guerrero, one of Mexico’s most violent states. The firm had operated in the area for 40 years but closed down after a spate of attacks on its facility and workers there.

‘It’s a weird paradox’

Violence throughout Mexico hit record levels in 2017, when the country had 25,339 homicide cases – the most in a year since the government began releasing data in 1997. During the first four months of 2018, there were 8,900 homicide cases opened – 14% more than the same period in 2017 and the most on record for that period.

As of March, Mexican President Enrique Peña Nieto has since taking office in December 2012 presided over more homicides than his predecessor, Felipe Calderon, who kick-started the country’s drug war, saw in his six-year term.

Growing insecurity isn’t limited to homicides. More than four of every 10 businesses in Mexico were victims of a crime in 2017, according to business group Coparmex. Violence cost the economy 21% of GDP in 2017, according to the Institute of Economics and Peace.

The transportation industry is a frequent target, especially in the Gulf region and northeast Mexico, where criminal groups – which have extensive ties to state and local government and law enforcement – have branched out from the drug trade, targeting in the energy, mining, and other commercial sectors.

The same day Grupo Lala announced its shutdown in Ciudad Mante, the Veracruz government said it would reinforce railway security after several train-robbery attempts.

Grupo Mexico Transportes, one of Mexico’s biggest rail carriers, said a derailment on Saturday appeared to be caused by sabotage – one of several “acts of sabotage” the company has reported in the Gulf region in recent weeks.

Throughout Mexico, there were more than 1,750 robberies and nearly 10,870 acts of vandalism on trains in 2017, according to government data. The roads aren’t much safer. Highway truck robberies fell through 2014 but almost doubled in 2015 to 985, hitting 1,587 in 2016, and rising again to 2,944 in 2017.

More than 80% of goods in Mexico are transported by road and rail, and more theft is a setback at a time when Mexico is trying to diversify and generate new sources of business.

“Mexican businesses cannot be competitive or generate more jobs if we do not have minimum safety guarantees,” the president of Mexico’s Business Coordinating Council said in March.

The American Chamber of Commerce in Mexico said in 2016 that violence and corruption were the two main concerns of foreign companies in Mexico.

A number of businesses, faced with increasing crime and high rates of impunity, have turned to private-security firms, which are booming in Mexico, despite additional security problems they create.

“Extortions are up, kidnappings are up, cargo theft is up, and so both for average Mexicans … as well as for companies investing in Mexico, the security situation is not great,” James Bosworth, founder of political-risk-analysis firm Hxagon, said in April.

But that has not sent businesses fleeing.

“Companies that are in Mexico today, and have been in Mexico for the last decade, they’re not looking to pull out. They’re looking to expand,” Bosworth added. “The security situation is not scaring them away from Mexico in any sort of way. Most companies are looking to expand in Mexico, because Mexico is a giant consumer market of 120 million people … that really has a lot of potential.”

“Mexico’s a fairly livable country … it’s not a bad place to be,” he said. “It’s a weird paradox to talk about those two things.”

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