#242 - Gold, Migration, and Cocaine

Hello listeners. Welcome to another episode of the Jacob Shapiro Podcast. I am Jacob Shapiro. Joining me today is Will Freeman. He's a fellow for Latin American Studies at the Council on Foreign Relations. Will is an incredible follow if you're trying to understand what's going on in Latin America in general. I will put links to some of the articles that he's written in the show Notes.

Just want to thank Will for being A willing to come on to the podcast with somebody he didn't know that well and B, I had to move it on him a couple times because of things going on in my own life and he was very gracious to keep up with me even though he had no reason to think that I was actually a real person. So thank you Will for coming on. Listeners, you can email me at jacob ognitive.investments if you want to talk about anything. Otherwise, take care of the people that you love.

Cheers and I will see you out there. Will, it's really great to have you on the podcast. I've been following you on social media and your work at CFR for a long time and I'm glad that we were able to make time to get you to come on. And I also want to thank you publicly in front of the listeners. I had to move this twice on you because of things that were going on in my life. So I appreciate your graciousness for being being Will to move something with a stranger.

Look, we're going to talk for 45 minutes. There's no way we're going to tackle everything. So I hope that I don't scare you off and that you will come on and do future conversations

with us. But I know that a lot of your work right now is focusing on crime and about the threat that crime is posing to different countries in Latin America. So I thought that we could maybe just talk about your high level viewpoints on crime and then maybe talk about some examples, whether it's Mexico, Peru, El Salvador on everyone's mind. Guatemala is one that you said that we should talk about.

And I'm really excited to talk to you about Guatemala, but I was reading one of the articles that you wrote that you sent me and we'll link it in the show notes for the listeners who want to know more.

And I was really struck by the way that you framed it in terms of many of these Latin American countries had problems with military dictatorships and political instability and coups in the 70s and 80s and they successfully reformed institutionally to allow the growth of democracy and the flip side of the growth of democracy is that it has created this organized crime threat that seems ideally suited to take the best of, you know, the best of organized crime, the best of state actors and the best

of militaries, and smush them all together and are carving out what seem like undefeatable roles in societies that otherwise I would be really optimistic about. So why don't you just give us, from a high level point of view, why do you think crime is so important in Latin America and why. Why has it really taken a hold in Latin America the way that it has specifically? Well, I think it's.

You anticipated maybe my answer, that those transitions and periods of reform in the late 1970s, early 1980s into the 1990s, that laid the foundation for so much of the good we see in Latin America today. The democracies, the reasonable measure of rule of law when it comes to other questions besides organized crime, the general stability, which is higher today than it used to be, or you can, you know, it's there in more appreciable levels.

I think all of that, all of those accomplishments are thanks to the efforts of democratic reformers of societies that really recognized and then resolved a number of historical challenges. International environment shifted in ways that helped too, after the Cold War. But I think that the missing part of these democratic transitions was a serious focus on preparing criminal justice institutions to handle what was coming. And it's very hard to blame the democratic reformers at the time for that.

I mean, take one example. Raul Alphonsine. First at president during. After the democratic transition in Argentina, Alphonsine faced something like more than five coup attempts during his relatively short presidency, Several attempted military uprisings by officers known as the Carapintadas, who paint their faces in war paint and storm government buildings.

He was trying to lead an effort, and eventually contain an effort to hold accountable for human rights crimes the former members, leaders of the military dictatorship, something no other country had ever done in terms of its own domestic justice system without international courts. And he was dealing with a very rocky economy, as were neighbors in Brazil, which had hyperinflation as it was entering democracy. Same in Bolivia, a number of other countries.

So you can't blame these reformers that maybe they weren't anticipating that they would have their own Pablo Escobars to deal with in 10 or 20 or 30 years. But I think that that's what happened in many ways, both international partners of the region and the region's leaders themselves let the ball drop on this question of criminal justice. And in fact, In a few, if you go back to sort of the archives, you can see that a few of them were aware that they were making this trade off.

There was a post transition president in Bolivia who said at the time, you know, Bolivia, big producer of coca, the staple ingredient for cocaine. There was a leader there who said, you know, we understand that the Americans want us to focus on coca right now, but look, we are just coming out of a military dictatorship. We have other bigger fish to fry. And I think that that was probably the thought process implicitly for a number of leaders who recognized the challenge.

I'll say there's one country that very much saw this coming because it was already living it. It was already living a huge wave of organized crime in the 80s and 90s, and that was Colombia. So Colombia actually did begin a very serious process of reforming the national police and of building at least somewhat more decent and adequate prisons, building the apparatus to actually do intelligence driven investigations of organized crime in the, in the 90s and 2000s.

And it took decades for that to actually bear fruit. And even today, Colombia remains fairly violent, deals with you know, very significant organized crime. It's by far the world's leading producer of coca. But you compare it to where the country was in the 90s or 2000s when it was really looking at, you know, almost the verge of a state collapse. And the results are, I think, in relative terms, impressive.

So Colombia is a bit of an outlier, but the rest of the region, I think you can characterize this way. I mean, it's a Pyrrhic victory. It's the story of a region that is a remarkable success on so many fronts, but where you have this very serious issue of organized crime left unattended. And I'll just add one thing which is that obviously besides violence, which in which Latin America is a world outlier, you know, 8% of the world's population, but around 33% of murders any given year.

So. So really violent for a region with no active war zones. Besides that, the other way in which Latin America stands out globally is its inequality, of course. So you look at Gini coefficients across the region. We're talking about the. One of the most unequal regions of the world, maybe the most. And I think that that's another issue which of course has kind of haunted the region and in a way has contributed to the organized crime problem.

It's not as simple as to say that all high inequality societies are prone to spawning violent drug cartels. You look at Thailand, for instance, extremely unequal country in many years, the world's most does have a lot of drug trafficking. It doesn't tend to turn into violent cartels that dominate territory. But in Latin America, inequality and organized crime often have interacted.

You know, it's currently estimated that, I think the economist put this out, that drug cartels are something like the fifth biggest employer in Mexico. I mean, where do they find this reserve pool of labor, usually poor young men without much formal education?

You know, they find that because these are very stratified societies still, where there's been impressive social mobility in spurts over the last 50 to 75 years, but never enough to level out the really grotesque, I would say, levels of inequality you see in your Brazils and your Mexicos, your Colombias today. Man, I'm already sad that we only have 45 minutes because there's so much that I want to get into.

This was a question I was going to ask you later on, but something you just said made me want to bring it up because I know that you had a chance to interview the new president of Guatemala, Bernardo Arevolo.

I know recently who's an incredibly impressive figure, and we've talked about him a little bit on the podcast, and I was reading a previous interview that he did with somebody at cfr and I was really struck by how he talked about how Guatemala's problems are not about necessarily fear of violence and gangs and things like that. He really framed it all in terms of poverty and class, which I thought was a really interesting move.

So I know it's a chicken or egg type type thing, but what do you think comes first? Is it that inequality breeds the sort of violence? If we're telling the story from a Mexican perspective, for example, you could say, okay, NAFTA is 94, 95. Incredible increase in the overall wealth of Mexico, but incredible increase in inequality. That's how free trade works at first. Is it a coincidence that within 10 years we're talking about Mexican drug violence, you know, going to the moon?

How do you think about the relationship between those things? Yeah, let me break it out in two parts. I mean, one, I'll go a little deeper on that relationship between inequality and organized crime. And then I have a few things to say about Arevolo on the issue of inequality and organized crime. I think you're right that it's not a perfectly linear relationship.

And in fact, some of the leftist parties and leaders in the region, including Mexico's, until recently, Mexico's president, Andres Manuel Lopez Rador Amlo, have parroted this theory that's by now debunked, which is that if you simply reduce inequality, that on its own will weaken organized crime substantially. We're not seeing that. Look at Venezuela. Venezuela was a country that although it's forgotten now, and obviously so much chaos came afterwards.

But in the 2000s, the economy in Venezuela was fairly strong. Oil prices were high. Hugo Chavez, the late populist president, redistributed lots of income and it had the short term effect of significantly reducing inequality and reducing poverty. And at that very same time, Venezuela was becoming extremely violent.

In fact, it became several of its cities became among the most violent in the world by the end of Chavez's term, the beginning of course, his well known and infamous successor, Nicolas Maduro. So there's your perfect case to show you that it's not as simple as to say reduce inequality and these problems go away.

I think it needs to be a focus on reducing inequality and social marginalization alongside a rebuilding of what is really a weakened and hollowed out capacity of state institutions to deter crime. So if the costs of committing crime are zero, it may not matter that you reduce inequality. There will still be plenty of opportunistic actors out there willing to try to get rich this way, to try to run profitable illegal businesses.

And I think unfortunately in a country like Mexico, this is probably the most extreme example, but you can find it elsewhere. De facto, certain crimes are today amnestied. The law won't tell you that. But I mean, I was speaking to a high ranking former member of the AMLO government who I have to preserve their anonymity. But they said to me the main conclusion they came away from working in that government was that homicide had been amnesty.

And you see that, you see 95% of murders in Mexico go unsolved. Not a problem that started with this past government, but it's remained just as bad, maybe gotten a little worse, the problem of impunity. So I say that because I think it's one obviously the types of deep inequality and marginalization in Latin America that you have do feed these criminal groups. They provide recruits.

But even if you were to create alternatives for some of these would be recruits, you also need to deter this criminal activity at a high level. And you only get that once you have decently functional prisons, police, prosecutors and courts now coming to Arevolo and Guatemala.

I think he made that point specifically in relation to migration, saying that the drivers of migration in Guatemala, and specifically in the highlands in the north and the west of the country where most people have historically left from that, that is driven by poverty and a lack of economic opportunity. And I would say that that's correct in that case, but it's a bit of an outlier.

And I think because we still have something like 200,000 Guatemalans arriving at the US Mexico border every year or 200,000 encounters with Guatemalans there, that's a large number. It's generally one of the larger nationality groups arriving that we have in our mind in the US a sort of mental model that people in Latin America are largely escaping this kind of rural poverty. But that's really a unique Guatemala story.

Guatemala remains, if not the most rural country in the region, one of the most. Something still like 50% of the population living in rural areas. And I've been to these rural areas. I mean, they are extremely deprived. It's. You would, you know, you. I think if people have a mental image that, you know, large stretches of Latin America are dusty roads and it takes 10 hours to get there and there are gaping potholes that could swallow a car.

And once you get there, the state presence is a police officer with a big gun and basically no schools or hospitals, that would be a caricature in most places, especially in large parts of Brazil or Argentina or even Mexico. It's not a caricature in the highlands of Guatemala. Those are the conditions. So I think he was referring to that as a driver of migration. Absolutely. Still the case in those parts of Guatemala. But just look at neighboring Honduras there.

I think gangs are just as important of a factor in driving well. And I think you've also put your finger on one of the things that makes it so difficult to tackle this challenge. And it goes back to your point about Colombia in the 1990s. Colombia is outsourcing a lot of what it's doing, or at least those Colombian drug groups are outsourcing their activities to Mexico or to power vacuums around.

I mean, the, the rapid descent of Ecuador in the last couple of years just tells you how crime is finding this element. So on the one hand, you know, somebody like Arevolo is saying no, like, we have our own idiosyncratic reasons. We have to tackle this from a Guatemalan perspective. We need Guatemalan solutions for this. At the same time, if you don't have some kind of regional agreement or coordination on how you're going to do this, it's almost like water.

Like it will find the crime, will find the weak spots that will come up in these, in these different places and I don't really know. Right, right. I mean, I think you're absolutely right that there's this. We've seen over the last 40 years, this incredible ability of organized crime to expand transnationally in Latin America. And when you think about it, it's pretty alarming.

And I wouldn't say it's impressive, not in the sense of a good thing, but it's impressive in the sense that it's striking that in countries like Colombia, with some of the most complicated geography on Earth, I mean, three huge mountain ranges that divide up the country, make it very hard to build infrastructure, run export industries, that you have Colombia as the launching pad for one of the most lucrative, illicit lucrative industries in the world, which is the coca and cocaine trade.

But you're right that you've seen a center, you've seen the center of gravity shift. If you go back to the 80s, a time I mentioned earlier, when really organized crime in its modern form got started in Latin America, Colombia was the hub. I mean, this was obviously the home of Pablo Escobar, but also the Cali cartel, which came to succeed him really, as the dominant group, and then, and then later others. But you had a stretch in the 80s and early 90s when Mexico wasn't as important.

Mexican groups were doing more of the trans shipment. But by the late 90s, 2000s, you have Mexico garnering Mexican groups, garnering a lot of the profits, turning Colombians really into suppliers more than anything of coca. And what I heard on my most recent trip to Colombia was now you're even seeing more and more that Mexican groups are paying for and handling parts of the processing.

So it's really just the Colombian part of the supply chain is just that production of coca and maybe the initial movements out of the coca farming areas. But that means that, you know, I think some people would be surprised to learn today that in Colombia, illegal gold mining actually out earns cocaine trafficking by a factor of two, sometimes three to one, depending on the year.

So just to say that I think you're right, you've seen this shifting of how organized crime works, where the illicit communities are the strongest around the region. And obviously that necessitates cooperation. But I think that gets to two tricky issues. One is that, look, this is a region of democracies.

In many ways, that's a great thing, but obviously a challenge that comes with that is that governments change often, and governments change in ways that sometimes put them at odds with one another across borders.

So, you know, you have the example of Mexico's now former president Amlo, clashing frequently with the governments of Peru with Ecuador over this raid on a diplomatic on an embassy house in which a Mexican foreign minister is knocked down in Ecuadorian trying to flee justice and seek asylum. Diplomatic asylum was taken out of the house. But just to say that you have governments which are usually sparring, I mean, that's, to me, is a downstream consequence of it being a region of democracy.

So in a way, it's the flip side of quite a good thing. But it does mean that you don't have continuity in office over 10, 15, 20 years in almost any country that would permit and probably facilitate cooperation among governments on some of these really critical issues. That cooperation gets bumped down to the level of prosecutors, offices of police forces, militaries. And that's not always sufficient to give it the political leadership and vision that I think this problem needs.

Yeah, you mentioned the gold mining thing, and that was actually one of the things I underlined. In one of the things that you wrote, you actually you talked about three different market disruptions. Each one of them sort of blew my mind. The one that everybody knows about is migration, because that's the one that is in the headlines and that is driving things in American politics.

But, I mean, you had a figure in here that 11% of global gold production is through illegal mining in Latin America, right? Yeah, Latin American illegal mines, which are largely concentrated in the Brazilian Amazon, the Peruvian Amazon, Colombia. The Amazon, and the mountains in the northwest of the country, the lowlands there, and then in Venezuela. So it's really just four countries that are pumping out the majority of this illegal gold.

So it's astonishing to think that it makes up, you know, one in every 10 ounces of gold you find in investors portfolios or central bank, you know, safes around the world. Yeah. You know, one of the things we talk about in the podcast a lot is about the rise of cryptocurrencies and what that means. And one of the things people are always worried about is, oh, well, bitcoin or these cryptocurrencies could be used for nefarious purposes or for money laundering.

I mean, if 1 in 10 ounces of gold that is being mined is illegal, like wildcat mining in Latin America, it's absolutely insane. And then the other stat that you had in there was that cocaine production has tripled over almost the last 10 years.

Yeah. 2014 to 2023. Which, again, is absolutely insane. So I guess the only reason that it makes sense that these groups or that at least Colombia became this epicenter is because there are only a few geographies in which you can grow cocaine. But that's changing as well. Traffickers have, they've been doing some pretty sophisticated agricultural science on this. And they found ways to grow coca in parts of Central America where you never saw it before.

You know, remote parts of Honduras, for instance. So now there's the thought that maybe you see there enough production emerging to partially supply the US market. That frees up more of the coca in the Andes in South America to go towards Europe, which is increasingly, it's, you know, the fastest growing market, one of the biggest consumers. Is there, Is there any unintended positive for that? Like, is it, will it lower the margins for the cartels themselves? Or like, or is it just all.

Is that just like an undifferentiated bad thing? That's a good question. I don't see the positive too clearly. I think what. It's true that in some years it seems like supply of cocaine. Cocaine is far outpacing demand or even just logistical capacity to move all this cocaine.

But I think what we've seen instead of that collapsing the market is that traffickers have just eventually played catch up and they've found ways to get the cocaine to ever further flung markets and to sometimes lower the prices in ways that makes it more generally accessible and expands the consumer base. So a market that's really taking off right now is Central and Eastern Europe. It's kind of like, you know, in Prague, like the 1980s were in Miami.

I mean, just this cocaine drenched period where all of a sudden you're finding, you know, the drug is more and more commonly used, it's being sold at cheaper prices. And I think that's so. I mean, in a way it comes back to this. It shows you that organized crimes has a lot of ingenuity. And I think we'll figure out ways to get this surplus product to market. Yeah. So, you know, you do see sporadic reports of, well, coca farmers in Colombia can't sell.

They produce so much, they can't sell it anymore. Maybe that's forcing them to try to change to a different type of cultivation. Although in the areas where they live, often there's nothing else that will really sustain a life. But we're not seeing it really majorly shake up or remake the market yet. Yeah, so before we get into some examples of how things are sort of going in the region, there were two other conceptual things I wanted to ask you about.

And I'll throw them both at you, and you can answer this however you want. The first is there are a couple countries that have Resisted this trend that we're talking about. Costa Rica always stands out like it doesn't make sense. Why Costa Rica should avoid on a relative basis all the things that have been happening around it. But is good. You mentioned Chile and, and Uruguay in one of your articles as well.

So the first conceptual question is what is the difference between those countries and some of the others that we're talking about? And then the second conceptual question I wanted to ask you was just to have you define for our listeners what a narco state is and sort

of what is. I know that it's an arbitrary line, but in your mind, how do you see the transition from, okay, here's a place where lawlessness and law is coexisting versus okay, now we're in Venezuela land, now we're in a lawless lawlessness has won the day and there is no law and order. Any of it is sort of a charade. Take those two questions however you want. Well, okay, I have some bad news for you about Costa Rica. Uruguayan Chile. Okay, great.

They're all becoming important trans shipment points for cocaine. And that's kind of the second chapter to the story we were just talking about. I mean, one was the surge in supply and demand, increasingly global demand during the 2010s for the drug. But the second chapter is that, you know, traffickers had to rewire all these trafficking routes. They used to mostly traffic cocaine to the main market, the US Through Central America and Mexico.

But as demand was rising in Europe, they increasingly had to rely on smuggling cocaine aboard container ships. So that really meant that any major port city was valuable, especially a port city with good traffic to Europe. That puts Montevideo and Uruguay squarely on the map. It puts the port of Limon in Costa Rica on the map.

And it also makes Chile an important part of the puzzle, especially because precisely for the reasons you identified, that no one thinks of these countries as anything like narco states or having to worry about the risk of major organized crime. They're pretty peaceful places, Costa Rica, decreasingly so. But all that meant is that the inspection of these ports was often pretty lax.

And so why would you run drugs through the port of Buenaventura in Colombia, which everyone knows is a drug hotspot, when you could shift it through Lima or through Uruguay or one of these other ports? So I think that unfortunately these countries are going to have to deal with this issue.

Now the positive is that because they're very solid democracies, among the most well regarded democracies institutionally in the world, I think that they have the institutions to approach the problem seriously. But we shouldn't let that make us complacent. I mean, Costa Rica's ex president Chinchilla Laura Chinchilla, has said that she's never seen a threat to democracy like this one of organized crime in the country since the democracy was founded in the 1940s.

Homicide rates in Costa Rica are now approaching those of Guatemala. I mean, nobody, nobody thinks about that. No one talks about it, but they are, they're fairly high and they're rising. Chile right now, if you look at the public opinion polls, is the country whose population is the most worried about crime and insecurity of, I think any in Latin America, a little surprising when you think that the murder rate is just a tad higher than that of the United States.

Whereas in Ecuador it's one of the highest in the world. But, but it is a growing concern. Um, so those countries have the foundations to address it. Um, I think Chile especially is starting to, in a serious way. But, but it shows you that no one's immune. And on the second question, can you jog my memory on that? Just your definition of a narco state. So what, what are the things that mean we've, we've gone past, you know.

It'S, I don't know if I love the term, but it's, it's in the ether enough that you almost feel you, you know, you, you use it for legibility's sake, because it's familiar people, it has intractability. But for me, what I use it is, I use it as shorthand for the idea of a government which at the highest levels is directly complicit in the trafficking of illegal drugs or some other type of transnational illegal smuggling.

So I think that when you apply that definition, it's not as if we're talking about dozens of examples in Latin America. I mean, we're talking about a few of really the worst offenders. Venezuela's current regime under Nicolas Maduro. I think there's good evidence to show that the military has been involved in transnational drug trafficking.

Honduras under Juan Orlando Hernandez, the ex president of the National Party, who's now in a prison here in a federal prison in New York, you know, convicted for narco trafficking. Panama, under their dictator, Manuel Noriega, who was of course, ousted by a US military intervention in the early 1990s. You know, these are the cases I'm talking about when I say narco state.

The interesting thing is that I think we've actually seen a decrease in maybe the frequency of these narco states over time, because the organized crime groups have gotten smarter and they've realized that it's perfectly sufficient to corrupt and co opt a critical mass of mayors, maybe governors, bureaucrats and institutions no one thinks about like the aviation control or the port authority.

And that once you have that army of kind of petty bureaucrats and politicians, that's enough to make it very difficult for even the best intentioned president or set of lawmakers or police to actually address this problem.

And I think more and more you see organized crime acting like a political party in Latin America, but a local or a regional one, where it has enough territorial control and political front men that it can pony up a lot of votes and make itself kind of an attractive coalition partner to a would be presidential candidate, but where it doesn't need to have its own people or even a direct line of contact with that president themselves.

It's just part of the logic of politics now that if you're running for office in Mexico and you want to be competitive in a big state like Sinaloa, you know that there are limits probably on what you can do or say against the criminal groups based there. Unfortunately, I think that's more and more organized crimes just part of the political fabric of the region. Yeah. Are there any countries that you feel like are winning this battle or that are doing a good job?

I think we got to think carefully about what winning would look like in this context, because we're talking about a multibillion dollar industry in gold, a multibillion dollar industry in cocaine, a multibillion dollar industry in human sm. Some of these groups probably have profits on par with the biggest legal companies and corporations in the entire region. So winning to me looks like preventing an Ecuador.

It looks like preventing a total breakdown of rule of law and predation, wanton predation on ordinary people. So if you put the benchmark there, I do think that there are a number of countries that are doing reasonably well. I'll just focus on one that hasn't gotten as much attention, which is Brazil. Brazil was getting increasingly violent in the mid to late 2010s. I think 2017 was the most violent year in its history.

And we can say that with some confidence because Brazil never had revolutions or civil wars in the way that other Latin American countries did. So it was startling. That was because of a feud between the two major criminal groups. Now it seems that they pacified the feud themselves. It wasn't good for their business.

But at the same time, you've also seen, I think you're just seeing now the Brazilian state at both the federal level and within certain states like Sao Paulo, starting to get really serious about this problem, you know, to investigate in a serious way the finances of organized crime and strike some pretty serious financial blows against the biggest criminal organization, which is called the First Capital Command pcc.

Not only that, I mean, you're seeing state governments begin to work intentionally on limiting crimes, access to critical infrastructure like highways and ports. I'm not saying I know how the story will end, but I think it's maybe not surprisingly the country in Latin America with one of the more. The big country with one of the more weighty, meaty state apparatuses is actually using it to make it harder for organized crime groups to do business as freely as they did in the past.

I see a ray of hope there. And as I mentioned earlier, I think Chile is doing some good work now. Do you have any. And first of all, that's music to my ears about Brazil. We're optimistic about Brazil for lots of reasons here. And a lot of me thinks that how Brazil goes is how the region will go. So if Brazil is able to put a dent in it here and can be a leader on this front and can show a method that works that is not the Bukele method, maybe people will start to catch on to it.

How do you feel about Argentina?

Well, one of the things I noted in one of the papers that you wrote was that Argentina was the exception on spending less on domestic security per capita in OECD countries. So you had this incredible stat that Latin America spends just half of what the median OECD country spends. But Argentina was sort of the outlier there. And Milei is. He's many things. He's also very fiery about this. And I hear from Argentines that they're worried about this in a serious way, too.

Are you worried that the institutions there are just under too much instability to do anything, or do you see any positive moves there? Yeah, I mean, so it's interesting, as you point out, that Argentina does tend to spend a little more on this question. They just have a larger state, and in a way it's Milla's running against that large state. So we'll see if all of his cutting, you know, this. This habit he has of. Of eliminating a regulation every day, which is sort of a side point for him.

Hopefully he doesn't tip too far into the regulations against organized crime. You know, I have no reason to think that he would, but I just. I don't get the sense that this is an important issue for him or an issue on the forefront. Now I think he's claimed that Rosario, for instance, the one real hotspot of drug violence in Argentina, it's not coincidentally a port city that in Rosario they've had a stretch of days without homicides or with lower levels of homicides than in the past.

You see, his security minister, Patricia Buric recently had a visit from Bukele and a delegation from El Salvador said that she wanted to learn from that model and she's not the only leader to have done that. But I don't see this Milei as a president who's going to put this front and center. Maybe in Argentina that's okay because you know, this is, it's still one of the countries with a lower homicide rate. It's really only very bad.

In Rosario you're still seeing the drug trafficking that does occur, which is mostly for local consumption, happening through these family clans which are relatively low level and pretty stable criminal organizations. So you don't see this kind of warring over territory like you get in the north of Brazil or in Mexico. So. Yeah, but I think Milei is kind of fighting other battles and I don't expect that to change.

Yeah. Okay, well, let's move into a couple other countries and it's crude to simplify them this way, but they all in their own ways are seeing the failure of democracy unfolding in front of us. I think Mexico is maybe the most important one and the one that is most connected to the US election that's upcoming. I have a lot of concerns about the U.S. mexico relationship and a second Trump administration, El Salvador, I mean, democracy is already gone, so is crime on a meaningful level.

And then Peru is just sort of like there's nothing. There's just like general political anarchy, it seems like. So I wanted to throw those three countries at you and ask you to sort of talk about how it seems to me that those three countries are what failure looks like. And I wonder if you have any silver linings there or if you would take issue with putting those three countries on narco state watch, if you will. Huh?

Yeah, I mean, maybe I nuance it and say that the threats to, dangerous to democracy in each of them are a little different. They're all in some meaningful way related to their. The prevalence of organized crime. And I'll get to that in a minute. I would just add Honduras, which I think is at a very serious turning point rather than a turning point. I mean it's just a very serious case of continuity where you had a narco state under Juan Hernando Hernandez.

Clearly he's in jail for narco trafficking in the US but now under his successor, supposedly his polar opposite, Ziomara Castro, who ran, you know, accused, accusing him of being a narco president, you've just seen that her brother in law caught on tape in a previous election soliciting or discussing funding with narco traffickers. And it's so bad that he in question, he says, well, I didn't take any money. That was his response. It wasn't the disavow that the meeting took place.

You've just seen Honduras cancel the extradition treaty with the US claiming that it's because there's some sort of maneuvering on the part of the US to oust Castro. In fact, the US helped ensure that there was an election, you know, a clean election, clean enough to facilitate a turnover in 2021 that she won. So I think Honduras is another one where we have serious concerns.

It's not only the Juan Orlando Hernandez aligned opposition that's worried, it's also civil society journalists, even former supporters of the governing leftist Libre party. But on those other ones, and briefly look in Mexico, I think Mexico and El Salvador are put into to a separate bucket, which is to say that there I do think we should be worried that democracy has eroded, but it's eroding with a lot of bottom up support.

And I think that that requires of us analysts and observers and people from the outside a certain degree of humility that look, we can say that leaders in those countries have eroded checks and balances, they have, but they've also been overwhelmingly voted for by their own populations. And that makes it a much more tricky situation to handle. I think we have to be careful about how you go about critiquing that in Mexico.

You know, I see the election of AMLO in 2018 as in some ways as the way people read the election of Trump in the US as the sort of losers of globalization lashing out against a system that they, with some degree of rationality perceived disadvantaged them. In this case, it was the south of Mexico which was gaining less from NAFTA and from the sort of turn towards Washington consensus economics in Mexico, the 1980s and 90s than the north, which did quite well.

And so I think with Amril, you see him channeling a lot of that frustration over the lingering and severe inequality, regional inequality in Mexico, and also of course the impunity around violence in office. Did he solve those problems in a meaningful way? Absolutely not. Did he ameliorate some of the problems of inequality through cash transfers. Yes, you know, Some, I think 5 million is the conservative estimate for how many people left poverty because of the cash transfers.

Critics will say that they're only precariously out of poverty and I think that's probably right. But you know, I've been to Tabasco, amno's home state. I met people in markets there who were spending money. I saw them spending money from the cash grants were able to afford meat that they wouldn't have been able to eat otherwise.

You know, those kind of everyday changes have created a real well of bottom up support for Amazon and now his successor, Shane Bob, they, but I think, you know, you're right to put that in the group of countries where democracy, where we should really be. It's on, it's, you know, there's a red alert there, especially with this judicial reform which makes many judges in the country popularly elected.

You know, Sheinbaum and others in the government will draw a kind of facile comparison with, well, in the US you also have some elected judges. But keep in mind that large parts of the US are not dominated by warring drug cartels which will certainly try to infuse cash and put their influence in these judicial elections. I mean that without question.

I think there's a very cynical way you could look at this, that the judiciary in Mexico is already at a kind of ordinary level of ordinary criminal justice. It's completely ineffective. So how much worse could it get? But I don't think that's a question any country wants to be asking itself. Right.

So you have that, you know, you have the consolidation of behind Schoenbaum, of the Morena Party, the governing party is really a catch all that's taking some of the worst elements of the old pri, some of the very people that Amlo and Shane Bomb once said were the problem with Mexico and it's actually willingly let them jump on board. So you have a new, you know, of a new hegemony there for now. It has a majority support among voters clearly.

And it's very hard, I think for the, for the US to have a effective approach there, let alone other outside actors. I want to pause there for a second because I wonder from your perspective, like what would be a helpful US Approach? Because I read the US Approach in urging Calderon specifically in going on the offensive against the drug cartels as really inefficient. And you've got, I mean Trump is threatening to deploy the US military to Mexico himself.

I don't find that Harris is that much more of a dove. I mean, she's not on that level. But like, what, what could the US Realistically do to help a Mexican government. Here and not on the question of, of checks and balances or democratic institutions in Mexico. Here we're talking about organized crime. Well, yeah, because, you know, I'm with you on the.

It's hard to critique a Mexican party like Morena being elected with such a huge groundswell of popular support against an institution, the judiciary, which is already sort of like not doing particularly well. Like, I'm sympathetic to that.

You know, I just want to nuance one thing there, which is that I think that for amlo, this is all about clearing out the Supreme Court, which was one of very few checks that actually, you know, routinely activated against him, actually blocked legislation his supporters would say was overzealous in blocking his proposed legislation. But I think for him, he could care less about the ordinary court level. This is not a guy who cares about the problem of impunity in Mexico.

That's just plain from how he governed. What he cares about is eliminating political opposition to his agenda in the Supreme Court, which I think this reform will do. And so far from Sheinbaum, we haven't seen anything that suggests she really holds a different view, which is, I think, too bad and a real threat to the stability of the country. Also, look, their guiding light as a party is they say the well being of ordinary Mexicans.

It is not going to help that the currency is severely weakened by the looming judicial reform and what that will mean for actually having rule of law. So you were far from it. But, you know, I don't think this is going to make it better. Now, on the question of organized crime, how much cooperation can we expect? I think the positive here is that Shane Baum, as mayor of Mexico City, actually administration quietly worked quite well with the dea, with doj, with US Authorities.

And it was, you know, maybe in public would say this is a Mexican problem, Mexican problem to solve. We'll do it with Mexican authorities, but actually cooperated quietly and behind closed doors. And I know that from talking to several members of that city administration. But I do think that ultimately Shane Baum has very little, regardless of if she wants to cooperate with a Harris or a Trump or doesn't, she has extremely little margin to maneuver as president.

One, because of the vast amount of power that the military now holds. The military can be a veto player on security decisions, has its, I think, its own autonomy to say yes or no to certain choices on the fight against organized crime and also because of all this chaos and turnover you're going to see in the judiciary. So how do you implement what she's called an intelligence based approach to fighting organized crime when the institutions are like sand moving under your feet?

So I do think obviously that the relationship with a Trump will be much more combative, probably for Sheinbaum and other left leaning leaders in the region. Trump can be a bit of a political asset because he gives you an external enemy to frame to rally your coalition against. And of course, I would play in Mexico where there's a pretty deep tradition of nationalism. But yeah, I think things could get very rocky there with Harris.

I see basically continuity, which looks like partnership in the spaces where it's possible between Washington and Mexico, but unfortunately not much high level attention on the country, which is probably a bigger overarching problem between both parties. And looking historically at the US the fact that our biggest trading partner is often a footnote in public statements by leading State Department authorities, probably in terms of meeting time at the White House.

Yeah, you're preaching to the choir there. Whenever I give presentations to audiences, I leave Mexico as the last thing that I say because, guys, this is the most important thing that we should be talking about. Taiwan and World War Three. Come on, let's calm down for a second. We have problems here. I mean, currently, obviously. And I think this is growing on both sides of the aisle, both campaigns.

An assumption that you can harden the border enough to contain any instability in Mexico or further south. I'm not so sure about that. You know, I don't, I don't think that's what history has shown us. And I think a lot of our domestic politics and even our approach to the world rests on an unspoken assumption that, or taking for granted that Mexico retains a certain degree of stability. But say you were to lose that, I think we would feel the effects very quickly here in the U.S. yeah.

I know we only have a few more minutes, so I'll let you do some parting thoughts on Peru and El Salvador to wrap us up and beg that you'll come back on and we'll go deeper into some of these issues in the future. It really be my pleasure on El Salvador.

So I was last there in February. It's an extreme in terms of both the popular support that is there. It's real deep, it's broad. You encounter people spontaneously praising Bukow most places you go. And I don't think it's all or largely a product of a fear of not doing that. But you also, you know, there is a. There's a North Korea vibe, I guess I'd put it that way. You go, you land in the airport in El Salvador.

And I've never seen this in any other country or Latin American country that all the gift stores have little framed pictures of Bukele and shirts of Bukele and flags of Bukele. You know, it feels like a country that is governed by one ruling family. And I would just say you look at the history of Central America, that does not turn to. That doesn't tend to end up well. So maybe today Bukele is riding high. He's still benefiting from the popularity of having crushed the gangs.

But what happens in five years if the economy is still as weak as it is today, If Salvadorans are still leaving the country in large numbers, which they are because of that very weak economy, if you can't attract enough foreign direct investment because you have shredded rule of law and the courts are basically willing to say yes to anything you want politically. So I think some credit where credit is due, which is that there's a deep popular support here.

But I think that on pretty much every other count, I'm not optimistic about the direction that El Salvador is going, especially when you have such a prickly, reactive president and his family holding almost all the real power in the country. And then on Peru, a country which I'm sad we've come to last just because I think it doesn't receive the attention it should.

Three reasons it matters to us, I guess I'd say from a U.S. national security standpoint or just to the broader region. One is that this is a really important country from the perspective of critical minerals. I know copper is not always considered a critical mineral, but it's critical. Yeah. So I'd agree. Right. For electrification, for a green transition. Copper really does matter. And a huge amount of the world's copper is found in Chile and Peru.

So Peru is a massive, massive country in terms of minerals, also gold. Right. There are others. It's. Right now, I would say the country that China seems one of the countries that China, the brc, is courting the most aggressively. They're about to open a mega port, a logistics hub in Chiang Kai, a city north of Lima that's going to be the first of its kind in the Americas. You know, defense experts talk about it having dual use facilities.

So it could also be refueling and operational center for PRC naval vessels. So given that we're so concerned about US China rivalry broadly, and I Often hear it kind of brought up in context of Latin America. I'm astonished that we aren't following Peru more closely. Just as a Washington. It does not come up. Very few people writing about it, speaking about it.

And then the last reason I'd say is that this is a big country, 35 million people, so big for Latin America, I think it's sixth in terms of population, maybe fifth in terms of its economy. So big, relatively important country for the region, which is I think reaching a real moment of instability. This is a country that was a mafia state.

We could probably put it in that narco state category under ex dictator Alberto Fujimori, who I know you talked about a few weeks ago on the podcast during the 90s, then made an underappreciated and strikingly successful transition to democracy in 2000. Built I'd say the rudiments of a strong rule of law state. Obviously weren't always functioning well, but you started to get the institutions in place.

But like we've seen in a number of countries, Guatemala included, those rule of law institutions started to target very powerful people. Not target them, but investigate them for actual on evidence of crimes. And that led to a crippling backlash where over the last three years, two years since you saw ex president Pedro Caustillo try his own Fujimori esque autogolpe and get immediately ousted, which is the right thing to do by the way.

You've unfortunately seen the factions left behind, those that dominate Congress, mostly on the right wing. You've seen them take a chainsaw to the institutions of the country, both the democratic institutions and the rule of law ones. And I would just remark that they're doing so with the lowest levels of popular support of any government in the Americas. Lower than Nicaragua, lower than Venezuela.

I mean if you can believe it, right, that that such gangster regimes as those could even have an iota more of popular support than the leaders in Peru. But that's what we're seeing. Congress In Peru has 4% public support. So I detest the narrative that Peru is a deeply polarized and divided country. Maybe if you are in Miraflores in the fanciest district of Lima and you were listening to the 1% of the country that supports some of these parties in Congress, but no one else is divided.

I mean this is 96 between 90, 96% of the country agrees that things are moving in the wrong direction. I think are not happy to see the kind of venal self serving behavior of these lawmakers who are shredding courts and prosecutors offices and police just to protect themselves without any further thought for what's coming for the country down the road. But it's not a crisis we're talking about now. Maybe in a year or two, maybe in five years. Why I think Peru is hitting a turning point.

One is that extortion is becoming extremely common. There's been something like a 4,000% increase in the last year or so in reported cases of extortion, and you're seeing them reach into neighborhoods of all different socioeconomic strata. Two is that Peru is approaching elections in 2026, and meanwhile, Congress has made a number of maneuvers to actually allow itself to supersede a one term limit and entrench these current parties in office. So we should be worried about that.

And then three is the, you know, it's that all this is happening in the absence of an international response. The US and eu, I think both feel that Peru is only now stabilizing. And true, it is maybe compared to a couple years ago, but under the control of just a few very unpopular political parties. And that anything they might do to shake up that equilibrium will produce blowback in a negative way.

But I think we should be asking ourselves in Venezuela in 2009 or 10, when you're getting the real turning point towards a much darker type of kind of autocracy. Would it have been better for the country to be more unstable then and maybe return to democracy, get a different set of leaders, or would it have been better to just keep the boat smooth, sailing smoothly ahead? Well, obviously we see in retrospect that stability was not the most important thing at that moment in Venezuela.

It was averting the rise of a mafia state, which you ultimately see. And I'm very worried that Peru is at that same exact turning point right now. Yeah, I know we have to get you out of here. Ilo, our Peruvian friend on the podcast was worried about. He was worried about straight out civil war in Peru earlier this year. He was talking about that in January and February. I think that risk sort of fell away.

But it also goes back to what we talked about at the beginning and what you've pointed out in a lot of your writing, which is. And maybe this is too. Maybe I'm simplifying things too much, but it's almost like Peru became too democratic. Like the Congress has become so factionalized that it couldn't actually do. Do anything.

You couldn't have leaders that could actually do things without getting impeached by Congress or the factions using Congress against the president and the presidents themselves. Are corrupt. Like, it feels like the central bank is the only institution that had any professionalism and independence at all. And so unlike in a Venezuela like I don't see a Hugo Chavez waiting in the wings. Castillo might have been that figure. But as you pointed out, he's, well, let's watch 2026.

I do think it's a very. If there is the person out there in Peru who is an opportunist and is a cynic in ways and wants to channel all this rage, very justifiable rage against the current factions in power into supporting a sort of autocratic bid for the presidency, I think that that can absolutely happen. So that that is maybe what we end up with in Peru. And I think, you know, Drez, did democracy go too far? I think actually the democracy was, was a very positive thing.

And, and in some ways it was the fact that people were out protesting, the fact that the checks and balances working, especially the prosecutor's office working quite aggressively, it was stopping some of these would be autocrats like the ones you have now, from entrenching themselves. But I think the flip side of that, the other side of the double edged sword was that often checks and balances were kind of running on hyperdrive.

So you were seeing Congress use any faculty, even misreading the law or bending the law to use any to impeach presidents on the slightest of things. Right. And then at the same time you were seeing presidents shut down Congress sometimes. And you know, I think that's led to this resignation apathy, this perception that Peru is a basket case and that really any kind of stabilization in any form is better than the 2019, 2020 sort of situation you had.

But I again, I'll just end by saying I think that's a misguided, that's a misperception and is not sufficiently critical enough about what type of stability we're seeing emerge in Peru. In fact, I think it's one that plays exactly into the hands of organized crime where we started the conversation. Well, I'll let you get out of here on this. I mean, Peruvians were in the streets at the beginning of this year and they lost their energy or they lost their momentum.

If the rates are that bad, if the Peruvian people are so fed up, what is to stop them from washing out this system and overthrowing it in a revolution? Like what stopped them earlier this year and how do you get there? I don't think there'll be armed conflicts or an armed uprising in Peru or elsewhere in Latin America for that Matter. I think just for demographic reasons, it's far less likely than in the 80s when you had much larger young populations.

This is, we didn't talk about this, but it's one of the most startling things right now in Latin America is just the total drop off you're seeing in fertility rates like South Korea, level drop offs, but in much poorer countries, which I think is a sad reminder of just how hopeless this last 10 years has felt to a lot of ordinary people.

I mean you have slowing economies, you have the spread of organized crime, you have, have high level political dysfunction and democratic backsliding which we talked about. And increasingly, you know, the migration to the US looking like the most viable option. So yeah, just on the question of armed upper, I don't think, I don't really think that's in the cards. But I do think you could have the election of a Bukele in Peru. Absolutely.

You know, maybe that's what we're talking about in two years time. Well, I promise to be an optimistic foil to your, to your clear hearted, sober view of the world. So I think I failed. So you'll have to come back on. We didn't get to, you know, it's not really my wheel wheelhouse, but there's so many other positive things I think happening in the region. You know, I think it's a much more socially accepting and tolerant place than maybe it once was.

It's a, it's a, in terms of the global south, it's still the most democratic region and there are democracies like Chile and Uruguay that score higher on Freedom House indexes than the U.S. right. So it's obviously a mosaic of, you know, politically, socially, culturally, it can't be flattened. But I think there's still reason to sound these alarms and to be as concerned as people are on the ground who are living through them. Absolutely.

But to your point, and I try to talk about it on the podcast as much as I can, I mean Chile might be the renewable energy center of the world in the next 10 years. Brazil looks like it is finally coming through on some of its potential. And if it could lead the region in a different direction, maybe that could be good. I'm a little more ambivalent about Mexico.

I think Schoenbaum means well now whether if you gut the institutions like it's okay if Shane Baum is the one who's pulling the strings, the question is, well, when it's not Shane Bauman, it's some kind of narco back corrupt person who has control of the institutions, then what happens? But maybe she has like a three to six year window to try and do things. I'm. I'm with you there.

So anyway, Will, I've already taken more of your time than I said I was going to, so thank you so much and we'll have you back on.

Thanks so much for having me, Jacob.