DiscussionDIVAS

All eyes on Mexico

Violence in Mexico and its spillover into the United States is taking up a lot of real estate in the news lately, and the urgency to do something about it is intensifying, with resources, top officials and journalists headed for the border.

Beyond the obvious—that a major war between the powerful drug cartels there and the government is paralyzing parts of the country—here’s a roundup of U.S. efforts to address and help the situation, and why this is a story that won’t go away any time soon.

1. As the violence spills over into Arizona, the United States is deploying money, people and technology to strengthen border security and intelligence, fight the cartels and stop the violence.
2. Speaking in Mexico this week, Secretary of State Hillary Clinton said the U.S. shares a co-responsibility for the violence since large demand for drugs comes from the United States.
3. Stemming the flow of guns from the U.S. into Mexico is also part of the increased border efforts. A recent Economist article says sales at gun shops on the border are “higher than the average” and “thousands of automatic rifles are sold for export to Mexico, which is illegal.”
4. About $700 million has already been approved by Congress, part of a larger $1.4 billion initiative passed under the Bush Administration (called the Merda Initiative) to help Mexico fight the cartels by providing equipment and assistance to local authorities. One controversial plan already underway is to spray herbicide on plants along the border to get rid of hiding places for smugglers.

The big picture

Mexico is the third biggest trading partner for the United States—about 80% of their manufactured goods are exported to the United States. But with the U.S. economy suffering, demand for those products is also suffering, and many Mexicans who live here are having trouble sending money back to their families.

On top of this, Mexico and the U.S. are sparring over a small detail buried in the spending bill, passed recently, which stopped permitting Mexican trucks from operating in U.S. territory, something they’ve been allowed to do under the North American Free Trade Agreement (NAFTA). In response Mexico jacked up tariffs on U.S. goods coming into the country, like produce, pressuring farmers here who sell their goods there. Speaking of NAFTA, a New York Times story this week revealed the pluses and minuses it has had for Mexico, and gives a nice history of the recent economic situation for the country.

Meanwhile the drug trade in Mexico is quite strong, estimated to be worth about $20 billion to $50 billion, a big industry for a country where the World Bank estimates half of the population lives in poverty. Of course solving the supply and demand problems of drug trade is no small task, and you’ll probably hear a lot of suggestions about how to fix it at the border, including legalizing drugs. And don’t forget about the huge 700-mile wall that continues to go up along the border, too. Regardless, let’s hope someone is able to get the violence under control soon.

North Korea tests international relations -- an impending launch and two journalists detained

Two journalists are detained by North Korea for reportedly filming a story on North Korean refugees in China, and it offers a good opportunity to touch on a region that remains a political hot button.

Even before the journalists were detained, North Korea was already making headlines this week, saying it plans to launch a missile between April 4 and April 8. It also asked U.S. aid groups to leave the country and turned away food donations.

Detained journalists and refugees

Reports say two female journalists with Current TV were in China to report on people who have fled over the border from North Korea. Reuters reports the women were filming on the frozen Tumen River that borders the two countries, and that tensions were high because South Korea and the United States have been conducting military exercises that the North sees as aggressive.

Since the early 1990s, tens—perhaps hundreds—of thousands of North Koreans have fled the country, where resources are tight and control is strict. Some two million people are estimated to have died from famine during the 90s, and the World Food Programme estimates nine million North Koreans will need food assistance this year. A Congressional report says about 75% of the refugees are women who are subject to prostitution and human trafficking.

One of the journalists detained is the sister of the reporter Lisa Ling who reported a few years ago on North Korea by posing as a doctor’s assistant. Oprah interviewed her about her experience in 2006.

North Korea and the missiles

Almost three years after testing seven missiles—one that could have reached Alaska—and setting off fresh alarms about its nuclear plans, North Korea will launch a rocket that is expected to travel over Japan. In 1998 it surprised the international community with a similar launch. Pyongyang (the capital) says they’re putting a communications satellite in space, but Japan says the launch violates United Nations resolutions and is considering new sanctions. Japan is also preparing to intercept falling debris, and the United States is ready to intercept the rocket entirely if need be.

The big picture

In her first few weeks as Secretary of State, Hillary Clinton made it clear that the United States is open to working toward peace with North Korea, particularly if they abandon their nuclear weapons pursuits. When hearing of the planned rocket launch she called it “very unhelpful.” North Korea says any attempts by the United States or South Korea to shoot down the missile would be viewed as an act of war. Unfortunately it seems these two journalists may have been testing the waters at a time of heightened tension, and hopefully they’ll be released quickly. It’s certain that despite cutting itself off from the rest of the world in many ways—restricting travel in and out, preventing the country from modernizing since the Korean War—North Korea wants to remain relevant on the international stage.

It's not easy being green

It was a green week, from a major announcement by a major company to convert its transportation fleet to run on alternative fuels, to the naming of a green "handyman"—Van Jones—in Washington. And while being green is en vogue, it’s not easy, as Kermit the Frog sang so well. And the recession is driving it home: Green isn’t easy because it isn’t cheap.

Of course billions of dollars of the stimulus package are aimed at green-related efforts—tax credits for using wind and solar, building a smarter grid, and Jones is expected to help shepherd in new green jobs. On Wednesday AT&T showed how costly it can be to be a green leader, committing $575 million over 10 years to convert its maintenance fleet to green-friendly vehicles. Their pledge is a boon to Ford, from which AT&T will order 8,000 trucks that run on natural gas.

Natural gas?

Apparently the United States has plenty of natural gas reserves, meaning it doesn't have to be imported. It's less expensive and burns cleaner than oil. Natural gas is largely methane, and is found in gas and oil wells predominantly in a slice of the United States that stretches from Wyoming down to Texas, and also in Alaska. (See map of reserves.) About a quarter of U.S. power is generated by natural gas already but only a fraction is used to fuel cars. Honda's natural gas car is called GX and sells for about $25,000.

Some cities are already using natural gas to power buses (i.e., San Francisco and Oakland, California). Problem is, it's expensive to convert vehicles to run on natural gas and you need a place to fill up. We have over 100 here in California and there might be 1,000 across the country. (See locator map of natural gas filling stations in the United States.) 

 

The Pickens Plan     

The AT&T announcement was good news for T. Boone Pickens, the Texas oil tycoon who has turned his focus to pushing the U.S. toward natural gas and wind power, often simply called The Plan . He founded BP Capital and is on the board of Clean Energy Fuels, where you might fill a car with natural gas some day.  He's spent tens of millions of dollars touting his plan. You'll probably being hearing more about the Pickens Plan in the near future.

 

The big picture

The main criticism against natural gas is that it just shifts our reliance from one fuel to another—a fuel that may be abundant but is limited in supply. Sun and wind on the other hand come with infinite, free supply. And while shifting to a non-carbon based economy will take a lot of policy and permitting and money, there are of course some everyday efforts individuals can make that don't cost a ton, i.e., buying carbon offsets and converting to CFL lights. So, tell us what you’re doing. We've started a list of some ideas we're hearing about—maybe you can add to it as a resource for the rest of us.

Market recovery rests in Washington

The government threw more money at the economy this week but the stock market continued to plunge downward. What's wrong with this picture?

First, a recap
The Dow opened the week just above 7,000 and immediately took a nose dive. By Friday morning it was trying to recoup some losses but for most of the week traders seemed to watch its fall in shock. Citigroup, once one of the largest banks, traded at under $1. Markets fell globally. 

Meanwhile, on Capitol Hill, Fed Chair Ben Bernanke, Treasury Secretary Timothy Geithner and the head of the Office of Management and Budget Peter Orszag were busy outlining new government programs and defending existing ones, all of which they hope will save the economy.
The new stuff
The government released details on two economic recovery programs that we’ve already heard about:

1) They announced specifics on who is eligible for the $75 billion loan modification program to help homeowners on the cusp of foreclosure stay in their homes, and outlined how the program will work. The idea here as we've discussed before is to find a floor for home prices by preventing more foreclosures from going on the market, which drags down home prices overall. The details announced this week give incentives for lenders to modify people's existing loans to make them more affordable.

2) The government also released details about TALF (Troubled Asset-Backed Securities Loan Facility), which taps the previously approved $700 billion TARP (Troubled Assets Relief Program) money for loans meant to get credit flowing back into small businesses, car financing and student loans.

More on TALF
Many say TALF is key to getting money flowing again, particularly to small businesses. Because that sounds so wonky, and kind of makes you wonder what it really means in real-people terms, we're thinking about it like water, which needs to flow to keep crops alive. If all the water is being held back by a dam, then the crops suffer and might die. Likewise, if all the money needed to run or start small businesses or help people get college loans is dammed up at the bank, then money isn't flowing in a way that keeps the economy growing. Make sense?  

So, TALF specifically targets this problem, with the intention of providing up to $1 trillion in lending. Basically, the Fed and Treasury will lend money to investors to buy highly rated asset backed securities (securities made from bundled up car and credit-card loans), which in turn provides the money to let more of these loans be made.

The big picture
The markets are all about confidence and right now they have none. They are looking to Washington for guidance and answers that the economy and the world aren't headed into the next Great Depression. It seems unreal, doesn't it? That so many smart people could be at the helm of the country's financials and trying to make a difference and yet the foundation feels like sand, slipping away beneath us. Of course TALF may need some time to get working. The lending is set to start March 25, but the market clearly didn't seem to care. We’ve raised the question “who’s in charge” because it seems with so many top people on the Hill and countless speeches by Obama, there still isn’t enough certainty about these plans to help soothe the markets. Why? Because general sentiment is that things are much worse than people really know.  

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