Hot Plate

This is an archived version of the PW Sources newsletter from Saturday, July 22. Sign up to receive PW Sources directly to your inbox here.


Mexican President Andrés Manuel López Obrador came to power in 2018 vowing to end the country’s war on drugs. Yet, as he nears the end of his six-year tenure, the immensely complex drug trade continues to yield high levels of violence.

In a 2016 article, OEINDRILA DUBE, OMAR GARCÍA-PONCE, and KEVIN THOM examine how trade policy and maize prices shape illicit crop production in Mexico. 

From the text:

“About 29% of agricultural workers (representing 14% of all workers) in Mexico were identified as maize workers in 1990. Over the course of the 1990s and 2000s, several major fluctuations in the maize price impacted income opportunities. The implementation of the North American Free Trade Agreement (NAFTA) in 1994 initiated liberalization of the sector, expanding import quotas and reducing tariffs. The introduction of NAFTA precipitated a large decline in the price of maize in Mexico: between 1993 and 1994, it dropped by 20%. Using data from 1990-2010, we demonstrate that price changes induce differential drug market outcomes across municipios of varying maize suitability. We show effects along the entire narco-trafficking chain, starting with increases in illicit drug crops and ending with cartel violence. We document impacts on the cultivation of marijuana and opium poppies, as well as seizures of raw marijuana and opium gum. It was hoped that NAFTA would deliver economic gains by more efficiently allocating resources. Relative price changes were expected to initially reduce agricultural incomes but ultimately encourage workers to join more productive, export-oriented sectors. While Mexican manufacturing has expanded, the reduction in maize prices following the agreement also contributed to the growth of the illicit drug sector.” 

+  “Tied to—or simultaneous with—anti-drug funding, laws are adjusted, and reforms are brought in that encourage privatization and increased foreign direct investment.” Dawn Paley on “drug war capitalism” in Mexico. Link

+  “The origins of Mexico’s drug wars can be found in the Mexican state’s decades-long attack on popular movements advocating for social and economic justice.” By Alexander Aviña. Link

+  “A significant effect of the Mexican Drug War on the GDP per capita for states with military operations equal to –0.5%, over the period 2007–2012.” By Jose Roberto Balmori de la Miyar. Link


Global banks

JULIEN ACALIN is an economist at the International Monetary Fund. In his job market paper, he explores how internationally active banks shape global imbalances. 

From the abstract

“This paper studies the role of global banks in cross-border gross and net capital flows. I propose a tractable multi-country model in which leverage-constrained global banks intermediate funds between local banks with heterogeneous projects. Following a relaxation of their constraint, global banks reallocate more funds, generating higher gross capital flows. I show that countries with higher net external liabilities to global banks experience a larger deterioration in their current account balance, driven by a larger increase in investment, after a leveraging up by global banks. Fluctuations in global banks’ leverage play a key role in driving global imbalances.”

+ + +

+  “At the core of this problem is that many treasurers do not have a complete view of their money across entities and the world.” New on PW, Elham Saeidinezhad interviews Tim van Bijsterveldt about transformations in the global payments system. Link.

+  “Mottley, Zelenskyy, and Modi’s framing of their demands shows how developing countries are determined to shift the global power structure to make their states capable of solving pressing problems.” New on The Polycrisis, Kate Mackenzie and Tim Sahay on how developing nations are seeking to remake the world order. Link.

+  “In this brief, we provide a comprehensive array of data on fully refundable state CTCs as a resource to lawmakers, researchers, and advocates.” JFI’s report on state-level child tax credits, by Halah Ahmad and Jack Landry. Link.   

+  A green cement technology tracker, from Leadership Group for Industry Transition. Link.

+  A report from Climate and Community Project, on how trolleybuses can help decarbonize San Francisco’s transit system. Link.

+  “Even if Bretton Woods III emerges, leading to the formation of a robust parallel financial system that is not based on the dollar, central banks will continue to engage with the legacy dollar-based financial system.” By Esfandyar Batmanghelidj. Link

+  “During the Anti-extradition Movement in Hong Kong, a wave of new unions surfaced—18 newly registered unions in 2019 and 491 in the first half of 2020.” By Anita Chan and Sallie Lau. Link

+  Geraldine Pratt, Caleb Johnston, and Kelsey Johnson on “the growing employment of companion robots in elder care.” Link.

+  “Until the late nineteenth century, most tequila companies did not have extensive landholdings or grow their own agave. Instead, they bought agave from the haciendas and larger farms in the area. As demand for tequila increased, the distillery owners began buying up smaller distilleries and acquiring land. Jesús Flores, Cenobio Sauza, and other local elites expanded their plantations of agave in the Tequila region. This led to an enormous concentration of ownership of the agave plantations. In 1890, out of a total of 60 million plants in Jalisco, Cenobio Sauza had more than 5 million (spread out over twenty-five hundred to three thousand hectares of land); several other elites in the region had between 2.5 and 5 million agaves each. By this point, the hacienda land in the Amatitán-Tequila valley was almost completely planted with agave. A description of the region from 1893 noted that the tequila producers had “dedicated themselves assiduously to the cultivation of [agave], which now [constituted] the wealth of some of the haciendas.” And in 1896, making full use of the loopholes permitted to elite landowners by President Díaz, Cenobio Sauza obtained the last agave fields in Jalisco that were still held by the indigenous population.” By Sarah Bowen. Link

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