Business on the bloody border

Desperate measures to keep businesses alive in the world’s most dangerous city




Published by The Economist

A STEEL fence is all that separates El Paso, in west Texas, from Ciudad Juárez, in northern Mexico, and it has never stopped business flowing across the border. Drinks, dentistry and divorces have been served up to bargain-seeking gringos for decades. But since fighting erupted among local drug-traffickers in 2007, Juárez has seen more violence than anywhere on Earth, battlefields aside. The murder rate last year was over 200 per 100,000 people, more than ten times the national average and 200 times the rate in El Paso. In a once-busy tourist area close to the border, well over half the shops are boarded up.

Visitors “think Mexico is a country at war,” says one dentist with a practice close to the frontier. Since the violence ratcheted up, three-quarters of his mainly American patients have decided that crossing the border for half-price drilling is not worth the risk. It does not help that since September 11th 2001 crossing the border can take up to two hours, rather than a few minutes. Most gringo-oriented businesses have struggled: a few blocks away Club 21, a betting shop, has closed, as has the Montana restaurant, which once served toothsome steaks. A hotel lies half-built; the rumour is that its backer was a drug lord who was killed earlier this year.

Alongside lower demand, businesses face new costs from extortion, which has flourished as small-time crooks have taken advantage of the mayhem. The maquila factories in the suburbs, which make car parts and various gadgets for the American market, are safe because they handle little cash and have off-site bosses. Smaller shops, where the owner sits behind a till full of pesos, are more vulnerable.

José Luis, the manager of a souvenir shop selling masks, statues and other handicrafts, says his family shut two similar stores in 2009 rather than pay protection money. The gangsters’ piso, or floor-rent, apparently varies from 500 pesos ($35) to $1,000 a week. Businessmen who can’t afford to pay the piso or to employ bodyguards have in some cases shut up shop to work anonymously from home.

To protect entrepreneurs and reassure visitors, the city government created a heavily policed “green zone” for businesses in December 2010, which completed a trial period last month. Under the plan, 120 federal police kept a 24-hour guard on a small commercial area close to the border. Checkpoints were positioned every 500m to inspect cars and keep an eye on racketeers. The crackdown cut extortion by more than 90%, says Juan Benavente, the state’s undersecretary of economy, who delightedly reports that two new restaurants opened in the green zone last week.

Shopkeepers say extortion has by no means disappeared, and that much goes unreported. But things have got better, according to Guillermo Soria, of Juárez’s chamber of commerce. Before, “you would stop at traffic lights at 11pm and be the only car there. Now there is more traffic, more movement.” People are selling cigarettes at road junctions again; some restaurants even have queues at the weekend. Businesses can report extortion via the chamber of commerce, which passes the information to contacts in the not-always-trustworthy police.

Despite its apparent success the green zone was scrapped last month, ostensibly because its mission had been accomplished. Officials admit that the police were in fact called away partly to help at October’s Pan American games in Guadalajara. Since then officers have been moved to Monterrey, which has a growing security problem of its own (see article). As night falls, a single federal police lorry creeps along the southern edge of the former green zone. The loss of protection is palpable: on November 12th a body was found outside a defunct nightclub called Vértigo in the formerly secure area.

Yet some wonder if the green zone, with its hints of Baghdad, did as much to dissuade visitors as tempt them in. One shopkeeper, who had a checkpoint positioned outside his store, says it was hardly a “red carpet” to welcome visitors. With Juárez’s murder rate down by a third this year, the problem will be increasingly one of perception, Mr Benavente hopes, though things remain fairly dire.

There are plans to launch a tourist-police force next year, with English-speaking officers to give a friendlier impression than armed checkpoints. Mr Soria laments that many executives are still forbidden from visiting Juárez by their fearful bosses (or spouses). A pitch this month to host an annual jamboree for 1,000 lawyers will be a test of whether the new, slightly safer Juárez can attract business. Until it does, criminal enterprises will make life difficult for legitimate ones.