El Padrino, #EndSARS, Rising Food Prices and the Week in Review
Happy Friday, you merry band of beautiful humans. A few housekeeping notes: In our latest podcast, Maxim Suchkov joins us to offer a Russian perspective on the Armenia-Azerbaijan conflict and whether Putin will still be Russia’s president in 2030. You can listen by clicking here, and if you aren’t subscribed to the podcast on iTunes or wherever it is you listen to podcasts, you are missing out! Also: if you still want to sign up for what promises to be the best virtual conversation of the COVID-19 era (yeah, we said it) between Jacob and Red Fan Communications president and founder, the incomparable Kathleen Lucente, there is still time! Learn more by clicking here. Keep wearing those masks and we’ll catch you on the flipside.
El Padrino. Mexico’s former Secretary of National Defense, General Salvador Cienfuegos Zepeda, was arrested in Los Angeles last week on drug and money laundering charges. Cienfuegos was subsequently denied bail and has been ordered to stand trial in New York. A recently unsealed indictment filed in Brooklyn in August 2019 accuses Cienfuegos of multiple counts of drug conspiracy and one count of money laundering. The U.S. Attorney for the Eastern District of New York has accused Cienfuegos of accepting bribes and using his position to permit the H-2 Cartel, an offshoot of the Beltran-Leyva cartel, “to operate with impunity in Mexico” in exchange for bribes. For this, Cienfuegos earned the moniker “El Padrino” – The Godfather.
What it means: In March 2007, then-Mexican President Felipe Calderón requested U.S. assistance in fighting a war on Mexico’s drug cartels. Calderón’s predecessor, Vincente Fox, was by no means soft on drug trafficking. He deployed almost 20,000 Mexican soldiers annually to combat the cartels. But Calderón took it to another level, declaring war on the cartels when he assumed office in 2006 and deploying almost 50,000 troops in Mexico to fight the cartels by 2009. The U.S. answered Calderón’s call for help with the Mérida Initiative, which began in October 2007 and became official in December 2008. In the 12 years since the United States has provided $3.1 billion worth of support to Mexico’s military and police forces to fight its drug war. Hundreds of thousands of civilians have died in Mexico since. 2019 was the most murderous year in Mexico’s history since the National System of Public Security started tracking murders in 1997 and 2020 is on track to break the 2019 record. It is impossible to know exactly how much drugs the U.S. consumes each year – we’ve seen figures ranging between $25 to $64 billion – but it is safe to say the U.S. is the cartel’s best customer.
The violence is one of the biggest reasons populist Mexican President Andrés Manuel López Obrador (AMLO) won the 2018 Mexican presidential election. AMLO promised to do things differently. Rather than square off against the cartels head-on, AMLO hoped to eliminate the source of their strength by decriminalizing legal drugs, investing in treatment programs, negotiating with the cartels, and developing a new federal force – the National Guard – to maintain law and order so that the government could stop relying on the Mexican military to police Mexico’s streets. Two years into his presidency, AMLO admitted defeat when he authorized Mexico’s armed forces to participate in civilian law enforcement for four more years. No doubt AMLO hoped to emulate his favorite Mexican leader, Benito Juárez, who used his Rurales to stop the banditry afflicting the Mexican countryside in 1861. In practice, however, AMLO’s strategy has not succeeded in reducing violence in Mexico. Quite the opposite. And now, to top it off, emerges a major scandal that could have serious repercussions on the U.S.-Mexico relationship.
Perhaps this will be a moment that spurs AMLO back to his ideological origins. After all, if there is a single issue AMLO is associated with more than anything, it is his quest to battle corruption in Mexico’s political system. What could be more corrupt than a former General and Secretary of National Defense using his position to protect the very organizations that prevent Mexico from achieving its true potential? The uncomfortable question that follows, however, is where should AMLO turn? Previous Mexican presidents have relied on the Mexican military because they were seen as less corruptible than the police local political officials. Now it turns out at least some of the highest echelons of the Mexican military were in bed with the cartels, even profiting from their activities. This incident also forces the U.S. to think carefully about its own policies towards Mexico, as Washington has funneled $3.1 billion to men like El Padrino assuming that they were on the U.S.’ side and that shiny military tech was a panacea for Mexico’s problems. Even before the revelation on El Padrino’s activities, at least one U.S. Senator has called for the U.S. to “take matters into our own hands.” In the words of former Mexican President and dictator Porfirio Díaz, “Poor Mexico – so far from God, so close to the United States!”
#EndSARS. No, not the SARS disease and COVID-19 cousin. In Nigeria, SARS stands for the Special Anti-Robbery Squad, a unit that was so violent and corrupt that it became the rallying cry of anti-government protests that have spread throughout Nigeria. The Nigerian Army has since warned that it would “maintain law and order and deal with any situation decisively.” In southern Nigeria, protesters even stormed a prison and released 200 inmates. Anti-government protests continued unabated throughout the week after Nigerian soldiers opened fire on protesters in Lagos and killed at least seven people. Nigerian President Muhammadu Buhari’s promises of reforms and calls for calm have been balanced by his warnings that continued lawlessness and anarchy will not be tolerated.
What it means: Nigeria is a small but significant oil producer, the 13th largest oil exporter in the world, and responsible for roughly 2 percent of all oil exports. As a country, India is Nigeria’s single largest export destination, an interesting example of India’s growing economic clout in the world. The EU, however, is an even more important market for Nigerian crude, accounting for 34 percent of exports last year. And while China accounted for just 3 percent of Nigeria’s exports last year, China has also promised almost $100 billion in investment in Nigeria’s decrepit oil and infrastructure in recent years.
Nigeria is also the 7th most populous nation (over 200 million people) in the world and the largest in Africa. It is also one of the fastest growing countries in the world, with a total fertility rate of 5.4. Nigeria is a multi-cultural state, with multiple ethnic and linguistic groups leading to frequent conflict, not to mention an ongoing Islamist insurgency driven by the notorious Boko Haram group in the northeastern part of the country.
Aside from Nigeria’s political stability and the potential impact on oil markets, there are two primary reasons to continue to keep a close eye on how the protests develop. First is a theme we return to constantly: in a multipolar world, political competition is most pronounced in peripheral areas that are either rich in natural resources or that are strategically located. Nigeria is oil-rich, and perhaps more important, it is people rich – if Nigeria could ever get its societal ills under control, it could be a massive potential export market and an idea low-cost factory environment. Its strategic location on the Gulf of Guinea is important to any Atlantic power and also makes Nigeria a key entry point into the West African region in general.
Second is another long-standing theme we are increasingly worried about: rising food prices. It is hardly a coincidence that this unrest comes on the heels of large increases in food prices throughout the country. Food inflation in September throughout the country reached 16.6 percent in the country at large in September. That may make Nigeria a precursor to a more general trend of political instability driven by food insecurity even if on the surface the unrest is tied to ephemeral political grievances. This underlying malaise is likely what is keeping Buhari up at night: the protesters may be young and a relatively small portion of Nigeria’s population now, but a hungry population can easily become a revolutionary one. Which is a great segue to…
Rising food prices. The U.N. FAO Food Price Index is up 2.1 percent compared to the previous month and is up 5 percent year-on-year driven primarily by 5+ percentage increases in the price of cereals and vegetable oils. Flooding in major rice producers in Asia extended beyond Cambodia throughout the Mekong Delta region, pushing export prices for Vietnamese rice up 5 percent and leading to domestic price spikes in Bangladesh and concerns over fresh supply in Thailand. Food prices for staples like flour, sugar, onions, and tomatoes continue to rise in Pakistan as well.
What it means: Regular Perch followers will know we have been worried about a potential spike in global food prices for months. This is not a global spike – but it is a significant increase in some key staple groups, and we are also seeing high prices in specific countries based on poor weather or other supply chain related disruptions. China is spooked enough that it is continuing to buy grains to stockpile domestic reserves due to fears of a food supply scare. Meanwhile, Brazil and Turkey have become the latest countries to suspend tariffs and import taxes on staples like wheat, corn, barley, and soy to reduce food prices. Aside from the obvious human suffering food insecurity causes, it is also a key driver of political instability, especially in areas where risks are already elevated due to the economic pressures of COVID-19.
NASA is partnering with Nokia to put a 4G network on the moon, which means you might soon expect to get better service on the moon than in your neighborhood. Yay!
Indian soldiers apprehended a Chinese soldier who “got lost when he was helping local herders find their yaks.” Despite our best efforts, we have not been able to ascertain what happened to the yaks. We won’t rest till we learn the truth.
Two officials of the Chinese embassy apparently gatecrashed an event at Taiwan’s Taipei Trade Office in Fiji and beat up a member of the Taiwanese delegation so badly that the delegate was hospitalized, all because – and here’s the kicker – a cake at the event was emblazoned with Taiwan’s flag. #2020 #cakewars
Belgium has warned the UK that a no-deal Brexit will result in the immediate application of the “Fisheries Privilege Charter” granted to Belgium by King Charles II in 1666, which allows 50 Belgian ships a perpetual right to fish in British waters. Can’t make this stuff up.
China has issued warnings to U.S. government officials that China may arrest Americans if the U.S. continues to prosecute Chinese scholars in American courts. If you’re an American and you’re traveling to China for any reason now or in the future…watch your back.
The United States appears to have backtracked on a troop control transfer agreement with South Korea.
Even the Swedes are preparing for war.
Brazilian President Jair Bolsonaro is reportedly considering banning Huawei from Brazil’s 5G networks.
The United States will host the foreign ministers of Armenia and Azerbaijan in Washington on Friday.
Defense Ministers of NATO members approved a plan to create a new space center at an air base in Ramstein, Germany. If you thought the competition over 5G was intense, you ain’t seen nothing yet.
Thailand’s Prime Minister Prime Minister Prayut Chan-o-cha canceled a country-wide state of emergency after a week of anti-government and anti-monarchy protests.
The U.S. is getting serious about potential Nord Stream 2 sanctions.
Turkey defied expectations by keeping its one-week repo rate steady at 10.25 percent. Markets reacted by sending the Turkish lira tumbling by over 2 percent to a new record low, testing the symbolic threshold of 8 Turkish lira to the dollar.