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RUEAHLA/DEPT OF HOMELAND SECURITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 MEXICO 002749 
 
SIPDIS 
 
DEPT FOR WHA DAS JACOBSON, MEX DIRECTOR LEE AND INR HOHMAN. 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EAID PHUM MX
SUBJECT: MEXICO: MICHOACAN FACES TRIFECTA OF ECONOMIC, 
SECURITY AND MIGRATION PROBLEMS 
 
REF: MEXICO 1947 
 
MEXICO 00002749  001.2 OF 003 
 
 
¶1. (SBU) Summary:  Poloff traveled to Morelia, Michoacan 
August 18-21 to assess the political, economic, and security 
environment in the state with a number of officials from the 
major political parties, the state government, non-government 
organizations, and the academic world.   Michoacan is 
emblematic of the dilemma facing many of the states in 
Mexico: institutional weaknesses, political infighting and a 
lack of fiscal stability hamper the state governments' 
ability to make headway on poverty, unemployment, and 
insecurity. Failure to foster a local environment with 
promising prospects for investment and employment feeds 
security and migration problems which in turn increases the 
state economy's reliance on remittances and encourages local 
corruption. Recent mid-term elections left Michoacan's 
political leaders unchanged, barely touched by a spat of 
recent corruption scandals that scarred the state's 
reputation (reftel) but left the local way of doing business 
largely unaffected. Greater cooperation among local officials 
and with the federal government will be crucial to realizing 
better success in meeting the state's challenges in the 
future.  End Summary. 
 
 
Political Landscape Leaves Problems Festering... 
 
¶2. (SBU) Political power in the state is equally divided 
between the three leading Mexican political parties with the 
left-leaning Democratic Revolutionary Party (PRD) enjoying a 
small plurality in the state legislature (14 of 40 seats), 
President Calderon's own National Action Party (PAN) close 
behind with 12 seats, and the nationally re-ascendant 
Institutional Revolutionary Party (PRI) controlling 10 seats. 
 Smaller parties -- Convergence, the Green Party of Mexico 
(PVEM), the Workers' Party of Mexico (PT), and the New 
Alliance (PANAL) -- are bit players with their one seat each 
not enough to give them any real bargaining power. The mayor 
of the capital city, Morelia, is Fausto Vallejo Figueroa, 
from the PRI. The distribution of political power puts a 
premium on consensus-building and coalition politics but PRD 
Governor Leonel Godoy has been unable to forge any effective 
cross-party alliances.  More often than not personal 
rivalries and corruption have led to a political stalemate 
reflected in the local government's inability to address 
serious problems. Local elections will take place in November 
2011 for the governor, state legislature, and municipalities. 
 
¶3. (SBU) The balance among Mexico's three leading parties 
stems from several factors. PRD State President Fabiola 
Alanis attributed PRD's traditional strength in Michoacan to 
the fact that the party was founded there and maintains an 
effective and organized presence throughout the state. Had it 
not been for the May 26 arrests by federal agents of 28 high 
ranking officials on narcotics charges (reftel), the majority 
of whom were from the PRD, Alanis maintained PRD would have 
even won two more districts. Meanwhile PAN's influence has 
been boosted by President Felipe Calderon's status as a 
native of Michoacan and the corresponding resources from the 
federal government that flow through national programs and 
help raise the PAN's local visibility. Even though the PRI 
won big in the midterm elections nationally and in other 
states, it did not win any seats assigned to Michoacan in the 
Federal Chamber of Deputies. Instead, the elections produced 
an identical distribution of seats with PRD securing eight 
and PAN winning the remaining four. 
 
¶4. (SBU)  As is the case in Mexican politics at the national 
level, the differences between the parties is less an issue 
of ideological divide, and more a result of local 
personalities and party organization. Green Party State 
Congressman Arturo Guzman explained that the PRD emphasizes 
grass roots movements, whereas the PAN is more traditional in 
its approach regarding the importance of consensus building. 
Officials told Poloff that the PRI is known for its 
chameleon-like behavior and often forms alliances with the 
PAN in the state.  Representatives from local human rights 
NGOs complain that the PAN operates much like the PRI in 
terms of clientelism and believe the state will need a new 
generation of leaders willing to work together to confront 
the problems of the state. 
 
 
And Complicates Economic Development... 
 
¶5.  Godoy and his advisors in the state government repeatedly 
 
MEXICO 00002749  002.2 OF 003 
 
 
stressed their commitment to improve the economy 
notwithstanding political obstacles.  Erick Lopez, 
Coordinator for Development and Planning, told Poloff that 
the government's first priority is to increase production and 
exports of fruits and vegetables in rural areas, taking steps 
as appropriate to improve infrastructure.  Officials told 
Poloff that Michoacan already harvests more fruit than any 
other part of the country.  The government's second priority, 
according to Lopez, is to consolidate and expand Michoacan's 
tourism industry, which has taken a hit due to economic and 
security crises in the state.  He said the third priority is 
the continued development of the port of Lazaro Cardenas, 
which is the largest port in the country and has not/not been 
affected by the worsening security environment.  This 
includes business expansion, railroad investment, and highway 
development. 
 
 
¶6. Migration to the U.S. is another challenge for Michoacan. 
The local Secretary of Economic Development estimates that 
2.5 million people from Michoacan already live in the U.S. 
with most migrants hailing from the countryside. State 
Secretary of Government Fidel Calderon told Poloff that the 
governor wanted to target marginalized rural populations for 
assistance and development, which could potentially help stem 
the flow of young, able men to the U.S. To this end, the 
governor reportedly has increased the budget for programs in 
the countryside by 138 percent over the previous 
administration. It is not clear what impact this increase 
will make as the money still is being allocated. 
 
 
¶7. (SBU) Calderon complained about the lack of a stable 
funding base for the state, a weakness stemming in part from 
an institutional problem in Mexico's federal structure. Only 
20 percent of federal taxes are returned to the states and of 
that 20 percent, only 20 percent go to the municipalities. 
The states have very few sources of independent funding, 
deepening it reliance on flows from the federal government. 
Remittances from the U.S. boost the local economy but are 
unpredictable and closely tied to U.S. economic conditions. 
Michoacan led all Mexican states with nearly USD 2.5 billion 
in remittances in 2006 but recipients generally use these 
funds for basic necessities. Both PAN and PRD leaders 
stressed the importance of greater investment in the state in 
order to ease the historic overreliance on remittances. 
 
 
¶8.  PRD Secretary of Economic Development Ruiz thought 
NAFTA-generated investment from the U.S. was the best way to 
cut through existing red tape. He believes that the best way 
to increase investment and economic development in the state 
is to promote the Lazaro Cardenas--Kansas City Railway 
Corridor facilitating the transport of containers from the 
Far East to the U.S. by way of Mexico. PAN State Congressman 
Sergio Solis lamented the low industrialization rate in the 
state, attributing it to historical factors and the current 
economic recession. He opined that the ejido system 
(agricultural land that the federal government expropriated 
from large private holdings during the Mexican Revolution and 
redistributed to communal farms) makes the purchase and sale 
of property difficult, seriously limiting new investment. 
University of Michoacan Professor Benjamin Revuelta told 
Poloff that what Mexico really needs is a program of 
assistance from the U.S. on the scale of European Union aid 
to its poorer members. 
 
 
As Does Security Spending 
 
¶9. (SBU) We heard a consensus among state administration 
officials on the need for the state to forge economic 
solutions to the security crises confronting Michoacan. 
State Secretary Calderon maintained that jobs and education 
would contribute more long-term to the state's overall 
security than funds dedicated exclusively to security 
measures.  PRD Party Secretary Alanis complained that the six 
million pesos a day spent on the military mobilization of 
10,000 troops in Michoacan were draining resources from 
important social programs.  She further asserted that human 
rights complaints had increased six fold over the last two 
years due to the mobilization. 
 
¶10. (SBU) Local human rights NGOs echoed the charges, 
recounting numerous human rights violations by the military 
in the countryside, including collateral killings, 
 
MEXICO 00002749  003.2 OF 003 
 
 
unauthorized entry, arbitrary detention, torture, rape, and 
robbery. They cited the case of people attending a church 
service in Apatzingan, whom soldiers held for hours while 
they searched for a suspect.  They also maintained that 
federal forces seemed disproportionately focused on going 
after Michoacan's principal cartel, La Familia, as opposed to 
the Zetas.  Some even offered La Familia praise for providing 
many benefits to rural communities but conceded that it would 
be better if the cartel did not exist.  While the State Human 
Rights Commission President Victor Manuel Serrato faulted the 
military for failings, he said that the situation had 
improved over recent months as the military became sensitive 
to its human rights record. The primary problem, he said, was 
that the military lacked good intelligence.  He also opined 
that authorities should be combating kidnapping and 
extortion, at least as much as narcotrafficking, as they are 
more serious crimes in his view and have become more 
prevalent in Michoacan. 
 
¶11. (SBU) Notwithstanding disagreement between state and 
federal officials on security matters, local officials remain 
committed to strengthening their security apparatus.  On July 
21, the state passed a new public security law to improve the 
professionalization of prosecutors and police.  State 
Secretary of Security Minerva Bautista said that the new law 
would be implemented in the next five to six months to 
strengthen entry requirements, increase police vetting 
including regular polygraphs, provide regular human rights 
training, and implement programs in human development 
including physical and mental health.  She also mentioned 
that the state was improving intelligence gathering and 
coordination, including with other states and citizen 
participation.  Officials at the State Prosecutor's Office 
(PGJ), however, told Poloff that Michoacan had a long way to 
go before implementing the 2008 judicial reforms signaling a 
preference to see oral trails piloted first at the federal 
level. 
 
 
State and Local Corruption: Look the Other Way 
 
¶12. (SBU) Local government officials did not see any 
inconsistency between the May arrest of ten local mayors by 
federal authorities and their call for more cooperation and 
transparency between federal and local law enforcement 
efforts. State Secretary of Government Calderon complained 
that the federal government should have demonstrated greater 
respect for the state's autonomy by sharing more information 
about its operation with local authorities.  Calderon 
registered a similar complaint about the arrests of leading 
members of La Familia cartel, suggesting state officials 
needed information in advance to guard against possible 
retaliation. State officials did not comment on well-known 
concerns from federal authorities that sensitive information 
shared with local officials would leak to the subjects of 
their operations. At the same time, however, recent charges 
against the governor's brother for his alleged involvement in 
narcotics trafficking is fostering rumors from the political 
opposition that the governor himself may be involved in 
wrong-doing. 
 
 
Comment: Only One Way Forward 
 
¶13. (SBU) Michoacan faces a well-known Mexican trifecta that 
stems from serious economic, security and migration problems 
that are inseparable. New private investment, better sharing 
of tax revenues with the Federal government and a decrease in 
corruption would help stabilize Michoacan's economy and 
reduce its overreliance on unpredictable federal government 
handouts and remittances from abroad. But for now, political 
disfunctionality and increased spending on security is 
undermining the creation of a business climate that could 
support economic growth and greater job prospects. Only 
greater coordination and cooperation among the state's 
political parties and between state and federal forces will 
allow the kind of comprehensive approach that is needed to 
address Michoacan's serious problems. 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
 
PASCUAL