Mises Wire

Secession Movements in Mexico Challenge Federal Power

Earlier this month, The New York Times reported on a remarkable development in Mexico. In an article titled "Losing Faith in the State, Some Mexican Towns Quietly Break Away" we discover that some municipalities in Mexico are turning to de facto secession in order to put a stop to the rampant drug-cartel violence that has become so problematic:

Tancítaro represents a quiet but telling trend in Mexico, where a handful of towns and cities are effectively seceding, partly or in whole. These are acts of desperation, revealing the degree to which Mexico’s police and politicians are seen as part of the threat.

Visit three such enclaves — Tancítaro; Monterrey, a rich commercial city; and Ciudad Nezahualcóyotl, just outside the capital — and you will find a pattern. Each is a haven of relative safety amid violence, suggesting that their diagnosis of the problem was correct. 

But why have these areas become safer? 

All three of these areas are dealing with the problem of organized crime and corruption in slightly different ways. But all of the solutions involve working around the established political systems. 

In the cases of Tancítaro and Monterrey, private owners stepped in to provide security in places where crime had run out of control:

[In Tancítaro it] began with an uprising. Townspeople formed militias to eject both the cartel, which effectively controlled much of Michoacán, and the local police, who were seen as complicit. Orchard owners, whose families and businesses faced growing extortion threats, bankrolled the revolt.

This left Tancítaro without police or a government, whose officials had fled. Power accumulated to the militias that controlled the streets and to their backers, an organization of wealthy avocado growers known as the Junta de Sanidad Vegetal, or Plant Health Council. Citizens sometimes call it the Junta.

Nearly four years in, long after other militia-run towns in Michoacán collapsed into violence, the streets remain safe and tidy.

The reform has also been largely a byproduct of private interests in Monterrey as well: 

If Tancítaro seceded with a gun, then the city of Monterrey, home to many top Mexican corporations, did it with a Rolodex and a handshake.

Rather than ejecting institutions, Monterrey’s business elite quietly took them over — all with the blessing of their friends and golf partners in public office.

[Local business owners] hired a consultant, who advised top-to-bottom changes and replaced nearly half the officers. They hired lawyers to rewrite kidnapping laws and began to coordinate between the police and the families of victims.

When the governor later announced an ambitious plan for a new police force, intended to restore order, he again invited business leaders in. C.E.O.s would now oversee one of the most central functions of government. They hired more consultants to put into effect the best and latest thinking in policing, community outreach, anything that could stop the violence tearing through their city. They bankrolled special housing and high salaries for officers.

Ciudad Nezahualcóyotl, however, took a different approach:

Neza inverted Monterrey’s model: Rather than establishing an independent police force and co-opting the political system, Neza established an independent political system and co-opted the police.

Mexico’s establishment parties are more than parties. They are the state. Loyalists, not civil servants, run institutions. Officials have little freedom to stretch and little incentive to investigate corruption that might implicate fellow party members. Most are shuffled between offices every few years, cutting any successes short.

Neza, run by a third party, the left-wing P.R.D., exists outside of this system. Its leaders are free to gut local institutions and cut out the state authorities.

But merely cutting out cartels and local corrupt government employees isn't enough. 

The leaders of these administrative secession movements must also deal with state-level and federal government institutions in Mexico — and that's no easy task. 

The locals in these communities, however, are well aware of the threat that higher-up government officials pose, and, in Neza local officials have only managed to carry out reforms because they have held both drug gangs "and the Mexican state at bay." In fact, "[t]he state police are treated like foreign invaders."

But, given the way that the United Mexican States — to use Mexico's formal name — functions as a republic, the deck is stacked against local reform movements. 

Mexico: a Top-down Political System 

When confronted with the issue of Mexico's ongoing crime problem, many observers have been tempted to simply declare that it's unnecessary to look beyond "culture" to find the essential variable that makes the difference. 

Indeed, many Mexicans themselves might agree with that assessment. In his book Mañana Forever?, Former Mexican Foreign Minister Jorge Castañeda points to numerous aspects of Mexican culture as being an impediment to economic progress. 

On the other hand, an overemphasis on culture fails to account for the characteristics of a society's government institutions, which may clearly be problematic in themselves. 

A nation's political culture does not exist independent of its political institutions, and its political institutions reinforce the political culture. 

For example, had the United State's colonial period been characterized by an activist and overbearing regime — instead of by "benign neglect" from imperial officials who tolerated a great deal of local control for many decades — American political institutions today would be quite different. 

Similarly, the way that political institutions are constructed in Mexico, both now and historically, have greatly influenced the ability of local governments to seek out meaningful solutions to problems like crime. 

When we look more closely at Mexico's political institutions we quickly find that, compared to its American neighbor, Mexico leans much more toward centralization of political power. The tendency toward centralization dates back to the days of Spanish colonial law, and the Spanish footprint has never quite gone away.

The Mexican system is not a unitary system, however. The Mexican constitution is clear that the federal government, the states, and even municipal units are all units that share power and enjoy certain protections under the Constitution. The Mexican Constitution even has something equivalent to the American Tenth Amendment, Article 124, which states that "powers not expressly granted by this Constitution to federal officials are understood to be reserved to the States." 

Nevertheless, while Mexico is technically a federal republic, the federal government exercises far more power — relative to the 31 constituent states — than the US federal government does relative to the 50 US states. 

Nor is this a static situation. As with the United States of America, "during the nineteenth century, the [Mexican] states enjoyed considerably more autonomy," and things have changed over time: 

the Constitution was amended 415 times between 1917 and August 2004. "Almost half of these reforms were aimed at "strengthening" the federal government and thus, given the nature of Mexico's presidential system, also at increasing the federal executive power. Although the municipalities have experienced an evolution toward decentralization during the past 20 years, the states, in contrast, have suffered a deep reduction of their autonomy.1

Calls for decentralization have increased somewhat since 2000 when the system of one-party rule that had dominated Mexico for decades finally ended. Until the late 1990s, the Institutional Revolutionary Party (PRI) essentially had a lock on the federal government, and on most state governments as well. 

By 2000, though, other parties had gained enough of a foothold at the state level to finally win a national election for another party — specifically, the National Action Party (PAN). This allowed some decentralization efforts to move forward, but the changes have hardly been revolutionary. 

Even under the PRI before 2000, there was enough dissatisfaction with the central government to act as an impetus for some decentralization measures. 

The 1990s produced reforms such as handing education policy over to the states. Municipalities in recent decades have also solidified their status as entities with "exclusive jurisdiction in matters respecting basic public functions and services, such as potable water, sewerage and drainage ... construction of urban infrastructure, public safety, and transit."2

But in all these cases, the federal government has maintained the lion's share of control of government funding. As The Economist noted in 2003, most government revenue, including all levels of government, flows to the federal level alone:

Power may be dispersed, but money is not. About 80% of federal revenues are appropriated by the centre; most of the rest falls to the states, though 5% is spent by the municipalities. In Brazil, by contrast, the federal government controls only around half of total government revenues.

Under Mexico's law of “fiscal co-ordination”, the states' powers to raise local revenues are restricted. They consist chiefly of fairly small taxes on payrolls and on cars; municipalities must rely on symbolic property taxes. At one extreme, the Federal District, the quasi-state which includes much of Mexico City, raises about 45% of its $8 billion budget itself. Most states are at the other extreme—lucky if they gather 10% of their spending.

For the other 90%, they must rely on federal transfers, divided up under a notoriously complicated formula dating from 1980.

The situation had not changed markedly by 2018 with Robert Velasco-Alvarez noting:

According to Moody’s, the average Mexican state collects only 10 percent of its income. The other 90 percent of the states’ budgets comes in the form of federal government transfers.3 A former head of our secretary of the Treasury’s Unit for Coordination with the States claims that municipalities account for only 1.1 percent of Mexico’s tax revenues.

By contrast, in the United States, state and local tax collection — while certainly less than that of federal receipts — amounts to over forty percent the size of federal revenues. In numerous states, state revenues alone — not counting local revenues — reach thirty percent the size of federal revenues. When we look at federal aid to states as a percentage of state revenues, we find that rarely does federal spending amount to more than 35 percent of state revenues. 

In other words, states in Mexico are considerably more reliant on federal spending than is the case in the US.4  

There had been attempts to further reform this situation in 2007 with a new "fiscal federalism" effort, but funding nonetheless remained lopsidedly under the control of the federal government. Fiscal federalism had partly been pushed with the goal of increasing the fiscal independence of state and local governments, but the reality has not measured up. 

Mexican Crime and Centralized Political Control

Over time, the effect has been one in which state and municipal governments rely on the federal government to fund local operations like roads and public safety. This then distorts the local political reality by making state and municipal local politicians turn toward the federal government for money, and not toward the resident taxpayers who actually pay the bills in their states and cities. 

Velasco-Alvarez blames this disconnect for much of the state and municipal governments' apparent unwillingness to crack down on crime: 

As organized criminal activity has spiraled out of control in Mexico, two federal administrations have been unable to regain control entirely. At least, there is increasing awareness that Mexico’s national institutions cannot solve the problem. However, there is little discussion as to why our organizations at the state and local levels are ineffective at enforcing the rule of law. The importance of Mexican fiscal federalism in this explosion of criminal behavior is notably underemphasized. It is critical for the national security of both Mexico and the United States to understand this relationship...

This fiscal arrangement is the basis of Mexico's current political equilibrium. Governors operate detached from the people who elect them. And, despite its leverage over states’ finances, the federal government is unable to keep the corruption in check. Although citizens benefit from the decreased tax burden, they end up saddled with terrible governance and increasing graft at the state level.

For Velsaco-Alvarez, and for many others who advocate for a more locally-controlled political system, major reforms are necessary that will remove federal restriction on the ability of states and municipalities to raise revenue independent of the federal government. 

According to Gutierrez Gonzalez, over the past decade, the "Reforma del Estado" effort has continued to advocate for reforms such as these, including efforts to lessen the powers of the national presidency and "Allowing the states and municipalities to recover major and minor taxation powers as sources of revenue."

According to Tim Campbell in The Quiet Revolution: Decentralization and the Rise of Political Participation in Latin American Cities, decentralization efforts have been an issue throughout Latin America, and is part of a region-wide effort to assert local control in the wake of decades of domination from central governments. As an example, Campbell relates how some local governments have attempted to do this without changes to federal law. 

Large cities and small have found many ways to gather more income on their own. Most mayors, if they take the trouble to review property tax systems, as many did upon reaching office, recognized that simply by increasing coverage and updating property values, their represent system of tax administration would yield substantial returns.5

Campbell notes that with similar strategies in Tijuana, local revenue "increased 58 percent from 1989 to 1994." A major downside to this is that local governments have no ability to reduce federal taxes while increasing local revenues. Thus, the overall tax burden only increases. The upside is that federal power is somewhat reduced in relation to local power. 

While taxpayers — especially Mexican ones — are not known to cheer efforts to increase their taxes, resentment over taxes is mitigated if the taxpayers feel they have something to show for it. As one mayor in Campbell's study remarked: "when taxpayers see they are getting new services, they are willing to pay."

In Mexico, though, all too many residents aren't seeing "services" of any kind, and most notably absent are basic public safety services. Taxpayers continue to pay their taxes, primarily to Mexico City, but the promised services aren't materializing. 

Consequently, many townspeople have taken matters into their own hands, as they have done in Nezahualcóyotl, Monterrey, and Tancítaro. Realizing they're powerless to force any improvements from Mexico City, they've turned instead to throwing out local officials, partnering with local private businesses, and divorcing themselves from the national power structure. 

Needless to say, the Mexican government and Mexican nationalists have not often looked kindly on these efforts, and efforts to breakaway from the federal government's control have been met with knee-jerk opposition to federalism efforts. As David Merchant and Paul Rich note, these fears of nationalists aren't totally unfounded:6  

Concern about disintegration is not totally farfetched. One of Mexico’s leading intellectuals, Carlos Fuentes, frankly concedes that “... the pro-Americans in Mexican society do not disguise their hope that Mexico can become a sort of undeclared fifty-first state of the Union.” Business leaders in northern Mexico frankly admit that when stressed out they have discussed breaking away from the rest of the country: “We’ve got to do something extreme, and it would be worthwhile to make a big effort to make (the state of) Nuevo León independent from the rest of the country,” Luis Enrique Grajeda Alvarado, head of the Nuevo León Employers Center, told a news conference. The government is “punishing productive states like Nuevo León . . . we have liquidity problems,” said Gerardo Gámez Valdez, director of the Monterrey branch of the National Chamber of Commerce. “The idea of breaking out of federal coordination is one of the ways out for us.”... “It’s not fair that the federal government takes away funds from Nuevo León to grant them to states like Chiapas,” Grajeda Alvarado said.

These comments out of Nuevo Leon, which the Los Angeles Times later described as part of a "separatist campaign," were motivated by a familiar gripe. Monterrey is a highly productive center for international business which produces a sizable amount of tax revenue for Mexico City. Chiapas, on the other hand, produces far less revenue, but benefits handsomely from the tax revenue produced by Monterrey workers. Thus, according to the Times: "leading business executives in Monterrey even threatened to launch a separatist campaign last fall after learning that federal tax outlays to their state, Nuevo Leon, had dropped."

Realizing they're producing sizable tax revenues for the federal government, while getting less back in return, who could blame the business leaders of Monterrey for thinking they might be more than capable of providing services like roads and government safety on their own without the need of "help" from Mexico City? 

Indeed, had they managed to pull away, they might have been spared many of the worst excesses of political corruption and organized crime that have spread even to Monterrey over the past two decades. 

Nevertheless, in spite of a lack of any de jure secession, some local communities continue to show a drive to creating institutions that are more responsive to taxpayers and residents, without the corruption and bureaucracy so endemic to the government institutions run from Mexico City. They've managed to do this in spite of a federal system and political apparatus designed to stifle and limit local action. It's clear that for many Mexicans, the desire for peace and reform is already there. It's too bad the federal government won't simply get out of the way. 

  • 1Juan Marcos Gutierrez Gonzalez, "United Mexican States" in Constitutional Origins, Structure and Change in Federal Countries, edited by John Kincaid and G. Alan Tarr. p 233.
  • 2Juan Marcos Gutierrez Gonzalez, "United Mexican States" in Constitutional Origins, Structure and Change in Federal Countries, edited by John Kincaid and G. Alan Tarr. p 215
  • 3When Mexican taxpayers pay their taxes to Mexico city, their communities do get much of the money back as federal transfers. The problem is that the money first goes through Mexico City — where Party officials and other federal agents take their cut — and then is paid out to states based on formulas decided by federal officials. 
  • 4For more details on revenue formulas, collections, and spending in relation to Mexican federalism, see Emily Edmonds Elías's 1997 paper "Fiscal Decentralization and Municipal Governance in Mexico The Case of Chihuahua." (http://citeseerx.ist.psu.edu/viewdoc/download?doi=
  • 5Campbell, The Quiet Revolution, p 124.
  • 6David Merchant and Paul Rich, "Prospects for Mexican Federalism: Roots of the Policy Issues" in The Policy Studies Journal, Vol. 31, No. 4, 2003.
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