Extortion in Mexico: an obstacle to the country's economy and inflation.

The phenomenon of extortion in Mexico has become a significant obstacle for the country's economy, affecting not only those who are directly threatened, such as merchants and producers, but also the ability of the Bank of Mexico (Banxico) to control inflation. Although analysts emphasize the difficulty of quantifying the impact of these criminal practices on prices, anecdotal evidence, along with the experiences of those affected, suggests a cost transfer that further complicates the economic situation. Since Andrés Manuel López Obrador assumed the presidency in 2018, extortion figures have skyrocketed. In 2018, there were 6,895 reported cases, while in 2022 they reached a record high of 11,039. Although a slight decrease to 10,946 was reported in 2023, many experts believe these numbers do not reflect reality, as it is thought that many incidents go unreported. This growing trend has forced many businesses to raise their prices to cover the additional costs generated by the "protection payments." Leaders from various industries consulted by Reuters have pointed out that this situation has resulted in price increases of up to 20% for essential products like tortillas, a staple in the Mexican diet. Jonathan Heath, deputy governor of Banxico, admits that while there is no concrete data on the impact of insecurity on price formation, there is recognition that extortion is an increasing factor contributing to inflation. This phenomenon, which was previously considered temporary, is now classified as structural, indicating that its effects are deeply rooted in the national economy. Despite the slowdown in overall inflation, which stands at 5.16% year-on-year, it remains well above the 3% target pursued by Banxico. This translates into a complicated scenario for the central bank, which faces challenges that go beyond mere economics. Insecurity and, in particular, extortion present themselves as a structural factor that complicates its work, making it impossible to adjust inflation targets accurately. The National Association of Small Merchants (ANPEC) warns that the collection of fees has intensified for basic products, such as avocados and chicken, causing a domino effect on the prices paid by the final consumer. This effect not only impacts the companies directly involved but also reverberates through the consumer economy, which sees its purchasing power diminished due to rising prices. Meanwhile, economists are debating the real magnitude of the impact of extortion on inflation. Some argue that while they may distort prices, their effect is limited and may already be factored into costs. However, others warn that if the "fees" increase, this will inevitably reflect in final prices, further complicating the country’s economic recovery. The situation becomes even more alarming when considering that, according to the Employers' Confederation of the Mexican Republic (Coparmex), 65% of its affiliates have increased their security spending in response to growing pressure from organized crime. This includes installing surveillance cameras and hiring security, which represents an additional cost that could also be passed on to consumers. The elected president, Claudia Sheinbaum, has emphasized the importance of eradicating this phenomenon if sustainable development in the capital is to be achieved. However, the legacy left by López Obrador’s administration in the fight against extortion presents a considerable challenge for his successor. The situation of lime producers in Michoacán, who have faced increases in criminal fees, is just one example of the devastating effect extortion can have on agricultural production and the local economy. At the local level, the situation is so critical that armed forces have had to intervene in some areas to ensure the safety of merchants and allow businesses to operate. This intervention is a clear signal that the fight against crime must be intensified, not only to protect those targeted by extortion but also to ensure the economic stability of the country. Cases such as the temporary closure of Oxxo stores in Tamaulipas due to demands from organized crime reflect the hostile environment in which many businesses must operate. This reality has led entrepreneurs to express their fears and frustrations, denouncing that they live as hostages of criminal gangs that have normalized "protection payments." Extortion has become a phenomenon that, far from disappearing, has become part of the Mexican economic landscape, affecting everyone from producers to final consumers.