Blog
Trouble to the South

A situation that gets a lot of comment is the emerging crisis in Mexico. When a huge trading partner is facing loss of control of large areas of its nation it signals bad news to come. The current government in Mexico is facing the convergence of several forces:
The powerful drug cartels have not only gained control of several provinces but face up readily to federal troops. They have equivalent if not better armament and intelligence sources.
The wage gap vs. the United States continues to drive illegal border crossings. Much of the revenue paid by Central and South Americans now flows directly to the drug cartels. It’s a multi-billion dollar business.
A precipitous drop in oil field productivity. The country has already become a net importer of oil. A key source of revenue and economic base is fading away.
The Calderon administration is wavering on the use of force to fight the cartels. The cartels get media coverage on their own terms at will. Public perception is the government is impotent.
Some of the impacts:
- Which party wins the next election? Will the US eventually be dealing with a cartel-controlled government?
- When will the violence spill over the border? Will we see massacres of undocumented immigrants on the US side of the line? The deaths of 72 migrants recently hardly raised a ripple in the US press but how much longer will that last?
- What is the long term effect on the Mexican economy? Will there be a leveling of income across the border or will the wage pressure continue to send a flood of immigrants north?
- What is the effect on drug legalization deliberations in both countries? Will marijuana be legalized in both countries? Who will control the production and distribution?
- When will the issue make its way into US politics and elections? Will a war being waged just south of the US border affect the next presidential election in 2012?
Eyjafjöll

This is a classic situation of ripple effects that I discuss in presentations and help clients prepare for in consulting engagements and strategy sessions. Let’s take a look at just a few of the potential consequences:
- No air travel in and out of one of the world’s most crucial centers of commerce. Potentially for not just days but possibly weeks or months.
- Right now the volcano is erupting through hundreds of feet of glacier ice. As that ice melts the eruption might be less explosive but it could also launch finer ash even higher into the stratosphere. The effects of the ash on air travel might extend worldwide.
- The effects on air travel are in the UK, Scandinavia, and major airports in Central Europe. There are closures and delays in Rome, Moscow, and Eastern Europe. The airports affected handle hundreds of millions of passengers and millions of tons of cargo yearly.
- If the delays continue for weeks it will take weeks to clear the backlogs and return to any normal operation. Some of the slack will come from positioning larger aircraft to the routes but this will affect other air travel.
- Some passengers will crowd onto rail and ferry transportation to get to Spain, Turkey, perhaps even Moscow to get to airports still open and operating.
- Many passengers are stranded on other continents, notably the US, and face tough choices for getting back to their homes. Ocean crossings by boat may come back into favor if this continues for weeks.
- Airlines, especially those in the EU market, have been financially stressed by the economy and fuel costs. Expect this event to take down up to a dozen carriers. Even the low cost carriers in the EU will see significant effects. Losses per airline run between 3 and 20 million dollars per day.
- There will be pressure to fly through the ash. Some governments and airlines will begin to weigh the risks and consequences.
- The behavior of the volcano is unpredictable. New fissures might open. It may subside unexpectedly.
- We’ll see another spike in usage of telecommunication alternatives to travel. Probably with long term future effect. Telepresence will get specific attention and fiber optic advantages will come even more to the fore.
- Disruptions to supply chains, lowering of petroleum demands, economic effects, scarcity of air-freighted luxury products, changes in air travel routes, long term climate changes, and many other after-effects will arise.