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Mexico economy plummets as counterfeiting soars: canary in the mineshaft?

In Mexico, the crime organizations which used be called drug cartels now make only an estimated half of their money from drugs, says an expert in that country.

The other half comes from time-testing mafia businesses like kidnapping, extortion, and increasingly, something more modern: counterfeiting.  This according to Edgardo Buscaglia, an expert on organized crime with Mexico's Autonomous Technological Institute. 

The crime families’ move into piracy and counterfeiting has become so widespread and apparently unstoppable, that cartel logos commonly appear on pirated movies and software: a "Z" or a bucking bronco for the Zetas, a monarch butterfly for La Familia Michoacana.  And with profit margins in counterfeits exceeding that of trade in cocaine, it’s no wonder.

The hit to Mexico’s economy has been vast, and one wonders if vulnerable Mexico is but a canary in the mineshaft, an indicator of what is to come for the rest of the world if the counterfeiting black market continues to explode.

The Mexican footwear industry, for example, which has already been decimated with the closing of 70% of its business, has to contend with over 200 million imported fake goods.  Nine out of ten movies sold in Mexico are pirated.    And the Mexican Institute of Industrial Propertyestimates that Mexico lost 480,000 jobs due to piracy and what it calls “falsification” in 2009, the latest year for which statistics are available.

There is a singular form of counterfeiting which has been vastly profitable to the cartels: counterfeiting of police uniforms.  Using fake uniforms, cartel gangs have perfected cargo hijacking to a science and extract millions of dollars in thievery of entire trucks.   Applied DNA Sciences, along with the Mexican uniform supplier Prestigio en Moda,  is working to authenticate and defend against copying police uniforms, as detailed in our feature.

The effect of counterfeiting and piracy at this scale coincides with a signficant drop in Mexico global competitiveness: Mexico dropped six places to No. 66 in the World Economic Forum's 2010-2011 report on global competitiveness, fall to a position below Panama, Costa Rica and Uruguay.

While many other factors may be influencing this hit to the Mexican economy it would be foolish to overlook the effect of counterfeiting, and the importance of anti-counterfeiting to Mexico and its neighbors.  The Mexican phemenon may be what the International Chamber of Commerce meant when it wrote earlier this year that the massive upsurge of world wide counterfeiting is “leading many to question whether the global economy can continue to absorb the massive losses that result from IP theft, counterfeiting and piracy.“

 

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