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Mexico's rampant brain drain

Drug cartels are kidnapping and extorting wealthy Mexicans, forcing many families to flee north of the border. Contributor Todd Bensman talks to Passport about the elite heading north and the guns heading south.


Police arrest a man on suspicion of possessing and distributing drugs during an anti-narcotics operation in Mexico City. (Photo by Daniel Aguilar/Reuters)




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Below is a transcript of the Correspondent Call with Todd Bensman.


Passport: Good afternoon. Welcome everybody, I’m David Case, Editor of GlobalPost Passport in out Boston newsroom. It’s Thursday, October 1. Today we’re speaking with Todd Bensman about his recent reporting projects focusing on Mexico. Todd Bensman is a two-time winner of the prestigious National Press Club award and he’s been one of GlobalPost’s most prolific contributors, writing mainly about Mexico’s drug wars. In Passport last week, he broke news about how the Stanford financial group, allegedly the country’s second-largest Ponzi scheme, has decimated the savings of Jewish families and organizations in Mexico City and Caracas. This week, Passport published another Bensman investigation revealing how tens of thousands of wealthy Mexican executives and entrepreneurs are fleeing to the U.S. to escape drug war violence. Todd joins us today from San Antonio, Texas. Welcome Todd.


Todd Bensman: Hi, thanks for having me.


Passport: Before we begin, I have a few announcements. As usual, the call is being recorded and is on record. The format of the call: we will have a twenty-minute question and answer period that I will lead, feel free to interrupt that if you have a follow-up question or if you have a question or comment related to the topic that we’re discussing. At the end of the call, we will open the lines for ten minutes of member questions as well. If you do want to speak up, your lines are currently muted, you’ll need to press *6 so that we can hear you and when you’re finished speaking, you can press *6 to un-mute yourself. OK, we’re ready to go. Todd, briefly could you describe the situation in Mexico now regarding kidnapping and extortion?


Bensman: Well, of course the civil drug war that’s been going on in Mexico for the last three years has unleashed its own side eddies and currents that include organized extortion plots that target wealthy Mexicans and also a kidnapping business that before the drug war didn’t really exist to the degree that it does today, so if you’re rich, if you’re a business person, well-educated, you’re a target in Mexico now.


Passport: You’re essentially a potential treasure for gangsters.


Bensman: That’s right. In every major Mexican city, there’s wealthy Mexican entrepreneurs, heirs, and business moguls and what not that are being aggressively extorted and having members of their family kidnapped and that sort of thing, for ransom. And it’s really an explosion of this sort of thing. It’s really not a drug war, it’s sort of an offshoot of the drug war where these armed gangs set up, you know, in addition to protecting loads of drugs and their regular business enforcing territory, they’re going to this side business of kidnapping and extortion.


Passport: Hmm. So, as long as they’re well armed, they might as well diversify their revenue sources.


Bensman: Right. They have multiple income streams.


Passport: Right. So, we published your story this morning, it’s called “Mexico’s business class refugees,” and you mainly tell the story of two immigrants: Pierre Oliver Gama Valdes and his business partner, Manuel Octavio Espejo Pantoja, who made it rich providing private security in Mexico, ironically. So they kind of got rich off the drug war, providing a legal service surrounding the drug war, and now they’ve been terrorized into fleeing from Mexico themselves. Can you describe their story for our listeners?


Bensman: Right, well, these two guys are sort of the classic definition of entrepreneurs. Not a lot of formal education, but a ton of creativity and drive and they’ve managed to build up tremendous wealth for themselves in a number of different ventures in Mexico, in addition to the security business they offer, they also run a nationwide mail service delivery company that delivers credit cards and it’s a secure way for banks to deliver mail to customers because mail in the Mexican system isn’t very reliable.


Passport: So they’re competing with the police and the postal service, essentially.


Bensman: Yeah, kinda. And so, they’ve become tremendously wealthy, but in doing that, you know, they bought houses, and Gama Valdes liked fancy cars, sports cars, and all that put a target on them a few years ago and pretty soon they were being targeted for kidnapping. Gama Valdes was actually kidnapped twice. You know these were quote, “express kidnappings,” which means that someone picks you up at gunpoint and takes you to a bunch of ATMs and has you hit the limit and then they let you go. But things were getting even worse for the other ones, for his partner, Espejo Pantoja, who had young children and the kidnapping gang in Mexico City had threatened to take his youngest daughter unless he paid them 2 million pesos. And they left, at one point, a wreath on his door that is commonly put on gravesites with her name on it. That’s was sort of the straw that broke the camel’s back. After that, these two guys just took off and invested in a completely unrelated business in the U.S. that got them out. And that’s the other subject of the reporting is how these people are doing it, how they’re getting out.


Passport: And so you’re reporting, essentially, a significant exodus of Mexico’s ownership class. It’s highly educated elite and entrepreneurs. How are they able to immigrate legally when so many poor, so many millions of poor Mexicans, have to sneak over illegally and become subject to deportation and other problems?


Bensman: Right, the way they’re doing it is that the U.S. offers citizens of countries that are signatories to certain trade treaties. Mexico’s a signatory to all of them. And they offer visas, certain kinds of business visas that basically say that if you invest enough in a business on the U.S. side, you’ll get immediate residency that leads to citizenship relatively quickly. These are called E and L series visas. And that’s pretty much what these two guys did and I’m told that thousands of wealthy Mexicans have discovered these visas now and are on their way over, setting up businesses, restaurants, anything they can, whether or not they expect to turn a profit, they just want to get out with their families and that’s what’s happening.


Passport: So there’s a two-tiered system. It’s very difficult for poor Mexicans to immigrate to the U.S., legally at least, and it’s far easier if you have… what is the size of the investment that they need to make?


Bensman: Well, the regulations don’t specify. It just has to be substantial, which would be a ratio of your investment against your total wealth. So it has to be substantial for the individual visa holder. And all of that is sort of decided inside the embassies inside Mexico by sort of functionaries and bureaucrats, who get the paperwork, and typically, if everything checks out, they just stamp it and you’re in. So, really, you’ve got thousands of these Mexicans who seem to be coming over right now to places like San Antonio and LA and San Diego and these places.


Passport: Is anybody tracking this migration phenomenon?


Bensman: Well, not really. I had a hard time trying to quantify how many are coming over because San Antonio, being so close to the border, has always been a destination for wealthy Mexicans who’ve owned second houses. They like to come over and shop and it’s always been well known in this city that there’s been a large contingent of wealthy Mexican visitors. But all of that had changed now and they’ve coming over permanently and setting up shop by the thousands, so a lot of it’s anecdotal. There is some data that I found through to the end of fiscal year 2008, September, which shows that in the last few years, the number of E visas has doubled from about 7,000 to about 15,000. And the number of L visas has also risen significantly, I think from about 25,000 to about 33,000 in the past few years. And pretty much everyone I talk to, meaning professionals who are dealing with these people in real estate, law, all of the professional services that are required to set up a business are telling me that they’re pretty well inundated with these things, so 2009 is shaping up to be a real banner year for the E and L visas.


Passport: Interesting. You mention in the piece that American towns like San Antonio and Los Angeles despite the fact that many advocacy groups have been pushing in recent years to crack down on immigration from Mexico. Why are these cities welcoming?


Bensman: Well, because these are the good Mexicans, right? These people are very well-off, they are very well-educated, their children are driven to excel in schools, they open up bank accounts, they buy real estate, they use professional services, they open up businesses that employ people and so, at least for the city of San Antonio, there’s an aggressive push, actually, inside Mexico… and I’m sure it’s not just San Antonio. I would bet a number of cities are vying for this population right now. And I’m told, for example, that the city of San Antonio’s international office has set up shop in three different Mexican cities right now where they’re aggressively holding seminars and offering information about the city and why its such a great place to set up and they’re inundated. They’ve had a tremendous response because of the situation in Mexico, they tell me.


Passport: Do you have a sense at all, Todd, of what the effect is on the Mexican economy with all these elites, entrepreneurs, leaving the country?


Bensman: Nobody that I’ve found has… you know this phenomenon is so new that academia and the world of journalism and the rest haven’t really keyed in on this thing. It’s so new that no one’s really studied it. But really, what you have here, in my estimation, is a brain drain, a capital drain. This is something that no country wants to experience, and unfortunately for Mexico, they’re experiencing it. They’re having capital flight. Nobody wants capital flight; no body wants the best of the best of their population leaving for another country. I don’t think anybody’s quantified it yet, but somebody needs to. It’s a very, very interesting phenomenon and it’s going to continue to play out over the next several years, but again, it’s just too new to really have been studied adequately.


Passport: In your story you quote some Latino civic leaders who are comparing this migration to Cuba after the 1959 Castro revolution. For various reasons, Cuba has yet to recover from that drain and it’ll be interesting to see how this affects Mexico in the coming years.


Bensman: Well, that’s exactly right, but the city of Miami has done very well from having that population over the last few decades. And I think what we’re seeing here, I quote Henry Cisneros, the former secretary of HUD…


Passport: The Housing and Urban Development Department, right?


Bensman: …who is still quite a luminary here in San Antonia and he’s in the business of housing and he circulates in those circles, and he tells me there’s been nothing like this in San Antonio in eighty years. Not since the revolutionary fervor that hit Mexico in the 1920s. And you had a brain drain back then. He says that’s happening again now. And this isn’t someone who’s speaking impulsively. I think he’s seeing it and he’s experiencing it in his business and his side of the world.


Passport: Well, that could really put a dent then in the illegal business that’s still thriving in Mexico. Todd, you’ve also reported on the less-advantaged Mexicans who are also trying to flee the country, police officers, journalists, other people who have kind of found themselves in the crosshairs of the drug violence. What degree of success are those asylum seekers having?


Bensman: I do think that in the flight that’s going on form Mexico, you’ve got a pretty sharp class divide, what my reporting is showing is that there is a class divide. Those who have just simply get over the border, they buy their way over the border, no problem. Those who don’t have face limited options and one of those options is to apply for political asylum and go through this long, drawn out legal process whereby if you fear persecution for any of five reasons, our government provides safe havens and you can come over. Well, there’s been a lot of press over the last couple of years about the increasing numbers of police officers and other types of folks who are fleeing specific threats to their lives and are trying to get their families out. And what’s happening is that these political asylum petitions are failing because the political asylum law as it reads right now doesn’t squarely apply to their situation. American law looks at them as crime victims, so that doesn’t really quite qualify.


Passport: As opposed to being victims of an oppressive regime or something like that.


Bensman: Exactly. So their options are just to sneak over and hope no body catches them, but you know, if you get caught, then you get deported and if you get caught too many times, then you get permanently deported, you can never come in, so if you’re poor, that’s what you’re facing in trying to get out.


Passport: Let’s step back and look at the bigger picture, Todd. You talk about the up tick in violence, or at least some of your sources talk about it, as the result of Mexican President Felipe Calderon’s crackdown on drug syndicates and criminal gangs. Why has Calderon’s approach spiraled so out of control? And can you tell us a little bit about what’s the attitude of these exiled elites that you’ve spoken to? What do they think of Calderon?


Bensman: Well, there’s a lot of moving parts to that. The other factor is the U.S. crackdown. So if you factor in the U.S. crackdown with the Mexican government’s crackdown, it’s sort of set off rounds of fighting between the cartels over their routes. You know, one cartel gets their route cut off on the American side and they have to push over to the left or to the right into somebody else’s territory. So they’re fighting with each other over that and in the meantime, Mexican troops are being sent in, pressuring. And so it’s a pressure cooker over there; three-way, four-way battles between the cartels and then the government and the cartels, so it’s a mess. Most of the folks that I talk to are less politically aware or concerned, especially these wealthy Mexicans that are coming over here, seem to be less politically aware or concerned about what’s going on in terms of policy. But, I have had a couple of folks tell me, you know, if Calderon had not done that, they’d have been safer. And I think you’re seeing a return to local elections across Mexico with the PRI, which is the old, bad, seventy-year, corrupt regime that was always in bed with the drug dealers. I expect the PRI to make gains politically as this war goes on and the body count goes up.


Passport: So Calderon’s conservative law and order approach has really, completely backfired.


Bensman: Well, I think people are starting to wake up to the fact of ‘let the drug dealers do their trafficking so that we can be safe,’ because as long as they’re happy… what’s the old saying? When Mama’s not happy, ain’t nobody happy? So this is sort of like that. I’ve heard that sentiment expressed quite a bit.


Passport: It’ll be interesting to know what the impact has been on the supply of drugs on the streets in the US and elsewhere, but you don’t really report on that, do you Todd?


Bensman: No, not really.


Passport: You’ve done a lot of reporting on GlobalPost on gun running from U.S. gun stores to Mexican drug cartels. There’s been a lot of controversy over this with gun control groups saying that there’s scant evidence that U.S. guns are making their way into Mexico. Can you tell us what you know about that and how you know it?


Bensman: The second amendment rights people have been very aggressive to point out that only a tiny percentage of guns recovered in Mexico have been traced to U.S. gun stores. And they’re correct in that, they’re right in that, but what they’re missing is that huge numbers of other weapons have not been traced. And just about every expert, everybody in the government, and federal law enforcement that I’ve ever interviewed, and that’s a lot, tell me that once those things have been traced, the number will go up, the percentage will go up significantly. I do believe that field agents, people on the street, law enforcement on both sides are correct in saying that the vast majority of weapons that are being used by the drug gangs, the cartels, come from the U.S., come from U.S. stores. It’s going to bear out.


Passport: So this is kind of the case of not finding what you haven’t looked for and therefore saying it doesn’t exist.


Bensman: Yeah, I interviewed the head of ATF…


Passport: Alcohol Tobacco and Firearms department.


Bensman: … which is the lead agency on this situation. And what he said was, I think they’ve already hammered something out, was that the Mexicans were going to allow the ATF to go into the vaults, finally, and have full access to all of the recovered weapons so that they can all be traced and so that a much larger number than what was previously traced. I think pretty soon there’ll be some new data about where these weapons are coming from.


Passport: And President Obama and Janet Napolitano, the Secretary of Homeland Security, actually promised to make strides later this year in that direction.


Bensman: That’s right. They sent 100 ATF agents to the Texas border and they’ve been working gun smuggling cases for about three months. And I think in about a week, they’re going to finally release the results of all of that activity.


Passport: Let me invite anybody who wants to ask a question, now is a good time to jump in, we’ve got five or so minutes left. Or if nobody has a question, I can continue. Remember, you have to press *6 so that we can hear you.


Caller 1: This is Alex, I have a question.


Passport: Go ahead, Alex.


Caller 1: You’re talking a lot about how these wealthy Mexicans are being received with open arms in cities like San Antonio, but have you come across any racism at all in cities like Los Angeles where there is rampant racism against Mexicans with this new flood of immigrants?


Bensman: Not really. You know, to tell you the truth, I didn’t spend much time on the California side of this because I have enough of a human stream coming in to San Antonio, where I live. But, no, I haven’t really picked that up. I think what’s happening is that in San Antonio, they’ve formed these enclaves. For example there’s a region in north San Antonio that’s kind of a new, affluent, fast-growing part of the city called Stone Oak or Sonterra. And they call that Little Mexico because there are so many Mexicans moving in that they’re ubiquitous. I was at my gym this morning up here in Stone Oak and no body was speaking English in the locker room. Of course, this is a majority Hispanic city to start with. But I do think that they form these social enclaves of wealthy Mexicans and they’re probably relatively immune, or I don’t know immune, but certainly they’re not experiencing it like poor laborers.


Passport: Ok, any other questions? Let me turn our attention briefly to last week’s scoop, Todd. You’ve been very prolific for Passport these days. You wrote a story about the Stanford financial group’s Ponzi scheme. Can you describe for us briefly what you found in that story?


Bensman: Right, well, the main finding in the reporting was that this massive $8 million Ponzi scheme, which was based out of Texas, R. Allen Stanford started it. He’s basically from Waco and Houston. It seems to have decimated one particular community, the Jewish community, about 40,000 relatively affluent Jews that live in one particular area. And I found that quite an interesting phenomenon in that demographic to come out of this Ponzi scheme. What was particularly interesting is that it seemed to parallel what was happening in the Madoff Ponzi scheme, you know the largest one; $60 billion plus and counting, which also targeted Jews, mostly American Jews. But it had simply not been reported what happened in Mexico City and what’s still going on there, the devastation that this thing wrought. But, Madoff was Jewish, but Stanford was not and I think that we’re able to report that he’s Baptist. What happened was that he hired Jews from that community to head up his Mexico City operation and his Latin American operation and he was the one that was able to spread the Ponzi through that community through hiring other Jews as salesmen. So it was a very interesting demographic victim group to come out of that whole saga and I wrote about it.


Passport: And how did you come across this story? You mentioned that the story hadn’t been reported elsewhere, that people were kind of reluctant to talk about it because perhaps they were in a legal gray zone of expatriating as much money as they were.


Bensman: Well, the Jews in Mexico City were not eager to talk about this, for one thing. Because the Mexican government limits the amount of capital that any one family can expatriate, I guess, or move out of the country. And I guess a lot of them invested a lot more than that and I think they’re worried about legal repercussions, one, and two, I think they’re worried about attracting kidnappers. No one wants to say, ‘hey, I had all this money to invest.’ And you know, with kidnapping being the way it is in Mexico, they didn’t want to draw attention that way. How I found out about it is that two San Antonio law firms are handling the class action litigation and these are lawyers that I happen to know and they were just telling me one day about going down to Mexico to sign up clients and there were all these Hassidic Jews with all the accoutrements, yamacas and all the rest, and I think that was the story’s emergence, slowly through this litigation that’s coming.


Passport: Very good, Todd. I think we’re out of time now, but thanks a lot for all your great reporting for Passport and for joining us today on the call.


Bensman: Great, thanks for having me.


Passport: And thanks everybody who’s joined us, we’ll talk to you next week.