Mexico.

"Poor Mexico. So far from God. So Close to the United States." Goes an old saying.

Mexico has quietly & slowly transferred itself from what many would have at one point considered a developing nation to a country on the verge of becoming a failed narco-state. Its not only me that thinks this is a possibility. So does the Pentagon. http://www.theweek.com/article/index/92337/Mexicos_failed_state_threat.

I think this is something that must be on our radar as investors due to its proximity to us. There have been some key events that have happened south of the border in the past four years. The most obvious is the Calderon Government's war with the drug cartels that has been spilling over into the United States into places like Phoenix and Los Angeles. Today I've decided to link a few stories that I've recently seen. We'll probably be coming back to this topic in the future. By-the-way there is a Mexico ETF, symbol EWW {No positions}. As of this writing it is up about 36% for the year.

Links:

From The Nation which is a left leaning US magazine is an article outlining some of the basic issues Mexico faces. I'd skip the parts that seem to blame us for the country's problems though. http://www.thenation.com/doc/20090803/faux

New York Times Article detailing the decriminalization of certain levels of drugs within the country. This cannot be a good thing given what's going on especially along our border with them. http://www.nytimes.com/2009/08/21/world/americas/21mexico.html

From Blogger Gregor.US comes an article detailing what ought to be a rapid decline in oil production coming from one of Mexico's biggest oil fields. If true this is perhaps the issue with the most strategic importance to us. Mexico receives most of its hard currency from the following sources: Drugs, tourism, remittances from abroad, and oil. Of the four, one is an illegal activity, the next two are largely tied to the US economy and the fourth is declining. This cannot be good for their economy and raises the specter of millions more people attempting to cross our borders looking for work. http://gregor.us/mexico/clarion-call-from-cantarell/

As an aside I lived in Mexico for a year as an exchange student. I don't pretend to be an expert on the place but I have a little more experience down there than the average fellow I think. Also don't think that this is a problem that's far far away. Mexican street gangs work in almost every major city in the United States and have taken over much of the drug trade here in recent years. http://news.bbc.co.uk/2/hi/americas/7785334.stm.