Dell Global Security Conference: Trends and Forecasts

November 11, 2011

• Mexico Situation Update– Status of the Drug Trafficking Organizations– Status of Border Areas, Mexico City and Guadalajara– 2012 Election

• South America– Argentina Political and Energy Developments– Brazil Political and Security Developments

• Middle East and North Africa – Update on the “Arab Spring” – Egypt, Tunisia and Morocco– Hezbollah and Hamas Status Update– Israel – Iran Dynamics

OVERVIEW

MEXICO: Trends in the Cartel Wars

• Current Status and Trends

- The Mexican government and several other cartel organizations are bearing down on the Zetas.

-Consolidation of Cartel Alliances

-Sinaloa Federation

-Zetas

-”Independent Operators”

-Cartels becoming known as “Transnational Criminal Organizations” (TCOs), in recognition of the further diversification of activities into kidnapping, human trafficking, extortion and other crimes.

MEXICO: AREAS OF CARTEL INFLUENCE

MEXICO: Status of the TCOs

• Zetas are suffering losses – several key commanders arrested or killed in recent months.

-Not necessarily a game changer – Zetas training is based on military principles and thus much more disciplined than other cartels, making them more resilient.

-Strongest new challenges are being seen in Veracruz and Monterrey.

• “OpCartel” by Anonymous appears to have fizzled.

-Despite the Anonymous retreat, there are still significant risks to independent sources of information and reporters, as seen by recent journalist deaths and “Laredo Girl”.

Zetas Tamulipas Commander Edgar Huerta Montial, arrested in June 2011.

MEXICO: Border Trends

• New deployments of small IEDs, hidden in vehicles in several border areas. These devices should not be confused with “Columbia-style” VBIEDs.

• Decrease in violence in most border areas, mostly due to the large deployments of Mexican military forces which has decreased cartel on cartel violence. This decrease will likely be short lived when military forces depart.

• Continuation of large-scale police infiltration and corruption by cartels.

MEXICO: Mexico City

Mexico City –

-No longer considered neutral – now a “disputed territory”

-Because Mexico City is not yet a center for drug trafficking activity – though it is a center for more localized drug distribution – it is not considered to be part of the larger cartel turf wars, though smaller distribution cartels are fighting for the territory.

-Recent incidents of note –

1. September 2011 – Two female journalists murdered, their bodies found dumped in a park.

2. October 2011 – Two severed heads were found outside the SEDENA military office.

-Criminal problems, including various forms of kidnapping, are still a larger concern than cartel activity.

MEXICO: Guadalajara

• Guadalajara –

-The same transportation infrastructure and location that makes Guadalajara good for business makes the city good for cartel business.

-Further fighting is expected as the city and region remain disputed by:

1. Cartel de Jalisco Nueva Generacion (CJNG), formerly led by Sinaloa faction leader “El Nacho Coronel, killed in 2010. (MataZetas, or Zeta killers)

2. Knights Templar, formerly known as La Familia Michoacana (LFM)

3. Cartel Pacifico Sur, led by Hector Beltran Leyva, and allied with Los Zetas.

4. La Resistencia, formerly known as the Milenio or Valencia Cartel

MEXICO: 2012 Presidential Election

• Election for President, Senate and the Chamber of Deputies to be held on Sunday, July 1, 2012

• Due to constitutional term limits, current President Felipe Calderon of the National Action Party (PAN) is not eligible to run.

• Neither PAN, nor the opposition Institutional Revolutionary Party (PRI) or Party of the Democratic Revolution (PRD) have announced their final candidates.

• Despite campaign rhetoric, an “accommodation” or other agreement with the drug cartels is unlikely in the next presidential term. Mexican government policy toward the cartels is likely to remain very similar to Calderon’s policies.

Mexico President Felipe Calderon, elected in 2006

MEXICO: Watch Items

• Status of the Los Zetas Organization– Can they maintain positions in Veracruz and Monterrey?

Continued violence expected– Will the loss of further commanders hinder their operations?

• Status of the Cartel de Jalisco Nueva Genracion (CJNG)

-There are indications the group may be moving from the “independent operator” column into alignment with Sinaloa. This could cause more serious escalations in Guadalajara.

SOUTH AMERICA

• Argentina- Political and Economic Stability- Energy Infrastructure

• Brazil– Political Stability and Corruption– Security Situation

ARGENTINA

-The Argentine government has continual problems with cash flow, following cash crises in the 1990s. The Fernandez government has implemented a number of money saving measures that are impacting businesses:

1. Import Restrictions

2. Decreased Energy Subsidies

3. Planned and Unplanned Power Outages

4. Delayed Infrastructure Improvements

-Most import restrictions are aimed at bringing production into Argentina. However, recent restrictions have also been tied to problems with the Argentine tax authority, the AFIP. While this isn’t typically extortion, there are reports of this sort of corrupt behavior tied to AFIP restrictions.

Argentine President Cristina Fernandez de Kirchner

ARGENTINA Energy and Economic Stability

-Political stability in Argentina is largely tied to economic stability. As such, government measures that remove public and social benefits – such as the coming removal of energy subsidies, due to begin on December 1 – are frequently met with large-scale protests.

-Power and Electricity problems are likely to increase in coming years as the government has decreased its spending on needed infrastructure maintenance and improvements. Additionally, planned “load shedding” power outages are becoming more common. Often, these outages are planned in advance, making it possible to learn of some outages ahead of a loss of power by using appropriate local connections.

BRAZIL

• Political Stability and Corruption- Six high-ranking government ministers have

been forced to resign from President Dilma Rousseff’s administration due to allegations of corruption. Some instability was expected, but Rousseff’s quick action has largely been praised and her popularity remains high.

- The corrupt ministers were identified by a variety of sources, including investigative journalism and federal police investigations. Possible advances in government transparency.

- At least one additional minister may be forced to resign.