Last week my nephew read Paper I of this series (The Hundred-Year Divergence), and it made him think of Why Nations Fail, by Daron Acemoglu and James A. Robinson. I had heard of the book but never read it. On his recommendation, and because these subjects fascinate me, I bought it, and I am well into it, so it will surely leave a mark on this series.
A few pages in, I ran into my past and my present: Ambos Nogales.
Two cities with the same name, the same desert, the same climate, and the same families. For generations we have lived as one community while two completely different systems of government and economy run underneath us.
All my life I saw the difference, and I could never understand how the most basic things could be so different on one side and the other.
On one side, decent streets, working traffic lights, clear signage, modern patrol cars, and a city built on purpose. On the other side, block after block, those same basic things were missing.
Nogales has a topography unlike any other city, because it is full of hills, which up to a point makes it similar to San Francisco (minus the sea and other things LOL): a beautiful city when you know how to use it, with a very good climate because it sits high above sea level.
The American side they used those hills and designed the city around its nature. In Nogales, Sonora, the hills filled up with informal settlements. You see poverty everywhere, there are not enough services, and there are no streets that connect the city well.
Everyone in Nogales lives boxed in by hills you cannot cross, by the railroad that split the city in two, by heavy traffic, and by the border with the United States.
What the book gave me was a name for a difference I have never accepted.
Nogales, Arizona, and Nogales, Sonora, live under different systems and rules, and over time, under different cultures of citizenship and work.
One side has institutions that function, credit that is accessible and competitive, the rule of law, contracts that hold, courts that help settle a dispute, and an authority that respects people and is respected in return.
The other side has the same talent, the same work ethic, and the same drive to want more out of life. But that effort runs into a system that is not built to get the most out of its citizens.
Over centuries, that shapes the person born in Nogales, Sonora. It is thanks to the investment of the maquiladoras that people there hold on to decent wages and real professional skills. Even so, the opportunities offered on one side do not compare with the other.
Same people. Same land. Different rules.
That human connection, running right next to a disconnection between institutions, is why I started writing. I have spent my life watching North America work as allies in trade and as very separate worlds in daily life.
A truck moves a product across the whole continent under customs and transport rules we already agreed on, while the people who built, sold, and moved that product live with very different access to safety, justice, education, and capital.
We trade in the trillions of dollars and still accept that distance between the very partners who trade. I refuse to accept it as the natural order of this continent.
Paper I asked how a region with so much talent, land, energy, culture, and potential fell so far behind. This paper takes on the harder question: why the rules stay in place even after their failure is obvious to everyone living under them.
Because they work for the people who control them.
The machine behind the speeches
In my decades running businesses, I have learned to inspect a failing operation from the bottleneck backward. If the cargo is not moving, blaming the driver or the truck solves nothing. You map where it stopped, identify the key people, understand the rules and the process, and check whether someone benefits from keeping the flow stuck.
In the end, when you find how to fix it, you usually also find who wanted it left that way.
Mexico is full of systems like that. They create huge inefficiencies, they cost opportunities, they do not serve the citizen, and they do benefit a few at everyone else’s expense.
Bad governance deserves the same discipline: find the root cause and fix it. No country in the Top 10 has a perfect system. Not the United States, not France, not Canada, not Australia, not South Korea, not Japan. All of them have spent decades or centuries improving. The difference is that their systems learned to detect the people who abuse the rules, to expel them, and to fix the rules so that abuse gets harder each time.
Two concrete examples:
South Korea has sent four former presidents to prison for corruption; two of them, Park Geun-hye and Lee Myung-bak, were sentenced in 2018 to 24 and 15 years (Korea Times).
The United States, after the Watergate scandal, forced President Nixon to resign in 1974 and passed the Ethics in Government Act of 1978, which requires senior officials to disclose their assets and created a permanent ethics office (Ethics in Government Act).
Neither system was perfect. In both, the system reacted and corrected itself.
Latin America’s failures look chaotic from a distance. Presidents fall. Constitutions get rewritten. Parties disappear. Generals become politicians, businessmen become reformers, and reformers end up owning the same system they promised to dismantle.
Under all that movement, the same chokepoints and the same underlying failures keep showing up:
The courts, because power needs protection from consequences.
The electoral bodies, because power needs to control how it can be removed.
The state companies and public contracts, because power needs money.
The media, because power needs people to see only part of the story.
The security forces, because power needs an answer when its support runs out.
A market not designed to incentivize innovation, efficiency, and quality.
A banking system with little or no competition that is highly involved in government lending.
A weak legal system that does not offer the entrepreneur the legal support they need.
A poor education system, because it is not a priority.
The remarkable thing is that most Latin American countries fail at several of these and still present themselves as democracies in the photograph.
The congresses meet. There are “elections.” There are parties representing the different factions. The judges wear robes. The newspapers keep printing. And the constitution is displayed on the walls of government buildings.
The institutions keep the title of democracy and capitalism, but the reality is different. A political and economic system that does not improve and does not compete to be better than others is a system taken over by the interests of a few.
That is the capture machine.
The ideology is only the paint. Revolutionaries use it and conservatives use it. Military governments use it and civilian ones use it. It works under nationalization or privatization, under socialism or crony capitalism, and under every mix our region has invented.
The machine does not care what song is playing. It only needs access to the controls that keep it in power.
The referees go first
Mexico saw the machine defend itself on the night of July 6, 1988.
That night the vote count went dark. The phrase that stayed in our memory was “se cayó el sistema,” the system crashed. When it came back, Carlos Salinas de Gortari was on his way to the presidency and Cuauhtémoc Cárdenas was not. The ballots that could have cleared it up were destroyed later.
For years we understood it by instinct. Now there are studies: researchers reviewed more than 53,000 polling-station tallies and found alterations consistent with fraud in at least 30 percent, about 16,000 of them. The alterations were more common where the opposition had no representatives present and where PRI governors had the organization and the motive to inflate the result (American Political Science Review).
It was a political organization using the state, with precision, to protect itself.
The PRI understood something every successful capture understands: the referee matters more than the campaign.
A government that controls the count can put up with an opposition, because people eventually get tired of protesting.
A government that controls the court can afford a constitution that says one thing while it does another.
A government that controls the prosecutor can pass an anti-corruption law knowing no one on its team will see a jail cell.
Or at least that is how it has worked until today.
Venezuela followed the same logic with different words. After the 2002–03 oil strike, the government fired around 18,000 PDVSA employees and replaced them with loyal people, not experienced ones, at the company that funded the state. In 2004, the National Assembly expanded the Supreme Court from 20 to 32 justices, filled the new seats, and increased its power to remove judges (Human Rights Watch).
First they captured the money. Then came the legal brake.
Bolivia used a procedure with a more legal appearance. In 2016, voters rejected a referendum that would have let Evo Morales run for another term. In 2017, the Constitutional Tribunal decided that limit did not apply and let him run anyway. In other words, the result of a direct vote was reversed by the same court that was supposed to protect the constitution. Later, the Inter-American human rights system ruled that indefinite presidential reelection is not a human right (Organization of American States).
This kind of capture is the hardest to see, because it follows all the normal legal steps. The court issues a ruling. The electoral authority announces a result. From the outside everything looks in order, but the decision no longer reflects what people voted.
Every side has used it
This argument will make both sides uncomfortable, and that is fine.
Both the left and the right have run the same machine. Neither has a clean conscience. The problem is that each side sees the other’s abuses clearly and treats its own as minor mistakes.
Pinochet’s Chile showed that a government can preach the free market while handing public wealth to its friends. SQM, which belonged to the state, ended up controlled by Julio Ponce Lerou, Pinochet’s former son-in-law, through deals that became the symbol of privatization with a name already on it (Americas Quarterly). The owner changed, but the same insiders kept benefiting from the state.
Fujimori and Montesinos in Peru left the clearest proof, because Montesinos filmed what he did. The videos show cash handed to politicians, judges, and media owners. What he paid the most for, by far, was television: he gave a channel owner about a hundred times what he gave a judge or a politician, because controlling what people saw mattered more to him than controlling a courtroom. Inside the army he used promotions the same way. Buying one institution did not last; buying all of them at once, the court, the congress, television, and the armed forces, is what secured his control (Journal of Economic Perspectives, via Stanford).
Odebrecht turned this into an industry. The Brazilian construction company set up an internal office, the Division of Structured Operations, dedicated to running shell companies, offshore accounts, and payment schedules for bribes. It admitted paying about $788 million to officials, middlemen, and parties across three continents. Odebrecht and Braskem accepted at least $3.5 billion in penalties (U.S. Department of Justice). The scheme crossed parties and borders because a public contract gets signed the same way, whatever the ideology of the person signing.
This is where our conversation as a region almost always fails. We look for the villain who confirms what we already thought. We defend the politician who talks like us. We forgive the shortcut because, according to our side, it leads somewhere good. And meanwhile, the machine keeps working.
We never turn to look at the failed system; we try to point fingers at people, and that is the serious mistake.
Networks that don’t Work
There are real political networks in Latin America. The Foro de São Paulo grew out of a 1990 meeting convened by Brazil’s Workers’ Party and Fidel Castro, with forty-eight parties and organizations. Its meetings and declarations are public (Foro de São Paulo). The Grupo de Puebla, founded in 2019, brings together former presidents, former ministers, and political leaders, and has a legal arm, CLAJUD, that defends left-leaning leaders against what it calls lawfare (Grupo de Puebla).
These networks share ideas, contacts, and mutual defense among allies. That is documented. What is not documented is a single center giving orders to every government and controlling all the money in the region. I say both parts on purpose, because the moment you claim more than you can prove, you stop doing analysis and start doing propaganda.
The right has its networks too: business chambers, military relationships, family capital, media alliances, and international partners. Some defended democracy and open competition. Others defended privilege and authoritarian allies.
The rule has to be the same for everyone: follow the relationship, follow the money, point to the specific decision, and stop where the proof runs out.
The machine does not need a secret headquarters. It repeats on its own because the same incentives exist in every capital. A court gets pressured. A regulator gets weakened. A state company hides transfers. Official advertising rewards good behavior. A police commander gets promoted for loyalty. The blueprint travels from one country to another because it works.
What survives
Latin America has had good reformers and serious institutions. Many reforms died because they were built to win a case, not to survive the retaliation that came after. Others survived. The difference between the two is the whole point of this paper.
CICIG in Guatemala was one of the region’s best attempts. It came out of an agreement between Guatemala and the UN and worked alongside local prosecutors against criminal networks inside the state. By 2019 it had contributed to more than 660 prosecutions and 400 convictions, and it helped force President Otto Pérez Molina to resign in 2015 over the La Línea customs-corruption case (UN News). But when the investigations reached the next president’s circle, his government did not renew the mandate, and CICIG ended in 2019 (Human Rights Watch).
CICIG won a lot of cases, but it depended on a single political decision to stay alive. That is the difference between a good hit and an institution that lasts.
Central banks are the best example of what does last. Chile made its central bank independent in 1989, Colombia in 1992, Mexico in 1993, and Peru the same year. Other things helped, but eight decades of evidence show a clear relationship: the more independent the central bank, the lower the inflation (International Monetary Fund).
That reform survived because it grew roots. It created professionals, careers, reputations, and a public that remembers what inflation destroys. Attacking the central bank became more expensive than changing a law or firing an official.
Uruguay teaches something similar, and it is one of my favorite examples. Its parties, in real competition, moved little by little from favoring a few to serving everyone, because a rival could expose any exclusion and take their votes. Fair competition ended up producing better results for everyone. It is the same logic as a well-regulated free market, applied to politics.
Costa Rica made a firm decision in 1948: it abolished its army and closed off a traditional road to power. Not every decision fits every country, but it was a clear bet that could then be adjusted over time.
Chile added another layer in 2001 with a fiscal rule that forced the government to save the copper boom instead of spending it, which financed the region’s best response to the 2009 crisis.
Brazil built PIX, a public instant-payment system now used by 93 percent of adults, with about eight billion transactions a month, all traceable.
Colombia shows it in real time: its court, created in 1991, has spent two years blocking emergency decrees from the current government, one of them struck down six votes to two. That court does not answer to the president it is now restraining, because he did not build it.
Chile, Uruguay, Costa Rica, and Colombia built rules that outlived the people who created them.
Colombia is the clearest case: the court was ready a generation before the government now facing it existed.
Design for the worst leader
We spend too much time asking for honest presidents, brave judges, responsible businesspeople, ethical journalists, and patriotic soldiers. I wish we had them all. But a country that needs everyone to be good at the same time in order to work has already failed at its design.
The test of a good institution is simple: it has to hold up even if the worst possible person takes charge of it. If it cannot, it is badly built.
A country belongs to its citizens, and the government owes them accounts and results. From there come a few common-sense rules. No one should be able to replace all the judges and referees in a single election. The state’s accounts, its contracts, and its conflicts of interest should be public and easy to check. A promotion in the police or the army should follow professional rules that do not change every administration. And public money should leave a trail that does not disappear when a new government arrives.
An idea I took from Miguel Treviño, former mayor of San Pedro Garza García, Nuevo León, in his documentary Construyendo el Norte:
“Mexico’s problem is clear…The most talented young people, the ones with the most potential, do not see public service as a path to build a professional life. If we do not bring those young people into the rooms where decisions are made, where the public money is, where the authority is, where the microphone and the narrative are, where most of this country’s direction gets decided, then this country has NO future.
But if we do bring them in, that is where the talent is, and that is where our country can take off.”
That short video left a strong message with me, and what Miguel says about the best young people and public service makes complete sense to me. I believe innovation is the road to progress. If young people do not take part in our institutions, in continuous improvement, and in the innovation of our systems, we are not going to see a different Mexico.
The basic idea is to make capturing power expensive, visible, and reversible.
That work has none of the excitement of a campaign, and that is good. Political drama always pushes us to look for a savior or an enemy. Fixing institutions does the opposite: it spreads power out and gives more people the ability to say “no.”
That is why it also needs people outside government to protect it. The lawyer who defends an independent court even when the ruling hurts his party. The businessperson who defends fair competition even when privilege would pay better. The journalist who scrutinizes even the side he prefers. And the citizen who cares about the referee before the bad call lands on him.
We now have something earlier generations did not: the technology to reach agreement among millions of us. Most people live confused between what their politicians tell them and what they actually need.
A successful country is one that seeks the best for its citizens and lifts them up with strong institutions, both political and economic, understanding that we compete with the world and do not live in a bubble.
We have spent too long waiting for a leader to save institutions that we citizens never defended.
North America needs its North Star
This is where the argument comes home.
North America has already integrated factories, farms, railroads, energy, data, families, and supply chains. Mexico, the United States, and Canada can build one product among the three of them. We have proven that cooperation creates value at continental scale. What we have not accepted is the institutional responsibility that comes with it.
A trade agreement defines where a product comes from, how much tariff it pays, and how a dispute is settled. But a trade agreement does not, on its own, give a student a good school, a small business affordable credit, a family security, or an investor the certainty that the referee will still be there when the score changes.
Canada is the proof that it can be done. It is a mid-sized country next to the largest economy in the world, and it built courts, clean elections, and a professional civil service. It has its failures and its corruption, like everyone, but its system has more locks to stop and correct an abuse.
Mexico has built locks like that too. The autonomous Bank of Mexico closed the era when a politician could turn spending into inflation overnight. The electoral reforms of the 1990s took federal elections out of the government’s control, and that is why the PRI’s defeat in 2000 was possible. We Mexicans built those institutions after living through what came before. Today some of those gains are under pressure, and that should worry all of us on the continent, because we share the consequences.
A first-world production platform does not hold up on weak institutions that are easy to capture. Nearshoring needs real integration. The fact that companies from around the world are betting on Mexico shows they see us as a country that wants to modernize and strengthen its institutions.
When the United States and Canada signed a treaty with us, it gave the world a green light to trust Mexico. But we cannot rest on our laurels, because sooner or later the curtain falls.
Mexico is the greatest still-unfinished opportunity on this continent. The Mexican who escaped the system proves it with remittances and with the impact he creates, above all in the United States. And the Mexican still inside a machine that does not give him what he needs to produce, prosper, and build wealth is the country’s greatest asset.
I know this because I come from Ambos Nogales.
The line between the two cities does not separate two kinds of people. It separates two systems. One gives more people a fair chance to build, recover, compete, and stay. The other still lets too much talent pay extra in insecurity, in discretion, in impunity, and in privilege.
We, the citizens, need show the way for North America. Government will be part of the work, but the responsibility is not handed off to the next election. The rules belong to everyone who lives under them.
The region does not lack good people. It lacks institutions that can withstand the bad ones.
Next: Paper III, The Mexican Exit / La Salida Mexicana.
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Sources: American Political Science Review (Cantú, 2019); Korea Times; Ethics in Government Act (U.S., 1978); Human Rights Watch; Organization of American States; Americas Quarterly; McMillan & Zoido, Journal of Economic Perspectives (2004); U.S. Department of Justice; Foro de São Paulo; Grupo de Puebla / CLAJUD; United Nations; International Monetary Fund working paper (2022); “Construyendo el Norte” documentary (Miguel Treviño); series verification register v0.2 (2026-07-16) for the Uruguay, Costa Rica, Chile, Brazil, and Colombia additions.