Reporting on the Mexican Cartel Drug War

Why did Mexican organized crime grow so out of control?

Saturday, March 5, 2011 |

A look at the market conditions that have allowed the cartels and drug trade to thrive

By Alberto Islas

Conventional wisdom states that Mexican organized crime is fighting the government of President Felipe Calderón because he has confronted corruption and ended a long-time pact between the former PRI governments and cartel members. This explains the escalation of violence and the shift of crime gangs to other lines of business such as human trafficking, counterfeit goods and selling drugs in the local market.

However, this is false. The above explanation does not address why in the last 10 years—under PAN administrations—Mexican cartels have become the No. 1 suppliers of meth to the U.S. market; the price setters in the cocaine market; the No. 2 producer of heroin; netted profits over $75 billion in counterfeit goods and piracy, or why cartels run regular operations in Italy, Africa and Argentina.

Mexican organized crime organizations have gained extraordinary power in the past 10 years, due to shifts in the drug market and their ability to use Mexico’s logistical infrastructure at a very low risk due to the lack of a national security and crime policy. These elements have provided a fertile ground for corruption in law enforcement agencies and society. Today we have a highway of illegality in the country, where any black market product can be traded by organized crime with the support of top-notch logistic experts in the cartels who can outperform the chief of operations of DHL or Federal Express.

[MARKET SHIFTS IN COCAINE]

Plan Colombia was very effective in undermining the Colombian drug cartels. The increased interception of cocaine shipments in the Caribbean, combined with a decline in consumption, reduced their ability to determine the price of cocaine. Mexican cartels would only pay as much as $8,000 per kilo upon delivery, down from the $17,000 the Colombians would receive by selling it on the streets of Miami themselves. The dependence on Mexican cartels grew. In 1999, under the PRI, 54 percent of cocaine consumed in the U.S. passed through Mexico. Today, under President Felipe Calderón that number is 90 percent.

Under Plan Colombia, customs developed a modern IT platform that enabled them to exchange information with other countries in order to detect chemical precursors for the transformation of coca leaves to cocaine. This strategy reduced the output of cocaine and disrupted the manufacturing process. The same strategy and the lack of trade agreements with other countries stopped Colombian cartels from being a player in the meth market—the new drug that seized the U.S. and Europe.

On the other hand, the lack of control and corruption in Mexican customs facilitate the transport of pseudoephedrine (a nasal decongestant used to make meth) to the country. Mega labs are set up in Mexico in areas controlled by the Sinaloa Federation—Zapopan and Tijuana – where 50 percent of meth sent to the U.S. is produced. Based on the consumption patterns in the U.S. and output estimates, it is calculated that revenues from meth ($6 billion) double the net sales of cocaine ($3 billion).

After 9/11, poppy production was destroyed in Afghanistan, and the consumers needed to find a supplier. Mexico, a long-time producer of low quality poppies, increased the production from 6.6 tons in 2002 to 18 tons in 2007. Mexican black tar, as it is called, is of lower quality, but the gap in the market enabled Mexican cartels to gains market share on the east coast and central U.S. Asian gangs who controlled heroin distribution lost turf to “La M” (Mexican crime organization), which became a one-stop shop for drug buyers.

Due to acquired volume and the control of the retail chain in the U.S. market, Mexican cartels gained a strong leverage in setting the price when purchasing cocaine and ephedrine. In the case of cocaine, the fragmentation of Colombian cartels and the increased seizures by the Colombian Navy and U.S. Coast Guard reduced their ability to provide large volumes to their clients. As a result Mexican crime organizations paid a fixed price upon delivery to Mexico, giving them control over their Colombian counterparts and reducing their risk. In the case of ephedrine, Mexicans have taken advantage of the lack of control in Customs, the ease to set up meth labs, and the reach of the distribution network with the Mexican gangs, to increase their bargaining position due to the large amounts they produce.

As a result of global market conditions, a superb logistical base without government supervision and a 10-year lack of investment in security under the PAN administration, the Mexican cartels have been empowered. That’s why, however much success governments have in killing drug lords, while the current market conditions prevail criminal gangs will continue to be able to challenge the state.



Alberto Islas is a graduate of MIT and CEO of Ridsk Evaluation, a crisis management and risk assessment firm in Mexico City.

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27 Borderland Beat Comments:

Anonymous said...

This guy had me going until he said "Plan Colombia was very effective" Where the hell is he getting his information? Plan Colombia has been an EPIC FAIL!!! Not only did it not reduce violence in Colombia but Colombia is still the number one producer of cocaine. Colombia has a higher crime rate then Mexico even tho Mexico is in the middle of an all out war against the cartels. How does he explain that? Oh yeah "Plan Colombia was very effective" hahaha

porno said...

everything except "plan colombia was a success" makes sense. in other news is macho p. still active in sonora?

Sahid Marquez said...

9:23 PM

Plan Colombia was very effective on disrupting the cocaine manufacturing in Colombia but it did not stop drug trafficking. Colombia right now is in a middle of a warzone/civil war, between the government and the guerrillas and illegal paramilitaries. There are no criminal organizations in Colombia that could challenge the Colombian government like it used to have. Mexico doesn't have paramilitaries or guerrillas that can challenge the government like Colombia has plus Mexico is NOT a poor country like Colombia. Colombia is more comparable to Central American countries than Mexico.

Also Erny1 I will stop posting as EarniesWorld and I will delete my google account and start posting as Sahid Marquez. You can go back to Erny1, sorry if I confused people here.

UNCLE SAM said...

ATTEN:
JUAQUIN GUZMAN
WE'RE COMING TO GET YOU BOY!! YOU FUCKING PUNK!!

Anonymous said...

@March 5, 2011 10:12 PM

"Plan Colombia was very effective on disrupting the cocaine manufacturing in Colombia but it did not stop drug trafficking. "

No Plan Colombia was an EPIC FAIL all it did was transfer the power from Pablo Escobar to the FARC thats all it did. It did not disrupt anything, if anything they just found more better ways to get cocaine out of the country. For example using submarines.

"There are no criminal organizations in Colombia that could challenge the Colombian government like it used to have"

True but they still have criminal organizations in the country still active, not as violent but still active. With that said, Colombia still has an higher criminal rate then Mexico, and im not talking about paramilitaries and guerrillas, just crime from criminals, How in the world can someone explain me that, when Mexico register close to 34,000 thousand deaths these past four years and yet your trying to still tell me that Plan Colombia was a success??

hasta la madre said...

One of the best articles I've read on the current state of drug trafficking. To think that the current levels of violence are owed simple to Calderon v. Cartels, is missing the big picture. Who is this Alberto Islas?

Anonymous said...

Article is somewhat misleading. Taleban effectively stopped poppy growth in Afghanistan by banning it but production since the invasion has exploded.

Anonymous said...

That's a lot of cocaine being consumed. I find it hard to believe that it is only being consumed in the ghetto. "Cocaine. America's real cup of coffee?"
Also... Isn't most of the glitz and glamour in Miami built thanks to the noses of the cocaine consumer.

Anonymous said...

Prohibition does not work. Never will.

''lito'brito said...

who promotes drug use through their mass media?.. .

the same people who promote wars all over the planet...the same people who make endless war movies ...who promote degenerative morals with their propaganda tool MTV..the same who ruin economies by easy credit...the same who loan money to wage war , and then loan money to rebuild....the same people who have always dealt in slavery and prostitution...these are the people who promoted the invasion of Afghanistan, to restore poppy production..

the same people who are moving into Mexico right now positioning themselves up to reap the profit from the induction of Mexico into the perpetual debt/national debt system..

look for them behind the throne , behind the jackboot and the club..those who know them know not to say the name ..those who don't blame their puppets and red herrings for the problem...you will labor your whole life to pay rent , buy food, buy water , pay for the toys you have been conned into thinking are necessary ..your sons will be soldiers in their armys ...your daughters will be soft prostitutes for their entertainment ..
.
the war is not a war on terror ..it is a war on the family ..it is a war on those who are reluctant to accept their system of debt, credit , and inflation

they create the terror ..to induce populations to accept them as masters...peace at any price is the cry these lords of usury want to hear...shop 'till you drop is their anthem

read and study...ignore political correctness..free your mind

Petey said...

actually, the author says absolutely nothing to contradict his thesis that the lack of a PRI-cartel pact has contributed to increased cartel activity. in fact he as much proves it by showing how with the govts resources fragmented in combating all cartels instead of regulating some & suppressing others its created an unregulated marketplace where the cartels have benefited in an entrepeneurial sense and achieved remarkable growth and profit. Very, very similar to the US financial industry after deregulation! see? unfettered capitalism works

Sahid Marquez said...

@1:06

"Plan Colombia" did NOT transfer the power to the FARC, the FARC only produce cocaine they don't traffic it or distribute it whole sale like the Medellin Cartel did. It gave traction to the Mexican Cartels for cocaine trafficking and wholesale distribution more than anything. Like I said Colombia is more comparable to Central American countries or Somalia since it's been at civil war for 40 year now. Mexico has a lot more murder than Colombia or El Salvador but Colombia and El Salvador has more murder per capita. Like I said Colombia is more comparable to Somalia because both are considered legitimate warzones.

Buela said...

"Prohibition does not work. Never will"

Please back this statement with fact.

The country with the lowest drug use in the world, almost nil, is ??? answer Singapore
0.01..

drug crimes have harsh penalty life to death. The first trip I made to the country I was taken aback by the stiff warnings of what not to do while I was still in the air. But I have to give props this is the safest country in the world, and the most organized. You don't see the litter and garbage in the streets its even a crime to own or sell gum. I felt safe walking across the park at midnight alone. the short cut to my hotel.

then you have the drug experiments of places like Sweden where drug use it on the rise every year.

as for why Mx MDC and Org Crime got so out of control?

answer; corruption in the gov and political system it all goes back to this.

Sahid Marquez said...

@Buela so basically you want Mexico to become a communist country or dictatorship-like country?

Prohibition does not work and never will in a democracy, learn from history. The only reason why marijuana isn't legalized is because the private prison/jail industry is very profitable but more than anything the pharmaceutical industry will lose 10s of billions of dollars every year, it's all about money in the end. Drug trafficking will never stop as long as people have no opportunities for education or employment. The reason why organized crime is so out of control in Mexico is because the leadership of the criminal groups are being targeted/challenged by the government and rival groups fight each other because of the power vacuum a boss leaves behind when he is captured or killed.

Anonymous said...

@March 6, 2011 1:22 AM

Right, exactly what I was thinking. I've heard exactly the opposite of what this guy claims. Sounds like another worthless propaganda piece from some rich brat whose poppy (nice pun, eh) paid a fat endowment to buy his dopey kid a seat at MIT's rich idiot school (which finances the smart kids).

If the US government ever wanted to end the drug trade, it would have been done years ago. If they could take out Hitler and Hirohito in less than 4 years, saying they can't catch the Zetas is nothing but a bad joke. Drugs dealers and politicians are best buddies.

Ardent said...

Buela, Singapore is not the best example to be using at all for your argument in favor of more Prohibition type thinking. It is only a city state at best and not a typical country at all, so it is simply wrong to overgeneralize about anything worldwide coming about from Singapore's unusual situation.

The record is that the prohibition mentality against prostitution and drugs has produced catastrophe world wide. It has spread crime and disease rather than stopping it.

Buela said...

I took figures from UN Drug world report 2008-2009-2010 on durgs use and org crime, also DEA
European Drug report 2009-2010, DOJ....

I went for the lowest user rate and found singapore. Since I have been in Singapore many times and lived in Malaysia I feel I can speak about the country

as for do I want mx to be communist...are you high? what the hell is worng with you? you and ernie are the most blind-deaf people on this blog. I was speaking only to one issue...prohibition. I did not go further because of this forum be limited in space. But I have other figures that were stunning. Mx drug use is increasing rapidly, use use in MJ is major if that was legal the majority of drug issues would vanish. but I think that is a suject for another day.

Don't pick apart or attempt to defer from my point. it was a simple statement, factual and truthful.

take it or leave I really do not care, you obviously favor legalizing all drugs. That is stupid if not ignorant. I favor MJ legalization only. and if you think Mx people have great freedoms, fair justice system, parity in education, employment, medical care...then perhaps they do live in a system that needs no change, can you honestly call "this" democracy? a system constructed to keep 50-60% of its people undereducated and poor? really? The corruption in gov and political structure that allowed org crime to be out of control?

but lets listen to the words of Cabron oh excuse me Calderon mexico's fearless leader...

"You cannot build democracy without people who have democratic values," Calderon said. These are people who don't advocate, among other things, discrimination or segregation. "Tolerance is a learning process for everyone."

I AM GOING TO GO NOW AND THROW UP

ajulio said...

@ buelita

You got a point. If Singapore has a good record, its because they are doing something right. Even though, I am against Singapore's strict policies, I would choose to live and would feel much safer in Singapore than Mexico ANYDAY.

Singapore's government has BALLS!

Mexico's government is weak.

So weak that it is impossible to change. Corruption runs too deep within the core of Mexico's government. Mexico is a hopeless case.

I hate saying this...but if Mexico had an Asian or European leader instead of a Mexican leader, Mexico would probably be a better country...if you exclude Peru's president Fujimori.

Sahid Marquez said...

@Buela

You know why drug use in Mexico is rising? The reason the organized crime groups in Mexico have started branching out to other types of activities like extortion or local drug retail sale is because they to fund their war and make up for the 10s millions of dollars possibly couple billion they have lost from drug seizures/drug war. They also need recruits to sell their drugs so they hire lowlifes or gangs to do their work for them, they also get their disposable gunmen or "halcones" etc. from that same pool of people. People will get high illegally or not, just look at Portugal. They decriminalized marijuana use and their marijuana use per capita actually lowered from just decriminalizing it. I personally think marijuana should be legalized and want hard drugs like meth, heroin or cocaine decriminalized. Like I prohibition is the reason there is so much violence in Latin America and even on U.S streets, not only that but ruins people's life by locking them up and giving them a bad record. If you get caught in the U.S with cocaine or heroin your life is basically ruined for ever since you can't expunge felonies.

Buela said...

sahid;

of course I know, I have posted this is the way halcones are paid on the cheap at least a half dozen times on this blog. Tell me something I do not know. I simply made a statment of fact, this is not the forum to elaborate. I just finished 300 pages on the subject and I feel defeated in spirit.

mine was not to argue or speculate the "why" . I was simply saying Calderon points north for all Mexico's problems, and for sure we have screwed up in many ways, and in some ways that benefit Mexico such as reprimanding Mexico for their human rights abuses and threatening to withhold funds until rectified, such as Military abuses tried in civil federal court NOT military court. so what did Obama do? sent the miltary equipment anyway without calderon constituting change.

But Calderon need not look any further than the corrupt insitution of government, political system, municipalities and state government AND police and military forces to point the finger of blame. with that how can things improve.

Again...my point in stating the increases was to state just that. You need to study the facts more. Honestly I think you are very articulate and intelligent.

Such as your op that Singapore is communist. That is so absurd. SIngapore is not a pure
democracy, but more of a democracy with a caveat. Have you been to Singapore? I have many times as I lived in Malaysia (KL) until 911 and we sold our home and offices. It is a beautiful well organized highly successful in business and complete transparency. Yes for all intents it is much like Mx was in the way of one party control plus a few stragglers. The freedoms are much as any democracy, speech, media etc with a nasty caveat "prohibited if potential harm can arise to Singapore" but really there is not a problem with that. In fact they have no internet filters allowing the public to access worldwide press. Unlike the US which has media outlets disbanding global reporting altogether or greatly. Boston Globe is one that comes to mind.
Yes they have death sentences for 20 drug related crimes and have no tolerance for drugs. Say what you will but they have the lowest rate of use in the world. I am just offering a different view that PROHIBITION DOES NOT WORK...uh... it does in Singapore.

Anonymous said...

"Buela said...
The country with the lowest drug use in the world, almost nil, is ??? answer Singapore...0.01.."

ALMOST nil is the key. Prohibition still failed as there is .01% drug use.
BTW, those figures could be misleading as they do not factor in prescription drug abuse.

Ardent said...

Buela, we have to take all that you say about yourself with a big grain of salt because none of it ever adds up just right... It never does.

'I went for the lowest user rate and found singapore. Since I have been in Singapore many times and lived in Malaysia I feel I can speak about the country ...as for do I want mx to be communist...are you high? what the hell is worng with you? you and ernie are the most blind-deaf people on this blog.'

That's a quite beautiful story! Where except on BB do we find people like yourself, Buela, who claim to be little old Hispanic women running charity organizations in NE Mexico who have also had supposedly the history of living in Malaysia?

...lol... You are a real trip, Buela. What a Frankenstein-like personality you have pasted to together for yourself as your online personae! A brain from here, a heart from over there, and a head twisted on backwards!

ajulio said...

@ sahid marquez

if i were to disagree with you on this one, i would only be contradicting myself. i agree, prohibition does'nt work and i agree in legalization. the legalization of drugs would'nt create a perfect world but at least it would take the value off of the drugs. and that would be a cartel's nightmare.

but mexico could learn a few things from singapore. if anything, mexico should definitely create a stronger judicial system, even though singapore's is way too strict for my taste. it is unfair to give someone the death sentence for smuggling drugs.

i believe more in amsterdam's laws. i don't see nothing wrong with legalizing drugs and prostitution. i'm sick of politicians forcing their fake religious propaganda and pollitically correct ideals down our throats. who are they too say that drugs are destroying our social fabric and that GOD is against a women selling sex when these same swindlers use every means to rob us of our money.

@ buelita

i understand your frustration about mexico's condition even though we are waaaaaay different people. you like to hold on to traditional beliefs and conservative ideals. i come from a generation that produced crack cocaine and hip-hop. but one thing we can agree on, is that mexico has got to do more than just turn a blind eye all the time.

@ ernest1

i have to admit, you are very funny sometimes.

Anonymous said...

Ah sorry but Mexico is way WAY more violent than Colombia.. and NO Colombia does not have a higher rate of murder than Mexico. Mexico is a war zone. More deaths then Iraq/Afganistan. And not only are people are being killed but slaughterd in was most savage. Colombia is not perfect but they are going to see better days comming, unlike the Mexicans who are on there way to a particularly evil hell. All because of the Devils hand... Drugs Sorry Mexico, We pray for you.

Buela said...

Ernie-E1

I just saw your comment. My husband and I have had a business in the pacific rim since 1980. we began in Taiwan when everything was from the island country. We have had offices and factories in just about every country but today only in Taichung, HK, Viet Nam and China. 14 years ago I left my husband to tend the biz and we began our family foundation. My husband is in China apx 5 mos of the year at that time I am in Mx. Our home and business offices and most of our factories are in Dong Guan City. I now it is difficult for someone like you to believe or understand the sucesses of people or the life they lead. We are extremely fortunate to lead the life we do and been able to explore the world and its people. An dream experience for our family. It has not been without hard work just about every day of the year. I don't expect you to understand this way of life, I just make comments based on what I know from my life.

as for Singapore..I would say the almost nil user rate has to be called a sucess. I am not saying it is a perfect country, but as long as you follow the rules you are going to love the country and its organization. They are very hard on offenders, you can get jail time for chewing gum, selling or using...things like that is clearly over the top, but the place is so clean even the drinking water is pure. I love the country myself, and love Malaysia where we had our home. After 911 we decided to leave.

Anonymous said...

They are covering up the truth.....colombians still run the cocaine business they just stepped out of the light...more than 90pct of cocaine comes from colombia and since escobar and the brothers from cali went to prison. And anyone who gets caught distrubuting.gets extradited period.they just found a easier way to make money by sending it to mexico and letting them run most of the states. Killing pablo and arresting the key players only made then stay low key..colombia produces twice as much since the killing of escobar..truth is that escobar was highly known king pin and wanted to make a scene so society media..can focus on something else. there are more than 300 organizations that distribute cocaine .. As a colombian is sad to see that the pain we had for 35 years is shared with mexico..colombia is sending so much drugs that they are going to w over...think about it they can catch guzman if they tried but they wont yet..why even tho his one of the starting players usa and mexico make tons of money over the drug trade. Mex is catching to much attention that you will see cartels break down... These country's just want the violence to settle.. That cant happen when you deal with greed.... farc are poweful cuz.the army been trying to,capture in the last few years and cant. You see if escobar would of not killed all those people and not blew up the plain he would still be alive and free.. Why dou think that the brothers from cali..the once that help take down escobar only got ten years they are bollionares... And kept most of their money.cuz they didnt use violence as much as these other characters... they are both free and retired with billions.... they stay behind the scene and try not to use violence.. Mexico was a peaceful city til around 05 i had to sell my condo because all the corruption with kidnappers and cops..best way to end cartels and only way is to llegalize it...but our congress are ediots.. And wont. Pearhbition in the 30"s caused all this violence...until they llegalize it... Know the problem went away. Same thing with cocaine

Anonymous said...

there will always be drugs but the bad thing is cartels have 2 much money and power to control a country like mexico/.

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