Written by Gordon Housworth
Though notorious for their brutality, Mexico’s organized criminal groups are rational actors who respond to market dynamics. If they are not forced into a showdown or loss of face, their behavior can be influenced.
In the Mexican press, the prevailing narrative on organized criminal groups is one of irrationality, of crazed monsters on the loose, but the reality is the exact opposite. Yes, the criminal gangs’ methods are harsh and designed to compel compliance, but their intense violence and cruelty is driven by objectives that can, with expert guidance, be used to positively influence the threat they pose.
These groups are competing to prosper in a fragmenting and hyper-competitive market that has seen its primary market (drugs) placed under pressure. This has forced them to enter new markets, such as extortion of corporations and individuals, kidnapping, robbery and oil theft.
The leadership of these groups are actively trying to reduce both their own risk and their "costs of doing business," while maximizing profit.
How Mexican criminals mimic African warlords
Analysis of African “Blood Diamond” warlord behavior is directly applicable to that of Mexican criminal enterprises. The two groups share motives, methods, ferocity and absence of restraint. Both cartels and warlords are attempting to extract wealth from areas under their control while repelling competitors. In Africa it is mineral extraction. In Mexico it was transit rights to service the U.S. drug market, but has now diversified into wholesale extortion and other crimes. Writing in 2008:
Individuals are goal-oriented and adaptive, and will attempt to reach their goals by what they see as the easiest and least costly or most efficient means. (Rationality does not have to be a universally agreed-upon mindset.)...
"Blood diamonds" [is] a special case [of] resource-based means of civil war. To the degree that any primary extraction process can be sequestered by a powerful minority, the opportunity for conflict, extortion, and interruption rises. Coupling this concept with the fact that most wars today occur within nations rather than between them, the risk analysis of investing firms should be re-evaluated...
Collier and Hoeffler found that conflicts occur when rebels respond rationally to market opportunities, much as entrepreneurs and investors do. Civil wars that are so often blamed on chaotic, irrational ethnic, religious and communal feuds now have a unifying thread:
"Rebels need to meet a payroll without actually producing anything, so they need to prey on an economic activity that won't collapse under the weight of the predation... Natural resources is a good one. The same characteristics that make a commodity readily taxable -- that it's rooted to a spot, it can't move -- make it readily lootable, too."...
Negotiation short of warfare between opponents is extremely difficult, both for African warlords and Mexican traffickers, as there is no defined system to adjudicate grievances and no external entity to enforce compliance to agreements. The result is that the conflict groups take the least risky path of immediately attempting to eliminate their opponents in a winner-take-all effort. Again from 2008:
While most interstate wars end in a negotiated settlement, the majority of intrastate conflicts end with the extermination, expulsion, or complete surrender of one side. Civil wars with a communitarian or ethnic dimension are especially difficult to negotiate and the most likely to result in protracted strife, and, closely mapping to the African experience, often go on for years and sometimes decades. Szayna and Tellis note that the reason is straightforward:
"To end intrastate strife the warring sides must lay down arms and respect an agreement usually in the absence of a legitimate government and under conditions in which the agreement is generally unenforceable. In conditions of communitarian strife [it is] especially difficult for the two sides to go on coexisting in the same state. Put differently, there are only two main pathways for the regulation of ethnic conflict:
- Eliminating the differences (genocide, forced transfer of population, partition/secession, and integration/assimilation);
- Managing the differences (hegemonic control, arbitration by third party, federalization, and power-sharing)."
Because the trust that would allow for management of differences is absent once conflict starts, it is understandable that elimination of the differences becomes the preferred choice and that many ethnic and communitarian conflicts end up in prolonged and bloody strife, sometimes mixed in with attempts at genocide and complete elimination of the other side.
Criminal actions that appear irrational to the public generally have very sound operational and profit-driven motives.
Three converging threat trends
Three trends are currently combining in Mexico to put personnel and commercial assets at greater threat from criminal groups:
1) Territorial incursions and expulsions among cartels: Increasingly splintered criminal groups attempting territorial incursions and expulsions of their competitors. Such attempts are typically extremely violent.
2) Revenue expansion beyond drugs: Drug gangs are broadening their focus to extortion, both of individuals and corporations.
3) Increased willingness to target foreign nationals and firms: Growing effectiveness of formerly covert U.S-Mexican military cooperation is lessening cartel sensitivity to antagonizing the U.S.
Territorial struggles and splintering of violent groups
President Felipe Calderon’s effort to dismember the largest cartels by focusing upon their leadership has backfired. Deprived of senior leadership, second tier members have broken away and formed their own criminal groups.
These increasingly splintered criminal gangs are violently competing with both their former groups and other new groups, each attempting to penetrate competitors’ territory and expel the former owners. In some cases this has resulted in many entities fighting over smaller territories with increasing violence. The recent arson attack against the Casino Royale in Monterrey is being cited as one such extortion effort, but in early stages it is difficult to distinguish extortion from an effort to expel rival groups.
Revenue expansion beyond drugs
The post September 11 tightening of U.S. borders increased the cost of moving drugs to market. While significant quantities continue to get through, as evidenced by the stability of U.S. street prices, greater volumes have to be sent north to maintain that flow. Cartels soon discovered their own citizens as consumers, sparking a wave of drug addiction in Mexico. Selling within the country brings a lower street price, yes, but has lower costs with much less risk.
The next significant leap was institutionalized extortion of businesses large and small, as well as individuals. Largely unpublicized until now, this "tax" on commerce has reached epidemic proportions up and down Mexican supply chains. Thousands upon thousands of businesses have closed while the better financed have relocated, both businesses and their owners, to the U.S. Cartel responses to this last step have been to scour social networking sites to look for relatives still in Mexico who can be kidnapped for ransom against the fleeing owners.
Criminal enterprises have long infiltrated the petroleum sector and have now moved into penetrating commercial firms and their suppliers, to the point of taking over entire supply chains or taking revenue from large portions of the chain.
These more recent revenue streams have exhaustively targeted Mexican nationals. As the Mexican target set declines due to predation, closure and emigration, criminal groups will turn to foreign assets and those entities that have immobile fixed investments in the country.
Increased willingness to target U.S. nationals and firms
We have frequently commented on U.S. drone overflights of Mexican soil, including the March 16 observation, “Drones in various formats have been over Mexico for some time. What is new is the open admission coupled with deep penetration, multi-sensor efforts. Vetted sharing is also up.” it is clear that such missions are accelerating along a wide spectrum of communications, photographic, radar and signature intelligence collection.
This increasingly rich intelligence stream is being put to operational use by vetted, isolated silos of Mexican forces operating with U.S. intelligence, even launching from U.S. soil. A U.S. military officer said, “The military is trying to take what it did in Afghanistan and do the same in Mexico.”
This cooperation will inevitably increase direct criminal activity against foreign firms, including U.S. nationals and firms, which criminal groups have heretofore largely sought to avoid lest they draw U.S. retaliation. Once such "retaliatory" actions become common, these criminal groups will have less to lose in reacting to U.S. efforts and confronting foreign commercial assets.
The security situation in Mexico, and notably Monterrey, is deteriorating at an accelerating pace as threats worsen country-wide. Risks long keenly felt by Mexican nationals are becoming evident to foreign nationals and firms.
Criminal behavior must be influenced early, when groups are selecting their target. Cost and risk rise dramatically once your personnel and assets have been selected as targets. The worst days of Colombia saw security costs reaching as high as 50 percent of operating revenue.
Commercial firms have three options:
-Deflect (move hostile intent to another target)
-Defer (delay hostile efforts)
-Defend (interdict an incipient hostile attack)
Remember that these rational criminal actors are actively trying to reduce both their own risk and their "costs of doing business," while maximizing profit. As Defend is rarely a response option against such heavily armed opponents, commercial firms gravitate to Deflect and Defer.
Properly guided, potential targets (both enterprises and individuals) can take advantage of this ongoing feature of criminal planning and activity to make themselves less attractive than other potential targets under surveillance by these criminal groups.
Surveillance for target identification and selection has become more costly to criminal groups as their competitors ambush one another’s surveillance teams or track them back to their operating bases. Targets seen as predictable and less risky quickly rise up the targeting queue.
Criminal groups are rational actors whose actions can be influenced. A well designed systemic plan could help companies reduce the risks of operating in Mexico.
*Gordon Housworth is Managing Principal, Intellectual Capital Group LLC. Responsible for Risk Consulting & Competitive Intelligence (CI) - Geopolitical, Operational, Technology and Reputational.