Monday, October 5, 2020

Coahuila´s red coal; Politicians, mining companies and Los Zetas

By 'redlogarythm’ for Borderland Beat

The following is about the Coahuilan coal mines and how public corruption and Los Zetas got involved in the business. Contrary to previous reports it contains some history about Mexico and the mining sector in Coahuila for a better understanding….. (‘redlogarythm’)

If you have read Germinal by Emile Zola you would like to know that there´s a place in Mexico where the same drama is taking place, only after nearly 150 since Zola wrote his novel. There´s a place where thousands of men and children wake up each day at 3 am to take a bus to reach the mouth of a narrow and dirty black coal mine. After grabbing a shovel and a plastic hat they descend into the dark belly of the mine and stay there for nearly 8 to 10 hours of continuous arduous physical work. Then, at the afternoon they emerge from the scorched earth totally black, covered with the mortal coal dust that will destroy their lungs in less than 20 years just in order to take the bus back home in order to take a brief sleep before returning to the mine again the next day.

This horrible labor scenario has been reflected by Emile Zola in his rebellious marginal, by John Ford in his emotive How Green Was My Valley and by Miguel Littin in his sentimental Acts From Marusia. But this ain´t no fiction, this is as real as life itself, and it´s taking place in the area known as Region Carbonifera in the State of Coahuila, in Mexico.

It´s in this area where between 100,000 and 200,000 people live either directly or indirectly from the dozens of coal mines and open pits (legal and illegal) that have been opened through the years either by State authorities, international mining conglomerates, dubious local entrepreneurs as well as by shady individuals that are situated in the porous and opaque border separating the unscrupulous businessman from the organized crime boss.

It´s also in this area where tens of thousands of impoverished workers work as animals each day of the year in order just to survive and to achieve a brighter future for their sons and daughters, in order not to sentence them to a life of suffering in the obscurity of the coal mines. It´s also in this area that a brutal system has been configurated not only to drain Coahuila´s soil from its most valuable resource, but to exploit this men and women with a rapacity worthy of the most sadistic businessman from the XIX century. It´s also in this area that organized crime (impersonated in the figure of Los Zetas cartel) has become just another businessman who interacts in the coal market in order to obtain money and at the same time deceive the Statal and National mining authorities.

As we will see this system is composed and run by three main entities: politicians, businessmen and criminals. These three forces interact between themselves buying land, machinery and human flesh that can be sacrificed in the altars of coal for the sake of a miserable mineral than although black can be seen sometimes red: the Coahuilan blood coal.

It´s the analysis of this cynical and brutal business network what this article aims for. What I will  try to do is to explain how it has been originated, how it has evolved and how it actually works. In doing so I´ll use data and information obtained both from official documents published by Mexican authorities and from several studies and reports published by human rights associations that have been in Coahuila and have witnessed the brutal system that has been working uninterruptedly for nearly 40 years.

THE ORIGINS OF COAHUILAN COAL ECONOMY:

In Coahuila there are two main coal deposits: the Sabinas basin and the Fuente-Rio Escondido Basin. The biggest one is by far the Sabinas basin. Of 6,900 square kilometers it is situated in the central eastern part of the State it contains a considerable amount of coking coal (at least 900 million tons by 2001) that can be later used for melting purposes at the steel factories of the region.

Map of Coahuilan mining basins. The Sabinas basin is number II

 

Although we can trace back some coal mining activity to the XVIIIth century if want to situate the origins of the intensive coal mining industry in the State of Coahuila we must think about the political era know as the Porfiriato. Between 1876 and 1911 Mexico was ruled by Porfirio Diaz, he himself a military leader of the times of Benito Juarez and the fighting against the Conservative Party and the puppet French Government of Napoleon III. By the 1880s Porfirio Diaz had managed to pacify more or less Mexico either by the stick or the carrot. Once the country was pacified Diaz´s administration started a campaign of national industrialization that included the development of a Mexican mining sector. In an effort for attracting foreign investment Diaz and his economic advisors started granting cheap and irrevocable mining concessions that were granted for perpetuity. Thus, several mining companies from the US and the UK started arriving at Mexico and the opening of bug mining complexes started.

By the end of the XIXth century the Coahuilan coal industry boomed for two main reasons. First of all, the expansion and massive development of the US railroad network meant a constant need of coal to feed the steam machines running all over the States. Secondly, Porfirio Diaz tried to develop a national steel industry as well as a genuinely Mexican railroad. In both cases coal was needed either to feed the locomotives or the steel ovens. That´s why by 1884 a US mining company opened pits in San Felipe el Hondo and in Santa Rosa. In a few years new bigger mining firms arrived to Coahuila. Companies such as the American Smelting and Refining Company (ASARCO), the Mexican Coal and Coke Co. the British New Sabinas Co. or the Mexican Compañia Carbonifera de Sabinas which was owned by the Madero clan, the family of the arch known revolutionary leader that brought Diaz down in 1911.

The American Smelting and Refining Company (ASARCO) soon became powerful enough to open steel foundries in Monterrey and Aguascalientes which started receiving Coahuilan coke coal in order to feed the smelting ovens.

It was also during this time that thousands of humble peasants and unskilled workers started arriving at Coahuila searching for a secure job working for the ``gringo´´ companies. The mining firms soon realized that this massive amount of workers, if correctly managed, could constitute an almost endless reserve of workforce that would provide a continuous chain of virtual slaves. And so they started a social engineering project that at the same time was being tested in other mining regions of South America such as in the saltpeter region of Chile. This mining companies created what can be labelled as private cities where the firm provided the workers with hospitals, electricity, water and schools for the miners´ children. The workers lived inside these private towns owned entirely by the foreign companies. They didn´t receive a liquid salary in pesos but was known as Vales or Cupones which where exchangeable by food and basic goods at the local Tienda de Raya (the grocery shops operated by the company) Thus the miners and their families remained as virtual slaves of the companies because since they weren´t paid in cash but in kind they weren´t able to gather enough money to leave the place. At the same time this virtual slavery system was conjugated with inhumane working conditions: working days of nearly 12 hours, shovels and metal bars used as tools for extracting the coal with bear hands, etc. After all we can say that things haven´t changed very much since it´s the descendants of these XIXth century miners and their same methods the ones digging in the soil in 2020.

When the Porfirian socioeconomic system was torn apart by the liberal Revolution of 1911 and the subsequent civil conflicts that lasted until the late 1920s the Coahuilan coal industry was virtually destroyed. To the destruction of the national industrial network we must add the ruin of the railroad sector which became a military objective itself.

During the post-revolutionary era, when the victorious military establishment of the 1930s started developing the basis of the modern Mexico the crisis of 1929 hit and hit hard. Most of the little and medium coal mining companies filed for bankruptcy or directly disappeared from one day to the other. This circumstance was exploited by big mining companies such as ASARCO and American Metal Co. which started buying the licenses for operating new pits and mines.

During the 1940s the Mexican coal industry boomed again for two reasons. First of all, World War II provided Mexico with a neighboring and powerful country in constant need of coal to feed the never-ending armament race. Secondly, during these years the nationalist Governments of Mexico started implementing am economic strategy known as Import Substitution Program whose main objective was to develop a national industrial infrastructure capable of providing the Mexican people with the products the needed. And of course, this industry needed coal.

The Mexican economists of the 1940s/1950s (as many nationalistic economic planner of the post war period) thought that the best way of achieving a national and almost autarchic industrial complex was to ensure a totally national raw materials manufacturing system. And so, they designed and implemented a vertical integration productive process. This meant that the Mexican State would control the steel production chain from the very beginning until the end. From the coal mine to the steel plant.

Thus, they founded Altos Hornos de Mexico SA (AHMSA) with its main plant in Monclova (the second main city of Coahuila) and at the same time opened several mining complexes at Palau, Muzquiz and Barroteran. During the 1970s all these companies would be consolidated in the SIDERMEX group which concentrated mining companies exploiting coal, iron and manganese, and the steelmakers AHMSA, FUMSA and Siderurgica Lazaro Cardenas Las Truchas (SICARTSA)

This nationalistic economic approach was accompanied during the 1960s by an offensive against foreign interests in sectors that the PRI regime labelled as strategic. Of course, coal was among them. In 1961 the Congress passed the Mining Mexicanization Law which incorporated a Reglamento making mandatory that the Mexican Government held a substantive part of the interests of any company dealing with these strategic minerals. The private sector was allowed to intervene in the mining industry by exploiting the mines, but only if they handed 66% of their participations/stocks to the Government.

Several foreign mining companies accepted the conditions and passed through the ring. The American Smelting and Refining Company, for example, gave 66% of its participations to the PRI and changed its name for Industrial Minera de Mexico SA de CV (IHMSA)

During the 1970s the PRI regime had coopted the coal mining industry almost entirely and started modelling it according to its almost mafioso conception of the national economy. It is during this decade that the Coahuilan coal mining sector started developing the clientelist structure that has evolved into the current perverted version of criminal economy we´ll describe later.

It´s important to understand how the National Mining, Steel and Similar Workers Union has fitted in the equation since the 1970s. In order to get rid of the social unrest and the constant headache that truly working associations constitute the first post-revolutionary Mexican Governments (which constitute the roots of the PRI party) soon realized that by creating a network of State-run working unions would help them to channel social unrest towards spheres were labor militancy could be subverted through clientelism, perks and corruption. Thus, they created a deep web of working unions which supposedly fought for the rights of the workers but in fact worked as a platform for ``social peace´´ making sure that no labor conflict went too far. Very soon what had been created as a mean of controlling workers became a platform for massive corruption. One of the reasons was that these unions were so big and so tightly controlled by the State that being nominated as a Labor Leader would mean the opportunity of diverting some of the money collected as membership quotas to the own pocket.

Founded in July 1934 the National Mining, Steel and Similar Workers Union has been presided by only two individuals: a father and a son. Napoleon Gomez Sada was the first Union secretary and in 2002 his son Napoleon Gomez Urrutia was elected as his successor at the presidency of the Union. It seems that Jimmy Hoffa would be proud. It was public knowledge even at that time that the Union wasn´t there for fighting for the workers´ rights. The Union delegates never rose complaints for obtaining better working conditions, health security or social benefits. All they wanted was the quota (duly paid each week) and the attendance to the boring PRI party meetings.

By the 1970s the PRI regime realized that in order to maximize profits little and medium mining firms supposedly operated by the workers themselves (organized according to the Cooperativa model) could be introduced in the coal industry by directly operating the mines. In fact, these mining firms were run by the Union which ensured that the miners obeyed the instructions dictated by the PRI oligarchy. The product of the miners sweat (the coal obtained from the Coahuilan mines) was redirected towards AHMSA and other big steel companies (either public or private) Thus, the PRI regime created the perfect working system. A huge crowd of miners organized in Cooperatives managed by the party through the official Union which ensured that no controversy arose while at the same time the coal obtained was re-directed at a very cheap price towards the big industry.

By the 1980s this corruption and deficient system was almost exhausted and the old style PRI leaders with their nationalistic approach were substituted by a new generation of technocrats that had studied in western universities were they had fell in love with the new neoliberal market theories. And so, when Carlos Salinas de Gortari and his pals managed to reach the presidency in 1988 they soon started dismantling the old and outdated Mexican industrial network. What followed is widely known, the Mexican national economy was chopped, just like a pie, and sold out at laughably low prices to the own PRI oligarchy and foreign companies that found in Mexico a discount store.

In 1986 the Mexican Government shut down Fundicion de Monterrey SA (FUMSA) labelling it as an obsolete facility. During the 1990s the SIDERMEX group (the PRI´s experiment of a totally Mexican steel manufacturing conglomerate) was surgically divided and its firms sold. Thus, in 1991 AHMSA was sold to Grupo Acerero del Norte.

Nevertheless, the Salinas de Gortari didn´t only destroyed completely the industrial network created by its own party during the last 50 years. It also dismantled all the protective measures that had deterred foreign interests from investing in Mexico´s raw materials and natural resources. A huge list comprised by natural gas, oil and minerals (among them coal, of course) comprised the wet dreams of international energy conglomerates that saw in the almost unexplored Mexican deposits and basins the promised land.

In 1992 the Salinas de Gortari Administration liberalized completely the mining legislation and made it possible for foreign companies to acquire mining concessions without restrictions. The era of protectionism, political maneuvering and administrative squandering had come to an end but as we´ll see this didn´t mean the end of the story.

All this process of liberalization and economic restructuring brought unemployment to the Coahuilan coal mines. Tens of thousands of miners were suddenly fired or lost their jobs when the companies for which they worked were parceled and sold by pieces to foreign companies. In the case of the national firms that resisted the privatization wave of the 1990s we can see very clearly how three main levels resisted.

On the first level we have the big heavy hitters of the coal mining sector. Grupo Acerero del Norte was by far the most important company. It operated 6 mines, 2 open pits and 4 coal cleaning plants through 2 subsidiaries (MIMOSA and MICARE) monopolizing nearly 73% of coal production. IMMSA (ASARCO´s successor) also resisted in Nueva Rosita monopolizing at least 3% of the total production.

On the second level we have 3 medium size companies that controlled in total nearly 16% of the coal production: MINSA, MEXATIM and Carbonifera San Patricio.

On the third and lowest level we find several dozens of little and medium mining companies that obtained the resting 8% of coal using very rudimentary and backward extracting methods. The owners of these companies organized themselves into two lobbying groups: the Mexican Union of Coal Producers (UMPC) with 57 members and the National Union of Coal Producers (UNPC) with 67 members.

 It´s this group the one that we´ll analyze because since the 1990s it has grown considerably and because the size of the companies and the way they work have made possible the growing of a shady network of criminal businessmen that have used their connections with the local PRI Administrations to divert resources from the public administration constituting what possibly is one of the biggest robberies of the modern Mexican history. What follows is the story of how this robbery took place.

THE MOREIRA CLAN, THE PRODEMI AND THE ARRIVAL OF LOS ZETAS:

BY the late 1990s the new Coahuilan mining system was already functioning. A multitude of little and medium mining companies had managed to stablish themselves as the main mining firms of the region. Who was behind these companies? The answer is obvious: PRI politicians. The old PRI regime had collapsed during the 1990s, but as it happened in Eastern Europe the corrupted bureaucrats didn´t leave their thrones without making sure that they would participate in the profits of the New Order. And so it went; when Salinas de Gortari and his pals crushed the Mexican industrial network selling multibillion enterprises for a few bucks it was the high levels of the PRI the ones able to buy everything fixing the public auctions.

Maybe Coahuila is the Mexican State where the PRI has its firmest presence. Since the birth of the post-revolutionary Mexican State Coahuila has been ruled by 23 Governors. All of them belonged either to the PRI or to its preceding political parties, the PNR and the PRM. This means that the Coahuilan State has been controlled for nearly 100 years by the same political party, the PRI, and of course a century of rule by Mexico´s most criminal and corrupted political institution must have meant something in the field of the clientelist political and economic relations that have been generated.

The best example of how entrenched the PRI officials and the Coahuilan mining oligarchy have become provided by what two brothers (as Governors) did between 2005 and 2017. Their surname is Moreira and their actions, crimes and omissions will accompany the State of Coahuila forever.

It all starts with Humberto Moreira being elected as Governor of Coahuila in 2005. A former Normalista teacher and educator, Humberto had joined the PRI when he was a young student for the same reasons other PRI leaders of the 2000s did so, for the possibility of thriving in the ranks of an organization where corruption, power and greed meant everything. In fact Humberto´s career in the PRI ranks is nothing worthy of mentioning. A long career through most education institutions controlled by the party in the DF ended with the former Normalista teacher escalating ranks until reaching the point where he could return to his home State of Coahuila in pursuit of a local municipal presidency. And so it was, in 2003 Humberto Moreira won the Municipal Presidency of Saltillo (its home town) and became its Mayor until 2005.

By 2005 he had reached a considerably high degree of reputation inside the PRI ranks and had joined the Statal bureaucrats. This made it possible for him to postulate as the PRI´s candidate for the State Governorship. Through the classical combination of briberies, intimidations, scab hauling and patronage that have traditionally constituted the PRI´s main source of votes Humberto Moreira became the 26th Governor of the Independent, Free and Sovereign State of Coahuila de Zaragoza.

The two main coal lobbying unions (the UNPC and the UMPC) were founded during the late 1990s as a way of facilitating the contacts between the coal oligarchy and the ultimate buyers of the mineral (who was the Mexican Government itself) By the 1990s the Mexican coal was so outdated and presented so a bad quality (it contains approximately a 30% of impurities made up of ash and sulfur) that the only client who bought the coal being produced by the Coahuilan mines was the Federal Electricity Commission (CFE) which used it for feeding two big thermoelectric plants in the Nava electrical plant (centrals of Jose Lopez Portillo and Carbon II) which produce nearly 10% of Mexico´s whole electric energy. It´s important to understand that the ultimate and only buyer of the Coahuilan coal was and still is the Mexican Government (although we must exclude the coal produced by the biggest mining companies that use it for their own steel plants which have nothing to do with the fraudulent scheme we are currently describing)

How did the UNPC and the UMPC interacted with the State Government in order to sell the coal they obtained from the mines? It is important to understand this mechanism of negotiation because behind it hides one of the main reasons for Mexico´s public administration systemic default as well as public corruption: the mismanagement of public contracts.

 

A public contract is a framework document enumerating the conditions, clauses and obligations that two parts (one of which is the Administration) have created in the context of the negotiation for the provision of a certain good and service. When an Administrative authority (it doesn´t matter if Municipal, Statal or Federal) wants to buy a product or a service it can do it by itself (which comprises a lot of public resources as well as time and taxpayer´s money) or it can deconcentrate the product/service delivery handling it to the private sector which in exchange of a fixed price (settled in the contract) will manage to provide the product/service needed by the Administration.

 

If managed properly a system of Public Contracts can be extremely useful because it relieves Administrative personnel for other tasks and provides field for economic growth when making it possible the appearance of economic opportunities for the private sector. The main problem of any public contract system is its pathologic tendency to corruption and opacity which has transformed most public contract systems in mechanisms used not only by corrupt public officials but also by criminal businessmen and organized crime for earning incredible quantities of money.

 

In the case of Mexico (and almost any other country in Latin America) the public contract legislation is so confusing and opaque that it has allowed a lot of criminals to thrive thanks to their contacts with local political oligarchies. It has happened in Colombia, Guatemala, Brazil, Argentina and Peru and Mexico isn´t an exception. This is exactly what happened with the Coahuilan mining companies.

 

According to the official logic the functioning of the Coahuilan coal public contracts is very easy. On the one hand we have the mining companies which obtain raw coal from the mines and ope pits. On the other hand, we have the Mexican thermoelectric plants which need this coal for producing electricity. What the mining companies do is to use their two lobbying firms (the UNPC and the UMPC) for negotiating a price for each coal ton with the Federal Electricity Commission (CFE) This price of the coal ton is reflected in a public contract signed between the companies and the Administration and thus, each party leaves the deal with what each one wants: a fixed price for each coal ton for the mining companies and the coal necessary to operate its thermoelectric plants in Nava for the CFE. Now, since the CFE knows the exact amount of electricity that their two plants are going to produce each year they already know the exact amount of coal they will be buying from the Coahuilan mining companies. Thus, what rests is the negotiation of not the quantity but of the price. It is around the negotiation of the coal ton that all the misdemeanors happen.


How the public contract initially worked

For example, the UNPC (which was founded in 1995) started negotiating massive contracts with the CFE almost immediately. Between 1995 and 2003 the UNPC managed to provide the CFE with 1,5 million coal tons each year for a price oscillating between 232 and 312 pesos for each ton.

Nevertheless this system of direct negotiation between the Coahuilan mining companies (organized into the UNPC and UMPC lobbies) and the CFE excluded one variable from the equation depriving it of the possibility of participating in the huge benefits the coal economy could offer. This individual was the Coahuilan Statal Government itself.

When we speak about the current war going on in Mexico we usually tend to focus in two main agents: the drug trafficking organizations and the Federal Government with its armed forces and police corps. What we tend to forget is that there´s a third highly active entity which mediates between these two main forces proposing deals and solutions both to the Administration at the DF and to the regional chieftains managing the criminal groups. The Statal Governments constitute a mafia in their own right. According to an antique conception of Mexico they could be compared to the colonial Viceroys; regional authorities which are supposed to answer to a central authority which is too far away for knowing what happens in their domains.

It is fair to declare that the State Governments are responsible for most of the current Mexican tragedies since the deconcentrating of powers and delegation of aptitudes in State Administrations have created the perfect conditions for the expansion of corruption and crime in this regional zones.

It is also fair that the most corrupted State Administrations have behaved as predatory machines always in a frantic search of available resources in order to steal it. Their strategy is purely predatory and is deployed in several ways: by stealing federal funds directly from bank accounts, by converting aid into currency in the black market in order to dispose of the liquid funds, by creating false projects in order to spend a few bucks while pocketing the rest of the money, etc. This also happened in Coahuila, and it was the Moreira Administration the one designing the whole system.

As any other mafia the State Government couldn´t let any big economic undergo in its area of influence without being properly ``taxed´´ In other words, the Coahuilan mining sector was a fruit too delicious to let it be enjoyed by other. And this why the PRODEMI was born.

Under the old negotiating system, the mining firms grouped around the UMPC and the UNPC negotiated the price of the coal ton directly with the CFE. Under the new logic of the Moreira administration the State Government would fit in the middle of the negotiation by mediating between the mining lobbies and the CFE. The entity that would do such a thing would be the Promotora de Desarrollo Minero (Mining Development Promoter or PRODEMI) According to it´s own founding document the PRODEMI would ``carry on the processes that are necessary for the homogenization of coal in order to raise the quality of the mining products´´ The PRODEMI would also be in charge of ``acquiring and selling coal and other minerals and natural resources in benefit of the mining activities of the State of Coahuila´´

In other words, the PRODEMI would be the entity negotiating the public contracts for coal purchases with the CFE. Thus, Humberto Moreira and his colleagues at the State Government would negotiate the quantity of coal production as well as the price of the coal ton. And for doing so they would retain a certain quantity of money of each ton of coal in order to invest it in the modernization of the mining industry (in better equipment for the miners, health facilities, better infrastructure, etc) Of course, it is obvious that Moreira´s intentions when creating the PRODEMI was not to improve the miner´s daily life but to divert hundreds of million of pesos into the magnificent scheme that would ended up with a Coahuilan public debt of nearly 1,900 million US dollars.


PRODEMI coal scheme designed by Humberto Moreira and his colleagues

It is not very clear what role did the mining companies played in the creation of the PRODEMI. On the one hand it´s true that the PRODEMI taxed them not only for each ton of coal they produced but also for any kind of arbitrary reason: withholding tax for the creation of ``security programs´´, Middle and Small mining Escrow Fund, Ecological Restoration withholding, Coal Chemical Analysis fee, Road Infrastructure fee, etc. Each of these fees, taxes and escrow funds provided the PRODEMI with a reason for taxing the mining companies and thus pocketing an incredible amount of money that could be managed in total opacity. But it´s also true that the creation of the PRODEMI lead to the production of mass quantities of coal. In fact the mining companies managed to get contracts for producing so much coal that they couldn´t attend the CFE contract requirements due to their deficient infrastructure and workforce. And this is where Los Zetas fit into the equation.

THE  COAHUILA ARRIVAL OF LOS ZETAS:

As we all know Los Zetas were born as an armed wing of the Gulf Cartel during the 1990s. It was during this time that several enforcement cells were founded by the leaders of the CDG: Los Metros, los Lobos or Los Rojos some of which still operate today. The idea behind the creation of Los Zetas was the conception of a spear head that would go into disputed zones in order to bend local resistance, crush foreign rivals and create new business fronts for CDG bosses. As we know Los Zetas soon evolved into a national criminal network that reached almost every corner in Mexico. They expanded through the Gulf reaching the Yucatan peninsula. They managed to get to Chiapas and the Guatemalan border. They even invaded the Tierra Caliente and Guerrero unchaining a brutal conflict that would end with the birth of the Familia Michoacana and the Knights Templar. And in their effort for controlling vital smuggling points Los Zetas arrived to Coahuila, which share more than 500 kms. of border with the US and has in the town of Piedras Negras the border pass of Eagle Pass (a vital smuggling cross point)

The problem with Los Zetas arrival to Coahuila was that the State already had a heavy density of organized crime presence. During the Prohibition Coahuila was a center for bootlegging, and in fact there was at least one big whisky moonshining facility working at full capacity in Piedras Negras. During the 1980s the Gulf Cartel expanded to Coahuila through a local cell known as Los Texas commanded by Guillermo Martinez Herrera aka El Borrado and Omar Rubio Pardo.

But soon other bigger entities arrived and by the 1990s the Juarez Cartel of the Carrillo Fuentes clan, the Sinaloa organization of Mayo Zambada and Joaquin Guzman and a group known as Los Michoacanos linked to the Milenio cartel of the Valencias were operating in the region smuggling tons of cocaine and marihuana from the town of Piedras Negras and Ciudad Acuña. During this time, it was the Juarez Cartel the one managing the big plazas of the region and it is impossible to describe the level of criminality that the continuous frictions between the different groups brought to the region.

During the early 2000s and under the Vicente Fox presidency the DTOs started the scalation of violence that led to the declaration of the war on cartels by Felipe Calderon in 2006. Coahuila was among the main States involved in the scalation of the drug wars all along with Michoacan and Baja California. There the Sinaloa Federation launched a massive offensive for the cities of Acuña and Piedras Negras which were also coveted by the Gulf Cartel. In the ensuing brawl the Zetas won the battle by far maybe because of their social strategy of creating huge and tight halconeo networks among the youngsters of local working suburbs. Anyway, by 2005 Los Zetas had gained control of most of Coahuila for their CDG masters. This tight control would turn into total ownership when the secession between CDG and Los Zetas happened between 2010 and 2011. From then on, Coahuila would be labelled as the Zeta State and it was there were some of the most gruesome and terrible episodes of violence of the current Mexican conflict have happened (the Piedras Negras CERESO affair, the Allende massacre, etc)

In other words, by 2005 Los Zetas was the criminal organization with the firmest presence in Coahuila. And because of the predatory economic strategy, they developed which meant the control of almost any illicit activity as well as the taxation of most licit businesses conducted in the region their relationship with the coal mining industry was just a matter of time.

Interestingly enough the culmination of the conflicts between the Sinaloa Federation and Los Zetas ended with the victory of the latter and with the installment of Humberto Moreira in the State Government, and although during his last time as Governor and when he returned to the ``civilian´´ life Moreira held a very critical position against Los Zetas it is undeniable that his Government collaborated at some point or at least did nothing to prevent the installation of the group in Coahuila.

It is not very clear when Los Zetas got involved in the mining business, but what can be said is that undoubtedly the reform of the mining public contracts under the PRODEMI scheme helped them a lot because it made it possible for organized crime local bosses to operate their own illegal open-pit mines. How did this happen?

Under the PRODEMI contract form the CFE granted a single big contract stating the coal production and the prices for the ton coal. For example, in 2009 Humberto Moreira and his PRODEMI signed a contract with the CFE. This contract stated that the PRODEMI would provide the CFE with 3,3 million coal tons for 927 pesos per ton. This big contract was then handed over to the lobbying groups UNPC and UMPC which parceled it into smaller producing contracts assigning each one of them to their respective affiliated mining firms. Nevertheless, if we investigate these mining companies we will discover that dozens of them were nothing more than a corporative name with just a pair of administrative employees. In other cases the firms had just a few workers in payroll and operated mines of a capacity much smaller than the one assigned by the contracts. For example, a certain mining firm would operate a mine with a capacity of 50,000 tons of coal but according to the contract granted by the PRODEMI this firm would contribute with 150,000 tons. And although the company didn´t have the infrastructure for providing 150,000 tons but only 50,000 in the end they would give the CFE 150,000 tons.

So where did these extra 100,000 tons come from?

There are two possible answers to this question. The first one is that the mining companies under contract with the PRODEMI and the CFE subcontracted a significant part of the production by hiring the services of other mining companies which were the ones obtaining the coal by exploiting miserably their own workforce. Thus, the census of the two lobbying groups (the UNPC and UMPC) reveal that they had 127 inscribed members. From all of them, only 72 obtained a contract from the PRODEMI. It´s obvious that the remaining 55 companies were subcontracted by the 72 which had a contract in order to provide the portion of coal they weren´t able to collect. Now the question is how these subcontracted companies operated. They did so with extremely poor infrastructures and by exploiting coal mines located in inhabited areas were mining activities are strictly forbidden. Of course this kind of mining allowed these companies to obtain coal for very little money which at the same time makes it possible to sell it to the PRODEMI contracted companies for a price under the one paid by the CFE.

Let´s make it clearer with an example. Imagine that the CFE grants a contract for 100,000 tons of coal to the PRODEMI for a price of 900 pesos/ton. The PRODEMI then contracts mining company A for producing these 100,000 tons but company A is only able to produce 50,000 tons. What company A does is to subcontract the production of these 50,000 tons to company B which operates with poor infrastructure and uses cheap and unregistered workers. Thus, company A buys these 50,000 tons for 300 pesos/ton (in total, 15 million pesos) Then company A goes to the CFE and hands both cargoes the one it obtained and the one bought to B and receives the money stipulated in the PRODEMI contract (90 millions) In the end company A has earned 75 million (90 million from CFE minus 15 million paid to company B) But this scheme works because company B belongs to the owners of company A or because by doing so company A doesn´t have to hire more workers or infrastructure which would result in higher fixed costs.

The second possible answer to the question about where do the extra tons of coal come from offers an explanation of how and why Los Zetas got involved in the coal business in Coahuila.

An even cheaper why for obtaining coal in Coahuila is to buy it from the groups operating illegal mines. As in any country when a Mexican mining company wants to exploit a certain mining deposit it must ask the Government in order to obtain a mining concession. But under Mexican law mining concession grant only the extraction of resources located underground, so if the company wants to do anything, they have to negotiate with the owners of the surface under which the mine will be located. This usually leads to a complicate negotiation with the communities or ejidatarios who own the land and is a current source of social conflict with the mining companies because they usually break the agreements and refuse to pay the communities.

The dream of any mining firm in Latin America is to get rid of the troublesome communities who want to perceive some money for handling their lands. And this can be done very easily by any armed group which makes from the use of force their main negotiation strategy. In Colombia the ELN, the ex-FARC mafia and the paramilitaries have gained control of the gold mines by exterminating social leaders and native communities, in Venezuela it´s the same but with the Pranes, in Brazil with the Comando Vermelho or the Primero Comando da Capital. And in Mexico, the Coahuilan mines attracted the attention of various Zeta leaders.

It´s obvious that there was some sort of previous relationship between local mining businessmen and certain Zeta cells. It isn´t clear how this relationship started or when it surpassed the mere coexistence for becoming and indistinguishable merger. But the truth is that by 2011 high-ranking Zeta leaders (among them Heriberto Lazcano Lazcano aka Z3 himself) were operating their own coal mines in the Sabinas basin zone.

These became public when Humberto Moreira declared it publicly in a radio interview after a Zeta cell kidnapped and murdered his son in what apparently was a transversal vendetta provoked by the killing of Alejandro Treviño Morales (nephew of Miguel Angel an Omar Treviño Morales) by the Mexican Armed Force in October 3, 2012. It was only then that Moreira (who had left office a year before, in 2011) said to a local journalist that that the presence of Zeta leaders in the coal mining zone was ``an open secret´´ and that Heriberto Lazcano (killed on October 7) was living in the town of El Progreso, in the middle of the coal mining region, and operated two mines by his own. Humberto Moreira said that the Zeta maximum leader sold the coal he obtained from his mines to Coahuila mining businessmen which then resold it to the CFE for a higher price.

It´s the same strategy used by licit subcontracted companies, but in this case the mines where the coal comes from are completely illegal and most of the times are operated in highly populated zones where local communities are either threatened or attacked in order to hinder protests and generate an atmosphere of silence where illicit mining operations can thrive.

It is hardly probable that Humberto Moreira didn´t know this fact when he was Governor of Coahuila. Of course he did, and thus we can conclude that he was the direct responsible of buying coal indirectly from the Zetas because in 2009 Humberto Moreira and his pals modified the State legislation in order to make the Governor the maximum head of the PRODEMI placing himself as the PRODEMI´s highest authority as well as the top responsible for the entity´s decisions and strategies.

A better idea of how entrenched the Coahuilan mining oligarchy and Los Zetas were during the early 2010s is given by what happened in the town of Cloete which is located 70 kms from Progreso (El Lazca´s last refuge) Here a local PRI politician and businessman called Alvaro Jaime Arellano started harassing local families in order to get them out of their houses for exploiting the coal deposits that laid underneath in the name of his mining company: Integracion Minera SA de CV.

Jaime Arellano started by offering basic goods and furniture (such as cradles) to obtain the families´ permission for extracting coal from areas adjacent to their houses. When this scam didn´t work he would turn into threats and when threats didn´t cause the intended results armed cells would appear, kidnap the resident who refused to grant permission to the coal mafia for digging into his garden and give him a generous beating.

Jaime Arellano apparently worked closely with and individual called Servando Guerra Rodriguez who ran his own mining company: Servando Guerra SA de CV. It seems that this individual and Jaime Arellano both ran the previous scheme of subcontracting the PRODEMI contracts. According to available data Jaime Arellano´s firm Integracion Minera SA perceived 10% of the coal extracted by Servando Guerra SA from to illegal open pit mines in the town of Cloete: 26,500 coal tons from a total of 265,000 tons which represented 19,875,000 only for Jaime Arellano alone.

According to local residents Servando Guerra always wandered around the town surrounded by heavily armed men and since his mines were close to inhabited areas some people gave testimony declaring that they had seen pickups loaded with tied people heading for Guerra´s mines. Maybe a further exploration of Mr. Guerra´s coal illegal coal mines would reveal some corpses.

The official lists published by the PRODEMI reveal that at least until 2016 both companies Integracion Minera SA and Servando Guerra SA profited from the system designed by Humberto Moreira and received hundreds of millions of public money for providing coal which had been extracted by organized crime from illegal mines.

Alvaro Jaime Arellano and some of the machinery used by Servando Guerra SA in their illegal open pit mines (photos are obtained from Guerra´s own webpage)

The 2016 accounts of the PRODEMI reveal even a darker result because they contain evidence of payments received and done to three firm which in 2012 were publicly identified as Zeta front businesses operating ``narcomines´´ in the State of Coahuila. In 2012 the news agency Reforma published that the SEIDO was investigating Impulsora JBN, Perforaciones Tecnicas Industriales and Minera La Mision for being involved in the operation of several coal mines for a drug trafficking organization in the State of Coahuila. This organization must have been the Zetas because in 2012 they were the absolute masters of the State. But that was all this news appeared 8 years ago and were published by every important Mexican newspaper and agency, but anything leaked after that. No one knows whether the PGR opened a formal investigation or not (although declarations made by the State prosecutor Homero Ramos Gloria at the moment revealed that the PGR was involved in the investigations)

Well, according to a document called Cuenta Publica 2016 published by the PRODEMI on the same year Impulsora JBN (the one pointed in 2012 as a Zeta money laundering front) received 620,096,826.91 MXP, Minera La Mision received 68,753,364.43 MXP and a third company called Perforaciones Tecnicas Integrales (a very similar name to the one pointed in 2012 as a Zeta front) received 20,558,874.38 MXP. One quick fact, the owner of Minera La Mision Basilio Niño Ramos was executed with a bullet to the head on December 2012 (his corpse presented signs of torture)

Payments done by the PRODEMI in 2016 to two companies which were publicly denounced in 2012 as Zeta front money laundering businesses

I haven´t heard anyone complaining about this incredible thing. In fact, it was during the investigation I undertook for writing this article that I discovered that at least two of the only three companies publicly exposed as Zeta ``narcomines´´ in the State of Coahuila have received money from the PRODEMI and thus from the Government itself at least until 2016.

THE END OF THE STORY?

By 2012 (1 year after Moreira left office) the PRODEMI contracts had become so dark that massive rumors about widespread corruption started leaking out. Moreira´s allegations about the indirect concerts between Los Zetas top bosses and the CFE through the PRODEMI subcontracting system was the straw that broke the camel´s back. And although after a period of 11 months of Interim Government courtesy of Jorge Torres Lopez (who got captured in 2019 and extradited to Texas were he faces money laundering charges) Humberto´s brother Ruben won the Governorship and continued with the PRODEMI hoax scheme for 6 more years no one would buy the scheme after the Moreira clan left the presidency. In fact destiny as brought some karma for Humberto Moreira, after leaving office in 2011 and losing his son at the hands of the police which had been under his orders for nearly hald a decade during which Los Zetas took control of virtually every sphere in Coahuila a massive debt of 1,900 million USD provoked by Moreira´s Administration was discovered. The guy left and Mexico and tried to hide in Spain, was caught there and extradited to the US were he´s currently facing charges of fraud.

It has been reported that during Humberto Moreira´s Governorship some mining companies started handling over to the CFE not coal but a mix of coal, mining waste and soil in an attempt of tricking the Government authorities. At the same time at least 354,000 tons of coal weren´t obtained by the PRODEMI from the mining companies, but the PRODEMI gave them to the CFE. Where did the PRODEMI obtain these 354,000 tons from? No one knows, although there are several possibilities ranging from the PRODEMI operating its own illegal mines to the fact the stole it directly from the mining companies in order to pocket the money paid by the CFE.

By 2014 the CFE started granting contracts outside the PRODEMI system. In this case what the CFE started doing were public bids which were a total failure because none of the candidates met the criteria demanded for participating in the bid (to have their miners affiliated to social security and to demonstrate that they owned legal mining concession were the main causes for leaving the first public bid by the CFE without candidates) After this the CFE started granting the contracts directly without asking for any kind of paper, so in the end the Coahuilan mining mafia managed to retain the production of coal (either legal or illegal) and we can by no means demonstrate that organized crime, although under new names and brands, is not profiting from the coal mining business once more.

Through this Report it has been my purpose to demonstrate or at least schematize how the merger between three entities (organized crime, the private sector and the Coahuilan Government) has transformed one of Mexico´s richest resources into a region scorched by disappearances, extrajudicial executions, tortures, corruption and horror. But I want to make a final consideration about the main injured parties here. They are the miners, men and children, all of whom descend into the mines in order to obtain a mineral that although black as obscurity could easily be seen as red, because the coal of Coahuila is soaked with blood.

 


UPDATE: In June 2019 (just last year) the CFE announced that an agreement had been reached with the PRODEMI for acquiring 300,000 tons of coal from the Sabinas basin area. It seems that the scheme is running again.


12 comments:

  1. WOW! Amazing work once again.... 🧡 👍

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    Replies
    1. Excellent, excellent reporting and clear writing. Is it available in spanish?

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  2. That Mexico is corrupt who knew?

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    Replies
    1. Corrupt down to the bare earth

      No hope ever for The Good Mexican Peoples

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  3. Excellent Story Thanks !!

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  4. Fuuuck that ending was good. This is insane reporting Red. So much to talk about this. No level of oversight anywhere it seems like.

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    1. Tanks Edgar. This kind of reports do take me a long time and it´s always appreciated comments and observations such as yours

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  5. I've been a lurker for years and never felt the need to comment but what an outstanding and informative article. Gracias.

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  6. The PROBLEM is mexican government corruption, if they grew some BALLS and stopped beig greedy they COULD END the CARTEL PROBLEM.. But just LIKE AMLO no BALLS
    Hugs and kisses for the capos and SICARIOS according to his DUMB a$$!!--

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  7. 1:37 any cartelito would corrupt your ass and make you crap your own corruption in your pamper, you dirty sanabagan you...
    If the Mexican People started killing the corrupt businessmen and politicians like they deserve you and your "kind" would be jumping like you did when Fusel Castro took care of business in Cuba, of course cuba used to be free, free for all if they were "connected", connected to the mob and corruption.
    The Zetas were founded as GAFES to fight insurgency in chiapas, oaxaca and guerrero, by guatemalan kaibiles and othwrs, when ernesto zedillo "La Neta" was presidente, mexiconwas all broke, he sold the mexican railroads, some to a Dick Cheney, and they used to ship coal loaded with cocaine even to california US...
    El Lazca is from Hidalgo State where a lot of illegal mining goes on since forever, owners are called "terreristas" and they exploit little illegal concessions they granted to themselves. Some even have a deal with the Sindicato de Trabajadores Mineros Metalúrgicos Siderurgicos blablabla y Similaresnde la Republica Mexicana, but for a while, sexretarynGeneral Napito Gomez Urrutia had to run away because of persecution from a new leader charro, a Pavón from Fresnillo Zac Seccion 62 of their miners' union, whennthenpresidente was FECAL and labor secretary javier lozano "el perro cagatwitters" wanted to expropriate even the illegal rat holes and privatize them under a new PANISTA name which i want to make clear was not Obrador's crimes.
    These days it has to be Manuel Bartlett who is in charge of the CFE.

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  8. Caroos "La Marrana" Pavón now has his own "Miners and Metal Workers' Union" pero se la peló a Napito who teturned from Canada to his Daddys Miners' Union whichnwouñd not have abandoned the miners in the exploded mine in Coahuila and where we had a lot of benefits, education, breaks, overyime after 8 hours, bonuses and better pay, health care, vacations...not everybosyngotnexploited, it was the Neo-liberal politician motherfackers starting with salinas under Miguel de la Madrid when they were lovers.

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  9. The Fresnillo Company was nationalized by President Lopez Mateos, in the 60s, by the 70s it was all federal investment and mexican management corruption stealing everything, from mining engineers to union leaders huevos and workers moneys due, positions etc, importing inept corrupt managers from Sombrerete and Concepcion del Oro, then the powers that be acquired the mine for "asarco" or frisco, whatever the name, it is a miracle the mine is still open, unlike Real Del Monte in Pachuca.
    With carlos La Marrana pavon heading the shit show

    ReplyDelete

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