Monday, December 7, 2015
Mexico needs an Economic Approach in Fight against Drug Cartels
By Mike LaSusa (InSight Crime)
Formulating effective strategies to combat Mexico-based crime organizations requires a nuanced understanding of their economic structures, says award-winning Mexican journalist
Carlos Loret de Mola.
At a November
23 event hosted by the Americas Society/Council of the Americas (AS/COA), Loret gave a presentation entitled "The Evolving Economics of Mexico's Drug Cartels," in which he argued for an economic approach to tackling organized crime.
"I am totally convinced that there [can be] no war against drugs, there [can
be] no law enforcement in terms of cartels, if you don't first of all understand … the economy of the cartels,"
Loret, a columnist for
El Universal who also hosts a television show and a radio program, began studying Mexico's drug trade as a university student in the late 1990s. Since then, he says, several factors have combined to create
"a whole new world" for organized crime in Mexico.
See also: Mexico News and Profiles
The defeat of the Institutional
Revolutionary Party (PRI) in Mexico's 2000 election cycle disrupted long-standing arrangements between cartels and corrupt politicians that had formed during the PRI's 71 years in power. At the same time, some criminal
groups that previously focused mainly on drug trafficking began branching out into more violent criminal activities, like kidnapping and extortion.
Additionally, Loret argues, due
to increased US border security after the terrorist attacks of September 11, 2001, "a lot of drugs stayed in Mexico," leading to the growth of domestic retail drug markets. Over the past two decades, Mexican crime groups also deepened their relationships with foreign suppliers of precursor chemicals used for drug production, which has helped them meet rising demand for heroin and methamphetamine on both sides of the border.
shifting market dynamics, combined with the implementation of a "kingpin strategy" aimed at taking out top cartel
leaders, contributed to the ongoing fragmentation of Mexico's underworld, which, according to Loret, set the stage for the development of several distinct business models for Mexico-based crime organizations.
is the model of "La Tuta," the recently captured leader of the Knights Templar, who concentrated his organization's efforts on using coercion to extract profits from individuals and industries in
areas under the group's control.
other model is that of "El Chapo," the leader of the Sinaloa Cartel. "He avoids confrontation with the government" and focuses almost entirely on drug trafficking, Loret said. "He
doesn't go into kidnapping. He doesn't go into extortion."
Loret added, "you can find something like Los Zetas" or the Gulf Cartel. "They do not work like El Chapo in terms of not messing around with anybody. They do not work like La Tuta, seizing almost every activity of the local economy. But they tax," he says, charging "protection" fees to
local businesses and other criminals seeking to operate in areas they control.
InSight Crime Analysis
For Loret, money laundering is "the key issue" when it comes to fighting the cartels. And he says policymakers have been slow to recognize
this, continuing to rely instead on an outdated strategy of attempting to capture kingpins and deploying large numbers of
security personnel to areas with high crime rates. Such policies often fail to have a long-term impact on crime and violence, while contributing to the migration and decentralization of criminal networks, thereby making them harder to dismantle.
it may sound simple in theory, tackling the issue of illicit financial flows has proven difficult in practice. Criminal groups
have adopted sophisticated methods of laundering their profits. Moreover, banks and other financial institutions have an incentive to resist enforcing
or adopting strict anti-money laundering standards.
"We can expect,
except for a few cases of unprecedented honesty, for banks to cover up the origins of dirty money," Loret told InSight
Crime. "Raising penalties for banks who engage in these types of activities would work if the government is capable of
detecting the illegal flows of cash and those institutions that allow them to come through, but this isn't the case: governments
fail to detect these, so who is left to sanction?"
See also: Coverage of Money Laundering
In addition to improving the capacity
of law enforcement to clamp down on illicit financial flows, Loret argues, governments should concentrate their efforts on
investigating and understanding criminal economies. "For the poor farmers that work for the narco cartels, whenever they
have a choice it's a surviving choice. It's not an ambition thing," he said. "It's because of the state
not being able to provide good jobs, good opportunities, and some sort of future for them that they become farmers for the
looking at the narco-economy, we can conclude that the government's aim is not to completely eradicate drug cartels,"
Loret said. "The sudden disappearance of drug cartels would trigger a brutal economic crisis that no government wants
to have in their territory. I believe governments are actually trying to reduce the negative externalities of the illicit
activities: less violence (executions, extortions, kidnappings, etc.) and less hard drugs available in the internal market."
In his presentation, Loret also stated that he supports
drug legalization. He pointed out that drug prohibition amplifies the profitability of substances like marijuana and heroin, which are cheap and easy to produce but can be sold at high markups once they are
trafficked to foreign markets. "I think the strategies that have been implemented so far have failed. So why not try
something different?" he said.
also highlighted the necessity for international cooperation in combating organized crime, specifically citing the United
States as the country best positioned to provide financial and technical assistance. "These are international organizations
that can have people across not only the continent but in Asia and Europe…. These are multinationals, and they work
as multinationals," he said. "No country can fight this by themselves."
This commentary, "An Economic Approach
to Fighting Mexico’s Drug Cartels," was first published in InSight Crime, on Dec. 2, 2015 and reposted per a Creative Commons authorization. InSight Crime's objective is to
increase the level of research, analysis and investigation on organized crime in Latin America and the Caribbean.