Drug Production and Trafficking in Mexico

 

Drug Production and Trafficking in Mexico

According to the U.N. Drug Report of 2009, Mexico is the second cannabis producer in the world (after Morocco).  Moreover, according to the Mexican Secretary of Defense, half a million people were linked to the illegal drug trafficking and 7 million hectares were dedicated to the production of cannabis.[1]  Furthermore, Mexico is the principal transit route of cocaine, accounting for 90% of the cocaine smuggled into the U.S.

The profits generated by the illegal drug business are very large.  Nevertheless, due to the illegal nature of the business, together with the lack of transparency and objective methodology of current studies, it is almost impossible to know the exact profits generated by the drug trafficking business.  However, some estimates are cited below:

13.8 billion U.S. Office of National Drug Control Policy (ONDCP)
18 to 39 billon National Drug Intelligence Center, U.S. Department of Justice, National Drug Threat Assessment
25 billion Hillary Clinton, Secretary of State
17.9 to 28.3 billion David T. Johnson, Bureau of International Narcotics and Law Enforcement Affairs, Department of State
25 to 40 billion David Robillard, Director General of Kroll Mexico

Due to the illegal nature of the business, it is very hard to know the exact figure of profits generated by drug trafficking.  These estimates do show that a large quantity of money is brought back to Mexico from the U.S.  The profits can be used to corrupt government officials and sustain a war between the different cartels or against the Mexican Government.  Furthermore, we should take into consideration that Mexico is a country with high levels of vertical inequality, where more than 12% of the population lives under the poverty line and 60% of the population lives under some level of poverty.  By taking this into consideration, together with corruption, we can see how drug trafficking is not only a matter of national security, but also a socio-economic factor.

The current situation in Mexico is critical.  There are struggles on all fronts:  the cartels are violently fighting each other in order to gain control of an increasing local and international drug market; the government is fighting against “organized crime,” which has no head, structure or hierarchy and that, due to poverty and corruption, is very well immerse within Mexican society.  President Calderon is fighting a war that is poorly organized, looking to legalize a weak Government that is supported only by a faithful army, which is trying to control the ongoing violence in several states.  However, in many cases, the soldiers are causing violence to the civil society, which finds itself immersed in a national fight against an international problem.  Finally, Mexico’s closest “ally” (i.e., the United States) is not only increasing the demand for illegal drugs, but also supplying drug traffickers with the necessary money and arms in order to perpetuate this “war.”


[1] Statement made by Guillermo Galvan, Mexican Secretary of Defense (SEDENA), August 7, 2009, Mexico.

Mexico Introduction, Historical, Political, Economic context (draft)

Mexico

Mexico is the 2nd largest economy in Latin America, and second most populous, after Brazil. It’s population is 113 million, and is younger, and growing faster than that of the United States (1.4% growth rate vs. 0.6%) . Life expectancy is 76 years old, among the highest in Latin America, and close to that of the United States (78 years) http://data.worldbank.org/country/mexico , http://www.prb.org/pdf10/10wpds_eng.pdf

Mexico is considered one of the success stories of Latin America and neoliberalism.  It has enjoyed significant stability and economic growth.  Because of its proximity to the United States, the economy is more diverse and less oil dependent than other large Latin American countries like Brazil and Venezuela.  Though influenced by its proximity to the U.S., the country developed in a corporatist paradigm, which continues to shape Mexico’s politics and institutions.  A shift towards greater democracy will require a greater shift away from the legacy of corporatism.  Two issues which dominate the news in both Mexico and the United States right now are the drug violence, and migration from the poor rural southern areas to the north and to the U.S.  These inter-related issues have an influence on the economy and politics of Mexico, and are in turn greatly influenced by Mexico’s corporatist past and by the country’s dependence on the United States.

Historical Context – Stability, Economic Growth, Inequality

Among Latin American countries, Mexico is considered to have had one of the most stable histories since its Revolutionary period ended in the late 1920’s, (Santiso, others). Unlike many other Latin American countries, for 90 years, Mexico has experienced a period without revolution, and a stable transition from one leader to the next. As a result, economic growth was greater than it might have been otherwise – though this does not mean that this growth was equitable or constant. In addition to its long history of “political stability”, Mexico’s growth is credited to some degree to its location next to the United States, a major trading partner and influence on Mexico’s policies and economy (Santiso, others).

The violent period of the Mexican Revolution ended around 1928, with the assassination of General Obregon.  From that period forward, presidents left office relatively peacefully, without violence.  The PRI party was started in 1928, and from 1940-2000, a succession of PRI candidates won presidential elections every six years.  However the elections were not particularly free or open, and the incoming president was generally handpicked by the exiting president.  Mexico’s institutions, labor unions, and civil society developed in this climate of clientelism, in which the president controlled the legislature and policy-making, and handed out favors to the various interest groups.  According to Santiso,, “In spite of belonging to the same partisan dynasty, for decades each new president tried to differentiate his new reign from his immediate predecessor in successive autonomous gestures in order to consolidate his authority not only over the state but also over the party” (pp 139-140) “alternating between interventionism and laissez faire policies” (p 140)

 

In 1994, a financial collapse, and the signing of NAFTA marked a shift towards greater openness in the economy and in elections, and towards neoliberal policies.  The US’s bailout of Mexico after the liquidity crisis, and the implementation of NAFTA, have made Mexico even more dependent on its ties with the US.  “The economy has slowly achieved a great transformation of its productive machinery,” and it’s risk premium has been delinked from other Latin American countries (Santiso, 154-155).  As a result of Mexico’s increasing ties to the U.S. market through NAFTA, Mexico grew it’s non-oil exports, helping it to escape the dependence on oil of other Latin American economies, and the “Dutch disease” of heavy reliance on global demand for commodities.  However, analysts say that much more needs to be done towards transforming Mexico’s oil industry to a market-driven one in which the state plays a significantly smaller role, and improving the government’s tax collection.

This stability and growth is not only due to Mexico’s relationship with the United States.  As the country has moved towards a more democratic system, it is also strengthening its institutions, including the federal election commission, and an autonomous central bank.

Politics

After 70 years of rule by the PRI party, the center-right PAN party won the presidential election in 2000 and 2006.   This election was hailed as evidence of the democratization of Mexican politics and a move away from the more authoritarian style of the one party government.  Yet, “if democracy is fundamentally a system of governance based on the participation of citizens in the public realm, it follows that democratisation involves more than the institution of competitive elections. Democratization also requires the transformation of the institutions of the state, economy and civil society into public spaces that reflect a culture of citizenship, in which there is a recognition, encouragement and protection of the rights of citizens and their ability to participate in all spheres of public life.”  (Brickner, 2010).  In Mexico, the corporatist influences of the past continue to dominate institutions, for example the unions, the state-controlled oil industry, and monopolistic sectors of the economy such as banking. (Brickner, The Economist).

Further reforms since 2000 have been difficult.  The PRI continued to control Congress, and the divisions between the parties has made the process of cooperation difficult.  Vicente Fox was not considered an effective president during his 2000-2006 term, though he claimed that he had shifted away from the authoritarian rule of past presidents and instituted greater transparency and democratization. (Wiarda, Kline, 2007, p 398)  Fox expected that he would be able to work with the Bush administration in the US to improve the immigration process and allow more workers from Mexico into the US, but after September 11th, 2001, the Bush administration turned its focus to fighting terrorism and to wars in Afghanistan and Iraq, and border-crossing difficulties and anti-immigration sentiments in the U.S. only grew.

After Fox’s administration, there was much speculation that Lopez Obrador of the leftist PRD party could win the 2006 election, but the PAN candidate, Felipe Calederon won and continued PAN’s control of the presidential office.  Calderon shifted Mexico’s policy of fighting the drug cartels, by deploying federal army troops to battle drug criminals.  Yet the effectiveness of his decision have been widely criticized.  In 2009, public policy think tank Mexico Evalua found that public sector spending on security increased by seven-fold compared to the previous administration, however the increased spending has not resulted in either a reduction in the crime rate or a more effective justice system.

http://www.mexicoevalua.org/descargables/6c9a29_MEX_EVA-INHOUS-GASTO_SEG.pdf

http://bit.ly/tBGJQj – press release (in English)

In fact, violence has increased dramatically, and there is growing evidence that many casualties are innocent citizens – both from army and cartel violence – despite Calderon’s claim that almost all of those killed by the army have been criminals.

Many Mexicans believe that they do not have the power to hold government officials accountable, and that the war on drugs is a losing proposition.  La violencia spreading to previously peaceful parts of the country.  In Monterrey, killings related to organized crime have risen from 22 to 178 in 3 years.  As many as 40,000 people have been killed over the past 5 years, and the vast majority of these deaths are never investigated.  While the government claims that those killed are connected with the drug trade, activists say that many being killed are civilians, and often by the military as well as cartels.  Many are calling for a scaling back of the militarization of the drug war that has escalated since 2006 when President Calderon declared war on the cartels and deployed tens of thousands of military troops for this purpose.  Estimates on the value of the drug trade to Mexican cartels are as high as $30 billion annually.  The US has pledged $1.4 billion in aid to Mexico’s military over 3 years in comparison.  Some are calling for legalization of drugs as a means to stem the violence.

http://www.theatlantic.com/international/archive/2011/06/in-mexico-growing-popular-movement-calls-for-end-to-drug-war/240311/2/

http://www.theatlantic.com/international/archive/2011/07/tombs-of-the-unknown-mexicos-mysterious-deaths/241713/

The PRI party is expected to benefit from the concerns about the drug violence, with “growing nostalgia for the way things were under PRI presidents”.  PRI party governor of the State of Mexico, Enrique Pena Nieto, is largely expected to be nominated as the PRI’s next presidential candidate.  Though the PRI lost two presidential elections, they control a majority of Congress, and state governorships – allowing them to control significant spending in ways that can garner votes.

http://csis.org/files/publication/111019_Wood_2012USMexicoRelations.pdf

http://www.economist.com/blogs/americasview/2011/09/crime-mexico http://www.theatlantic.com/magazine/archive/2011/10/beauty-and-the-beast/8626/

The latest Latinobarómetro poll, published by the Economist, shows that popular support for democracy has declined – those responding positively to the statement “democracy is preferable to any other type of government” declined 9 points since last year, perhaps due in part to the violence.  Only about 20% responded that they were satisfied with how democracy works in Mexico.

http://www.economist.com/node/21534798
http://www.latinobarometro.org/latino/LATContenidos.jsp

Economy

“At the beginning of the 1980’s, oil exports represented more than 2/3rds of Mexico’s exports, in 2005, slightly more than 1/10th.” (Santiso, p156).  Increasingly high-technology manufacturing has become an important component of the country’s exports.

Though strengthened by foreign investment, trade with the US from NAFTA, and remittances from the U.S., the economy faces ongoing challenges of deep inequality, over-reliance on exports to the U.S., a state-controlled oil company with shrinking production, and extremely low tax collections.

According to the UNDP, Mexico increased its performance on the Human Development index from .782 in 1990 to .854 in 2007.  Chile, argentina, Uruguay and Cuba are all ahead of Mexico in the HDI.

Inequality is a longtime intractable issue in Mexico, as in the rest of Latin America, which has persisted in the face of economic growth.  According to the UNDP, “10 of the world’s 15 most inequality-rife countries belong to this region.”  The Gini coefficient of Mexico is 51, compared to 40 in the United States (which is high among developed countries), 47 in Costa Rica, and 56 in Brazil.  Inequality rose during the 1980’s and 90’s, and has declined by almost 6% since then in Mexico. This is attributed in part to higher educational attainments, as well as to improvements in the country’s conditional cash transfer program. Some experts have suggested that privatization and free market reforms created greater income inequality (UNDP p 29_).  While Mexico’s HDI is increasing (0.801 in 2000), there are stark contrasts between regions – for example the HDI of the Federal District was 0.891 vs Chiapas at 0.703. (p 30) Additionally, there are deep inequalities based on race – the poverty rate (less than $1 a day) for people of European descent around 2000 was 12.3%, vs 40.0% for indigenous peoples and Afro descendants. This is true even after controlling for educational attainment and work experience. (p 36)

A study conducted in 2009 by Battison et al. looks at various data describing poverty in contries including Mexico from 1992-2006.  The study shows that in terms of income, school attendance, education, sewage/sanitation, and access to water and housing, there was a clear improvement in poverty in these dimensions – however, rural areas still lag in these multidimensional indicators of poverty. (UNDP p 41)

 

Source: Gasparini et al. (2009), based on SEDLAC (CEDLAS and World Bank, 2010

http://www.beta.undp.org/content/dam/undp/library/corporate/HDR/Latin%20America%20and%20Caribbean%20HDR/rhdr_lac_en_2010.pdf

The recession that began in 2008 was deeply felt in Mexico – its economy shrank by 6.1% in 2009, and the country lost hundreds of thousands of jobs, many in manufacturing.  Mexico’s oil production continues to decrease, and the country has barely succeeded in growing per capita income over the past ten years.  The unemployment rate (official) is 5.4%, compared to 4.1% pre-recession, and the percentage of Mexicans in poverty has grown to 46.2% (as opposed to 21.4% of the Brazilian population).  As the unemployment crisis continues in the US, Latinos are more seriously impacted, as well as remittances to Mexico.

 

http://www.economist.com/node/21526899

 

 

*from the World Bank data sets

The signing and implementation of NAFTA has meant that Mexico has been able to increase its trade significantly – it is the third largest trading partner of the U.S after Canada and China.  The World Bank calls Mexico the easiest place in Latin America to do business.  Exports to the US have rebounded.

Social Services, Urban & Rural

According to the UNDP, a full 43.7% of the urban population of Mexico is employed in the informal economy, in 2008.  This means that a large portion of workers are not eligible for social supports provided to formal employees.  Additionally, there is a gender disparity, with women generally involved in paid work but also primarily responsible for carrying the burden of unpaid work.

Oil

PEMEX is the nationalized oil company of Mexico, controlled by the state.  PEMEX accounts for about 40% of Mexico’s public sector revenue through taxes and dividends, and oil products represent about 15% of thMexico’s exports.  Declining production, large pension obligations, and mismanagement by the government which keep the company from making needed capital investments are all issues for PEMEX’s future.

 

http://www.economist.com/node/14548839

PEMEX’s earnings before interest and taxes in 2008 were about $72.7 billion

Standard and Poors investment analysis of PEMEX, March 2009 http://www.ri.pemex.com/files/content/PEMEX_SA_0309.pdf

While drug violence and immigration continue to dominate the news, there are stories of economic opportunity in Mexico, primarily from those seeking further neoliberal market reforms.   Analysts suggest that Mexico is significantly underperforming its economic potential for growth, and that the next president’s primary objective will need to be bolstering the economy.  A major element of this will be partial privatization of PEMEX, and opening up the oil sector to greater private investment.  This will be difficult however, as it requires approval of the legislature as well as the president, and state ownership of oil resources is protected by the Constitution in place since 1917. (http://univisionnews.tumblr.com/post/12510815444/mexicos-economic-challenges-after-the-2012)

Education

Educational attainments in Mexico have increased over the past 4 decades, along with upward mobility between generations (UNDP p 54)

Timeline:

Mexican war of Independence

  • Started in 1810 by priest Miguel Hidalgo y Costilla, who was captured and executed in 1811
  • Was in many ways a civil war between indigenous, criollos, and peninsulares.
  • José María Morelos assumed leadership of the rebel army
  • 1813 convened the Congress Chilpancingo, which issued the first official declaration of independence.
  • In 1821 a military coup in Spain led to conservative criollo forces in Mexico allying with rebel armies for independence.  The Treaty of Córdoba was signed with Spain, recognizing Mexican independence.  Iturbide was named “emperor”

First Mexican Republic – 1824-72.   Mexican American War took a large amount of northern territories from Mexico.  Conservatives and Liberals clashed over the role of the church in government, and of large landowners vs. workers and peasants.

1876-1911            Porifrio Diaz in power.  Diaz instituted land laws that restricted peasants from claiming land without formal legal title.  95% of Mexico’s land was owned by 5% of the population.

1910                       Mexican Revolution begins when Madero was jailed for running a campaign against Diaz. Madero wrote a letter from jail calling for “free suffrage and no re-election” and called for Diaz to be overthrown.

1911                       The federal army is defeated.  Madero signs the Treaty of Ciudad Juarez with Diaz.  Madero wins a new election.  Fighting continued when Madero failed to return lands to peasants and implement social reforms.

1913                       Madero forced to resign, and then assassinated in a coup led by Madero’s former commander in chief Victoriano Huerta.  Huerta installed as president.  Revolutionary groups led by Zapata and Pancho Villa continued fighting, and Woodrow Wilson refused to recognize Huerta’s government.

1914                       Huerta left office as fighting continued and US forces seized the port of Veracruz.  Venustiano Carranza took the presidency.

1917                       Mexican Constitution instituted many social reforms regarding agrarian land and labor.

1920                       Carranza assassinated under a revolt led by General Obregon and other military leaders.  General Álvaro Obregon elected president.

1928                        Obregon assasinated, marking the end of the violent “revolutionary period”

1929                       National Revolutionary Party begins (renamed PRI in 1946)

1934-1940           Lázaro Cárdenas president.  Instituted sweeping reforms returning land to peasants, and nationalized the oil industry.

1940-2000          Relatively peaceful succession of PRI presidents every 6 years.  In response to protests for meaningful elections (as opposed to handpicked successors of the outgoing president), presidents instituted various reforms, ultimately including mayoral elections where the PAN party won in Mexico City and Baja.

1994    Economic crisis

2000                       PAN candidate Vicente Fox won the election and took over the presidency from Ernesto Zedillo.  Fox was followed by PAN candidate Felipe Calderon, whose term expires in 2012.

Citations:

Santiso, Javier, “Latin America’s Political Economy of the Possible”, MIT Press, 2006.  pp 139-164

Other news

Pan American Post 10/25/11, Hannah Stone
A report in the WSJ looks at the high number of arrests of undocumented
migrants from Mexico and Central America who are detained by agents close
to the US’s northern border. Experts consulted by the newspaper said that
these individuals would not have crossed over from Canada, and suggested
rather that border agents may be overstepping their remit, and asking for
proof of immigration status even from those who are not trying to cross the
US-Canada border, but are merely traveling nearby.

Mexico is the most dangerous country in the Americas for journalists,
according to a joint report by the UN and the Organization of American
States (OAS), with 13 journalists killed so far in 2011. Many of these
deaths have been linked to violence caused by organized crime.

The New York Times reports on US infiltration of Mexican drug cartels,
saying that Washington’s network of informants in the country has grown
significantly in recent years. These agents have been involved in two dozen
killings or captures of high-level cartel bosses, according to the report,
but their presence remains a sensitive issue for the Mexican authorities

Pan American Post 10/24/11 Geoffrey Ramsey

The Washington Post reports on the reduced emphasis that the Calderon
administration is placing on drug crop eradication in Mexico. Owing to a
scarcity of resources and the domestic unpopularity of such efforts in
rural areas, soldiers who were previously involved in eradication have been
increasingly reassigned to focus on urban security in crime hotspots like
Monterrey, Ciudad Juarez, and Tijuana. In 2010, security forces cleared
43,000 acres of marijuana, down from 77,500 acres of marijuana in 2005.

Pan American Post 10/20/11
The Center for Strategic and International Studies published a
reporton
the resurgence of Mexico’s PRI party and the implications for the 2012
presidential elections. The reports argues that evern since winning a
Congressional majority in 2009, the PRI has managed to “prepare a path
towards electoral victory” by pushing federal funds towards the areas and
programs most needed to attract voters.

Pan American Post 10/11/2011
The Mexican government reported a large decline in the number of Central
American migrants crossing the country on the way to the US, based on a 70
percent drop in the number of undocumented Central Americans stopped in the
country. Some 140,000 were detained in 2010, down from 433,000 in 2005. The
Associated Press reports that this conclusion is questioned by academic
Rodolfo Casillas, who argued that detentions had fallen due to a government
decision to stop raiding cargo trains to look for migrants. However, as
noted in Thursday’s post, arrests of undocumented migrants on the US border
have declined to their lowest level in 40 years, suggesting that the US
could be seeing a real drop in those trying to make their way there via
Mexico, perhaps discouraged by the ailing economy or by the threat of
violence from Mexican gangs in the border region.

Feminist Activism, Union Democracy and Gender Equity Rights in Mexico

BRICKNER, RACHEL. Journal of Latin American Studies42. 4 (Nov 2010): 749-777.

“Making the Desert Bloom”, The Economist, August 27th, 2011

Grayson, George, “Mexico, the Emergence of a Messianic Reformer”, “Latin American Politics and Development”, Westview Press 2007, p 387-402.

 

News to go back to:

      Surprisingly, Mexico’s drug-fueled conflict does not seem to have taken
      much of a toll on economic growth. As the Wall Street Journal reports,
      Mexico’s GDP grew by 1.34 percent during the third quarter of this year,
      and experts believe that the country’s economy will grow four percent in
      total this year. Mexico is also on track to bring in $20 billion in foreign
      direct investment this year, which is as much as it received last year.
      Still, the article notes that smaller businesses are disproportionately
      affected by the violence, and are losing out in drug war hotspots like
      Ciudad Juarez.
      The office of Mexico’s attorney general announced on Tuesday that it would
      investigate reports that the Institutional Revolutionary Party (PRI) used
      support from drug cartels in Michoacan to win the gubernatorial race and
      several congressional races in the state’s recent elections. Reuters
      reports that local television broadcast footage of an alleged Familia
      Michoacana leader instructing voters to support the PRI in the municipality
      of Tuzantla.

Drug Cartels

Organizations

During the 1990’s, after the capture of Miguel Angel Felix Gallardo (a.k.a. “The Godfather”) in 1989, a division of the most powerful drug organizations took place in Mexico.  As mentioned, from his prison cell, Gallardo divided the most important organizations of Chihuahua, Sonora, Baja California and Sinaloa to his closest associates.  Consequently, his associates from Sinaloa became the leaders of the most powerful drug trafficking organizations in Mexico (excluding the Gulf Cartel which was the only cartel not associated with Gallardo).  Currently, the different cartels are in a constant fight with each other for control of the border with the U.S., as whoever controls the border, controls the flow of drugs.  Additionally, the cartels fight within Mexico in order to control the transportation routes and the increasing local market.  The local cartels, aware of the strengths of their competitors, have formed alliances between them in order to become stronger and control more territory.  The principal cartels are:

  • The Gulf Cartel:  Founded by Juan Nepomuceno Guerra and led by Osiel Cardenas Guillén until his arrest in 2007.   It controls the eastern states along the coast of the Gulf of Mexico.
  • Cartel de la Familia: They are located in the states of Michoacán and Morelia.  The founder and leader is Nazario Moreno (a.k.a. “el mas loco,” which means “the crazy”).  They are characterized as a “pseudo-evangelical” organization and justify torture and murder as “divine justice.”
  • The Cartel of Beltran Leyva:  Their operational base is in Sinaloa.  The Beltran Leyva brothers were part of the Gulf Cartel until their former boss, “El Chapo Guzman,” assassinated one of them.
  • Juarez Cartel:  Founded by Félix Gallardo, Caro Quintero, Fonseca Carrillo and Carrillo Fuentes.  Their operational base is Juarez City, which has now become the most violent in Mexico.
  • Sinaloa Cartel:  Founded by the “Guero Palma” and is currently being led by Joaquin “El Chapo” Guzman.  The organization operates within the states of Sinaloa, Durango, Sonora and Chihuahua.
  • Tijuana Cartel:  Founded and led by the Arrellano Félix brothers.
  • Los Zetas:  In 1999, the Gulf Cartel hired a group of corrupt former elite military soldiers known as “Los Zetas,” who began operations as a private army for the Gulf Cartel.  In 2010, Los Zetas made a deal with the Beltran Leyva brothers and became rivals of the Gulf Cartel.

BBC NEWS (available at http://www.bbc.co.uk/news/world-latin-america-10681249).