Like all good multinational businesses, they've diversified.
MEXICO CITY — When the U.N. Office on Drugs and Crime (UNODC) releases its annual status report on the narcotics trade later this month, it will almost certainly show a decrease in the volume of cocaine traveling through Mexico into the United States. Last year's report did too -- a 40 percent drop in seizures between 2006 and 2008. Worldwide, the cocaine market today is worth about half as much as it was just 15 years ago -- $88 billion compared with $165 billion in 1995.
This would be excellent news -- if it weren't for some alarming trends going in the other direction. As the cocaine trade through Mexico has fallen dramatically, the violence here has risen remarkably. Whereas 2006 saw just over 2,000 deaths attributed to drug violence, in 2010 there were an estimated 11,000 such killings, according to data from Stratfor and local press accounts. Ciudad Juárez, a border city of approximately 2 million at the center of the ongoing violence, has seen a particularly sharp spike. In 2001, there were just 16 murders for every 100,000 Ciudad Juárez residents. In 2010, that number reached 93 -- an increase of nearly sixfold -- according to the Mexican Commission for the Defense and Promotion of Human Rights.
In other words, the war on drugs may be taking its toll on the narcotics trade, but it hasn't done anything to end the violence -- a stubborn fact that runs counter to an emerging consensus about the drug war. Across Latin America, intellectuals, scholars, and even policymakers are increasingly arguing that there is just one thing that can bring an end to the narco-troubles: the decriminalization of the drug trade in the United States. Legalize and regulate use, proponents argue, and prices would drop and the illicit trade would disappear overnight. Cartels would be starved of their piece of the global illicit drug pie, which the UNODC has estimated at some $320 billion per year.
But would legalization really work? With each day that passes, it looks like it wouldn't be enough, for one overarching reason: The cartels are becoming less like traffickers and more like mafias. Their currency is no longer just cocaine, methamphetamines, or heroin, though they earn revenue from each of these products. As they have grown in size and ambition, like so many big multinational corporations, they have diversified. The cartels are now active in all types of illicit markets, not just drugs.
"Mexico is experiencing a change with the emergence of criminal organizations that, rather than being product-oriented -- drug trafficking -- are territorial based," says Antonio Mazzitelli, head of the UNODC office in Mexico City. They now specialize in running protection rackets of all kinds, he says, which might explain why the violence has gotten so bad: Mafias enforce their territorial control by force, killing anyone who resists or gets in the way.
"Before, we had organized crime, but operating strictly in narcotrafficking," adds Eduardo Guerrero Gutiérrez, a consultant and former advisor to the Mexican presidency. "Now we have a type of mafia violence ... and they are extorting from the people at levels that are incredibly high -- from the rich, from businesses." For this reason, Mazzitelli says, legalization would have "little effect."
Cartels such as the Zetas and La Familia, long categorized as drug-trafficking organizations, have transformed themselves into territorial overlords. With distinctive zones of influence, complex organizations, and a wealth of manpower on which to draw, they act as shadow governments in the areas they control, collecting "taxes" on local establishments and taking a cut of the profits from illegal immigration to the United States. "This fight is not solely or primarily to stop drug trafficking," Mexican President Felipe Calderón told the U.S. Congress in May 2010. "The aim is to ensure the safety of Mexican families, who are under threat of abuse and wanton acts of criminals."
The cartels' expansion may have begun through their everyday narcotrafficking work -- namely through money laundering, one of the most discussed topics in Mexican politics today. Once upon a time, this was quite easy to do; cartels could wire the money in convoluted ways or open new accounts to which individuals would report earnings from businesses that existed only on paper.
But as the government cracked down in recent years, the cartels got more creative. In June 2010, Mexican authorities put strict limits on how much cash any individual could deposit into a bank on any given day or in any given month. They also limited the amount of cash one could use to buy things like airplanes or cars. So the cartels started engaging in actual trade, which helps them launder their drug profits, explains Shannon O'Neil, a fellow at the Council on Foreign Relations in Washington. They buy consumer goods, such as televisions and perfumes, in the United States and sell them on the Mexican side at a loss. The revenues are "clean" money. And as a bonus, the cartels have a network of vendors ready and willing to sell illicit goods.
Other markets are entirely separate from the narcotics business. Perhaps the most dramatic example is oil, one of Mexico's largest exports and increasingly a vehicle for illicit trade. On June 1, the country's national oil company, Pemex, filed a lawsuit accusing nine U.S. companies of colluding with criminals linked to the drug trade to sell as estimated $300 million worth of stolen oil since 2006. That's an amount equal to the entire cocaine market in Mexico, says UNODC's Mazzitelli. In other words, if the cocaine trade dried up, the cartels would still have access to an equally large source of revenue.
Equally troubling is the firearms trade, which has a direct link both to the violence and to the sustainment of the criminal organizations working across this country of 107 million. There are no reliable estimates of just how big this market is, but according to a recent U.S. Senate investigation, some 87 percent of the weapons used by the cartels are sourced from the United States. "If this were Southeast Asia, they'd be bombing the gun stores in Arizona, as if that's the Ho Chi Minh trail," says Ted Lewis, head of the human rights program at Global Exchange.
Mexico's cartels have also infiltrated the government and security forces, though primarily at a local level. "Just going by all the reports -- academic and media -- we could safely assume that all municipal police departments are infiltrated," argues Walter McKay, a security consultant who has spent the last three years working in Mexico. "But it's not just the police. We focus on police and police corruption, but the entire apple is rotten." In the latest example of how high the rot goes, the ex-mayor of Tijuana, Jorge Hank Rhon, was recently arrested for gunrunning and alleged links to organized crime.
Then there is the cartels' sheer size. An estimated 468,000 people worked in the drug trade in 2008, making the cartels collectively among the biggest industries in Mexico. (By comparison, the state oil company, the largest firm in Mexico, has about 360,000 employees.) The cartels also now outnumber the police, estimated at just over 400,000 personnel nationwide in 2010.
The corruption and weakness of the police explains why, over the last half-decade, Calderón has deployed 50,000 troops across the country to decapitate the cartels' leadership and reclaim their territory block by block. Take away a criminal organization's leadership and turf, the thinking goes, and you also rob it of the ability to control just about every market -- not just the narcotics trade. Just on Tuesday, June 21, the government apprehended José de Jesús "El Chango" Méndez, leader of the so-called "Knights Templar" cartel. Calderón quickly touted the arrest as a "coup by the federal police against organized crime" on Twitter.
Yet critics of the government's strategy say it has been far too militarized. Violence has increased every year since the drug war began, and many civil society groups here accuse the national security forces of hurting as many civilians as they do actual criminals. And even "success" risks a "balloon effect," as a cartel squeezed in one location will almost inevitably pop up elsewhere. This effect is already painfully visible in Latin America as a whole, with Mexican cartels such as the Zetas moving into Guatemala and overwhelming the much-weaker state.
Many activists are thus calling for a completely new approach. Silvano Cantú, a researcher at the Mexican Commission for the Defense and Promotion of Human Rights, argues that Mexico needs to think bigger than trying to win back its turf city by city. "We need to be talking to everyone," he says, mentioning the United States, Colombia, Europe, and "anywhere they clean money and buy arms." The government, too, is frustrated with the guns; cutting down on the sale in the United States is one of the Calderón administration's key demands.
The legalizers, a group that includes former heads of state from Brazil, Colombia, and Mexico, largely agree with this comprehensive approach. Trying to cut supply without cutting demand is a losing game, they argue. "The global war on drugs has failed, with devastating consequences for individuals and societies around the world," they wrote in the most recent report of the Global Commission on Drug Policy, an independent panel that has called for a dramatic rethinking of the drug war. Their recommendations call for the normalization of drugs (that is, legalization of possession linked with public-health regulation), including cocaine.
That would almost certainly hurt the cartels, but it probably wouldn't be enough, counters Mazzitelli of the UNODC. "Legalization is a fake solution to the problem of security," he argues, citing a 2010 Rand Corp. report that found that legalizing marijuana in California would cut cartel profits by just 2 to 4 percent. If it does come, legalization is also quite a ways off -- and Mexico's crisis is happening now. Only about half of U.S. citizens polled last year by Gallup supported legalizing marijuana, the least lucrative (and arguably the least dangerous) drug entering the country from Mexico.
If legalization is out and sending in the Army doesn't work, what's left? Among the most popular alternative ideas floating around Mexican civil society is that of creating "citizen security" -- empowering local communities to resist organized crime. That means not only improving policing but also reintroducing the state in other ways, through education, economic opportunity, and a judicial system that investigates and punishes crime, explains Edgar Cortez, a researcher for the Mexican Institute of Human Rights and Democracy.
The broken justice system is unquestionably part of the problem. Mexico has a poor record of holding criminals to account for all manner of improper activity -- from trafficking to homicide to regular old theft. "You have all these arrests and more than 40,000 deaths, but we don't have anybody arrested and investigated successfully," says McKay, the security consultant. Most police departments in the United States and Canada, he notes, have an 80 to 90 percent "solve rate" of finding the alleged perpetrator. "In Mexico it's almost zero." It's no coincidence that crime rates of almost every kind are up, according to the Mexican government's own data. Extortion, bank robbery, kidnapping, and armed robbery have all risen dramatically since 2006.
The sheer amount of progress needed to stop the cartels is daunting. But Cantú, the human rights researcher, chooses to remain optimistic. "We have to put forward alternative options," he argues. "We have to call upon the people to have hope."
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