An Economic Approach to Fighting Mexico’s Drug Cartels

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…

Read this piece in its entirety at InSight Crime.

Mexico and the Autodefensas: A Deal with the Devil

Mexico’s plan to incorporate citizen self-defense forces known as “autodefensas” into its official security strategy in the state of Michoacán is going about as well as expected. While the militias had some success in rolling back the influence of the Knights Templar cartel in their state, their reputation has been marred by deadly infighting among various factions, accusations of extortion of local businesses and alleged ties to criminal groups.

Last month, the government reached a deal with the umbrella organization representing these groups that allows their members to join the so-called Rural Police (“policía estatal fuerza rural” in Spanish). The agreement requires the autodefensa members who do not choose to join the Rural Police to register their firearms and keep them in their homes. According to the Federal Security Commissioner for Michoacan, Alfredo Castillo, the government will not tolerate unregistered militias after a May 10th deadline.

However, some of the vigilantes are resisting. They fear the government is using the registration effort as a ploy to seize their weapons. So far, there are no indications that this is the case, but distrust of official security forces runs extremely deep in Mexico. One recent study found that 90% of Mexicans have little or no trust in municipal police. Just a few weeks ago, nearly 100 police officers in Michoacán were fired for failing confidence exams.

The state’s inability to provide adequate security was the original impetus for the formation of the autodefensas, but their very existence has created problems in and of itself. For one, there is strong evidence that elements of the autodefensas have joined up with criminals from the Jalisco Cartel – New Generation (CJNG) and the Knights Templar to form a new cartel known as La Tercera Hermandad (“The Third Brotherhood,” or H3).  Mexico’s police forces are notoriously corrupt, but since the former vigilantes will now be working alongside official police, opportunities for espionage and sabotage of anti-crime operations will likely become more abundant.

Another issue is the difficulty of distinguishing between “good guys” and “bad guys.” Undoubtedly, some of the vigilantes who are hesitant to join the Rural Police are well-intentioned enough. The deal between the autodefensas organization and the government was widely (and misleadingly) reported as a “disarming” of the groups. It would not be unreasonable to worry that the government might take their weapons and leave them unable to defend themselves against criminals or other vigilantes.

However, there are also others whose motives may be more nefarious. For example, just this weekend, a firefight broke out in Lázaro Cárdenas between federal forces working with the Rural Police and a group of gunmen posing as an autodefensa. 155 subjects were arrested. According to Alberto Gutiérrez, a spokesman for the council of autodefensas, these men were “collaborators” with the Knights Templar cartel.

Whether or not Gutiérrez’s accusations are true, government actions against those who refuse to register their weapons could create a violent backlash that would only make the situation worse. As a recent report from InSight Crime and the Wilson Center put it:

Michoacán has…devolved into a low intensity four-front battle: militias fighting militias; militias fighting DTOs [drug-trafficking organizations]; militias fighting the federal security forces; federal security forces versus DTOs. There are more potential fighting forces that have been neutralized, such as the local municipal police, which may also enter the fray. The resulting chaos has terrifying implications that the government, and the Mexican populace, are only now beginning to comprehend.

Essentially, the government has no good options. It can’t continue to tolerate (much less work alongside) unregulated vigilantes, but it also can’t ignore the fact that those same unregulated vigilantes have proven themselves to be a very effective anti-cartel force. Trying to forcibly disarm them would result in violent resistance, weakening both sides and making it much easier for criminal groups to sweep back into Michoacán relatively uncontested.

Still, the idea of creating a new police force out of unvetted, untrained ex-militia members seems suspect on its face. It is all but guaranteed that the new Rural Police will experience the same problems affecting Mexico’s law enforcement in general: corruption, infiltration by criminal elements, defections to organized crime, human rights violations.

The autodefensas were never a sustainable solution to the lack of rule of law in Michoacán and their codification as an official police force won’t change much. What the autodefensa movement proved is that significant advances against organized crime groups can be achieved with strong cooperation between communities and the government. At the same time, it illuminated the fact that, where rule of law and legitimate economic opportunities are lacking, crime can – and does – pay.

Mexico’s Drug War has already claimed an estimated 100,000 or more lives and by the end of current President Enrique Peña Nieto’s term in office, it is expected to claim tens of thousands more. What Michoacán and Mexico need is not more security forces or funding, but a comprehensive and holistic approach to socio-economic issues like unemployment and poverty. Not an easy path by any means, but one that will be far more successful and far less gory than the current trajectory.

An Overview of Mexico’s “Drug War”

It is difficult to say when Mexico’s “Drug War” began. For nearly a century, the United States and Mexico have been engaged in operations to halt the production of drugs south of the border as well as their shipment to the United States, which is the world’s largest drug market. However, the genesis of the current Drug War is commonly traced back to the mid- to late-2000s for a couple of reasons. Just days after taking office in December 2006, Mexican President Felipe Calderon kicked off a veritable “war” against the cartels when he sent 6,500 soldiers and police into his home state of Michoacan to “battle” organized crime in the area.

By 2008, Calderon had upped the nationwide number of anti-crime forces to 45,000 and by the end of his term in office in 2012, it was estimated that the number of deaths from drug war-related violence had topped 100,000. Also in 2008, the United States began implementing the Merida Initiative, a $1.6 billion program designed to help Mexico “disrupt organized criminal groups, strengthen institutions, build a 21st century border, [and] build strong and resilient communities.” The following is a brief history of the Drug War and a synopsis of the current status of the conflict.


The roots of the current “drug war” can be found in the 1909 anti-opium conference held in Shanghai, which marked the first of many US efforts to push its domestic drug legislation as a model for the international community.

Shortly thereafter, during the era of alcohol prohibition in the United States, a persistent two-way black market trade pattern was born. Illicit substances (mainly alcohol, but also marijuana and opium, all of which were produced domestically in Mexico) were trafficked north as guns and money came south – a pattern that has continued to the present day.

In 1925, the United States and Mexico forged an anti-smuggling agreement, but it failed to achieve its desired results. In 1938, Mexico attempted to nationalize the production of intoxicating substances, to which the United States responded by embargoing all medicinal shipments to Mexico while simultaneously encouraging the Mexican government to allow for hemp and opium production to aid the Allied war effort.

After World War II, the Mexican government attempted many US-backed eradication efforts, which had the perverse effect of dispersing drug cultivation throughout a wider area of the country, beyond the reach of even the so-called “Grand Campaign” (“Gran Campaña”) of the 1950s.

The 1960s and 1970s were characterized by an explosion of drug use in the United States and increased bilateralism between the United States and Mexico on the drug issue, especially under US President Richard Nixon, who declared a “War on Drugs” in 1971. The Mexican government once again ratcheted up aerial eradication efforts in the mid-1970s and succeeded in drastically reducing the amount of drugs coming into the United States from Mexico until the latter half of the 1980s.

While some experts considered these efforts successful at the time, it is likely they would revise their analyses in light of present-day circumstances. These “mano dura” tactics likely pushed smaller, less daring criminals out of the market, accelerating the development of more violent, more powerful drug cartels. Also, trafficking simply shifted out of Mexico and into Colombia and other Caribbean countries, leading to the rise of groups such as Colombia’s Medellin and Cali drug cartels.

In the 1970s, free market reforms pushed many Mexican citizens out of the “formal” market and encouraged “informal” market activities such as drug production and smuggling. Displacement of rural populations due to socio-economic shifts, including deportations of criminals from the United States, demographic “youth bulges,” and a massive influx of drug money from the “coke craze” in the United States during the 1970s kick started the “globalization” process of drug cartels throughout the region.

US-backed crackdowns on the Colombian cocaine trade and a decline in the supply of Turkish heroin through the “French Connection” in the 1980s led to a relocation of narcotics production and trafficking to Mexico. This was accompanied by an increase in anti-drug spending by both the US and Mexican governments that continued through the 1990s, which focused on eradication and interdiction efforts in Mexico and heavy-handed prohibition and incarceration in the United States, which also continue to the present day.

The introduction of democratic reforms in Mexico during the 1990s chipped away at the long-ruling PRI’s one-party system. This created opportunities for new alliances between cartels and the government and police forces. The introduction of NAFTA in 1994 lowered trade barriers between Mexico and the world’s largest economy just to its north, spurring an expansion of the drug trade and other illegal activities by organized crime groups in Mexico. Today, these drug gangs have established supply routes in Africa and Europe and continue to terrorize citizens in Mexico with horrific acts of violent intimidation.

Current Situation

The drug trade is an international problem, but nowhere have its deleterious effects on citizen security and state governance been more brutally apparent than in Mexico. As Moisés Naím, editor in chief of Foreign Policy magazine for 14 years, wrote in a 2012 Foreign Affairs article entitled “Mafia States”:

[T]op positions in some of the world’s most profitable illicit enterprises are no longer filled only by professional criminals; they now include senior government officials, legislators, spy chiefs, heads of police departments, military officers, and, in some extreme cases, even heads of state or their family members…Increasingly, fighting transnational crime must mean more than curbing the traffic of counterfeit goods, drugs, weapons, and people; it must also involve preventing and reversing the criminalization of governments. Illicit trade is intrinsically dangerous, but the threat it poses to society is amplified when criminals become high-level government officials and governments take over criminal syndicates.

Journalist Anabel Hernández alleged in a recent interview with Democracy Now! that “in Mexico [there] doesn’t exist really a war against the drug cartels. What exist[ed] in the government of Felipe Calderón was a war between the cartels, and the government took a side of that war, protecting to the Sinaloa Cartel.” While this is far from being a commonly accepted assertion, the fact that drug gangs are intimately intertwined with the official Mexican government is nearly universally acknowledged. Even Calderon himself admitted that half of the state and local police were untrustworthy and that federal forces were rife with corruption.

Moreover, the “Drug War” may be a bit of a misnomer. Certainly, drugs play a major role in financing the cartels. Marijuana alone is estimated to bring in between $2 and $20 billion per year, accounting for up to 60% of drug gangs’ revenues (for comparison, Facebook took in $5 billion in revenue in FY2012). However, as Harvard economist Jeffrey Miron argues in a 2011 essay, prohibition of drugs is “almost certainly the worst possible” policy option for dealing with violent criminal organizations.  The real danger posed by the cartels is not the negative effects of the drugs they sell. Rather, it is the fact that money earned in the drug trade finances much more pernicious activities including – but not limited to – sex trafficking, human smuggling, kidnapping, extortion, murder for hire, money laundering, counterfeiting and identity theft.

The incredible amounts of money and power accumulated by those involved in these illicit activities can be used to bribe or intimidate just about anybody into silence or outright cooperation (the “plata o plomo” dilemma). Faced with a choice between mountains of money or swift and merciless death for them and their loved ones, every citizen – from judges, prosecutors, police, and prison guards to governors, mayors, and city council members-  has very little incentive to stand up to the gangs.

Last month, the Mexican government announced an initiative to “legalize” vigilante self-defense groups that have sprung up in response to drug-war related violence. The groups, known as “autodefensas” or “Rural Defense Units” have actually had some success in battling cartels and the government has been moving from leniency to outright cooperation with them over the past few months. However, there is a distinct possibility that the cartels will exploit this new policy to their advantage by using state-sanctioned groups as proxies in battles between themselves. Also, since the autodefensas will be working with police, opportunities for espionage and sabotage of state efforts against the criminals will likely become more abundant.

The most significant recent development in the Drug War is the capture of Joaquin “El Chapo” Guzman on February 23, 2014 by Mexican law enforcement. Guzman was the head of the most powerful cartel in Mexico, the Cartel de Sinaloa. However, the long-term impact of this achievement will likely be limited. While many hailed Guzman’s arrest as a major blow to the cartel, there is plenty of evidence indicating that belief is mistaken. For one, Guzman has escaped from custody once before. Also, the leadership of most cartels is fairly decentralized and Ismael Zambada, aka El Mayo, Guzman’s second-in-command, is likely to assume his former boss’s role.

Despite the decades-long struggle to quash the influence of the cartels, their operations have spread throughout Central America as well as Africa and Europe and many locations in the US. While many regional leaders have called for a serious reevaluation of Drug War policies, the historical record and current political climate indicate that these policies are unlikely to change in the near future. With billion of dollars invested in the status quo, politicians and other actors on both sides of the border have strong incentives to continue along the present trajectory.