Magazine article SourceMex Economic News & Analysis on Mexico

Mexican Drug Cartels Said to Earn as Much as Us$40 Billion

Magazine article SourceMex Economic News & Analysis on Mexico

Mexican Drug Cartels Said to Earn as Much as Us$40 Billion

Article excerpt

Earlier this year, Forbes magazine listed notorious drug-cartel leader Joaquin Guzman Loera among its "new billionaires." Earnings of the Sinaloa cartel leader, who is also known as El Chapo, are only a fraction of what the drug industry earns as a whole. A recent report from consulting company Kroll de Mexico put earnings of drug traffickers in Mexico as high as US$40 billion. A separate report from the US government notes that the cartels are able to make the most of their earnings by organizing in much the same fashion as multinational corporations. The heavy financial power of the cartels has allowed drug traffickers to more than hold their own against the anti-drug efforts of Mexican law-enforcement agencies.

Earnings surpass budget for many Mexican government ministries

The Forbes listing of Guzman Loera among the world's billionaires caught many observers by surprise (see SourceMex, 2009-03-18), even though the high earnings of Mexican drug traffickers are common knowledge. Kroll, which put together a report for an Americas conference in Miami, estimated that Mexican cartels earn between US$25 billion and US$40 billion per year.

Some observers pointed out that drug-trade earnings surpass the budget of many Mexican government ministries. "These resources are three times higher than the budget requested by the Secretaria de Educacion Publica in 2010," said the Mexico City daily newspaper El Universal.

Kroll official David Robillard told participants at the conference--which was organized by the World Bank, Florida International University (FIU), and the state of Florida--that the annual drug-trade earnings greatly surpass remittances from Mexican expatriates. Remittances are expected to be down this year to about US$23 billion or less (see SourceMex, 2009-06-03 and 2009-09-02).

Robillard, who heads Kroll's operations in Mexico, said the slump in most of Mexico's economic sectors this year will magnify the impact of drug profits on the Mexican economy as a whole. "[Drug profits] will make a difference, much more than in the past," said the Kroll official.

Cartels organized like multinational corporations

The Kroll report coincides with a recent study from the US Department of Justice and the US Treasury, which notes that the structure of drug-trafficking organizations has evolved and become more sophisticated. Many drug-trafficking groups now operate much like multinational corporations.

"Mexican cartels increasingly have a more corporate structure, they have a CEO (chief executive officer), operations units, technological teams, financing cycles, and strategic alliances with other organizations," said a DOJ official.

The DOJ and Treasury put together the report after conducting investigations in the US, Canada, Europe, Central and South America, Asia, and Africa. The study also examined court documents filed in the US.

The report says that Mexican cartels control 80% of the cocaine traffic that originates in Colombia and other parts of South America and 90% of the cocaine traffic that enters the US.

Robillard pointed to the highly corrupting influence of the Mexican drug organizations, which now have a nationwide presence in Mexico. The cartels have threatened and bribed law-enforcement officials and politicians into cooperating with them. In a recent case, federal authorities arrested several mayors in Michoacan state for offering protection to the local drug organization known as La Familia, which has ties to the powerful Sinaloa cartel (see SourceMex, 2009-05-07 and 2009-08-19).

The financial power of the drug cartels has also given them a major advantage over local law-enforcement agencies, which at times are powerless to act against their far-reaching operations. The cartels operate with weapons smuggled from the US, which has been a complaint that Mexican officials frequently lodge with US counterparts (see SourceMex, 2008-06-11 and 2009-03-25). …

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