The Dimension of Mexican Organized Crime<br />September2011<br />
The risk<br /><ul><li>Mexican DTO’s have gained extraordinary power in the last ten years, due to shifts in the drug market and the availability to use Mexico’s logistical infrastructure at a very low risk.
The lack of a national security and crime policy, has been a fertile ground for corruption in law enforcement agencies, government and society.
Internal disputes among the Cartels, the competition for entry points into the U.S. and increased revenues from local markets (drugs, prostitution, extortion and black market activities), have resulted in over 45,000 murders that include police, military, prosecutors, elected officials and politicians as well as innocent civilians.
At times urban and large cities, in the country have been controlled for up to two days by the DTO’s.
The Mexican government does not have a consistent strategy due to a lack of institutional capacity and bureaucratic infighting, the result is an incoherent public policy and failed attempts to deal with the problem.
This analysis will provide an overview of the situation based on a market explanation and the possible scenario if the current policy is not changed.</li></li></ul><li>Trafficking is based on a logistic business model<br /><ul><li>Supply in Colombia
Money Laundering</li></ul>$4,000 USD<br />$8,000 USD<br />$6,500 USD<br />1 kg. Cocaine in Atlanta wholesale price without dilutions<br />$22,000 USD <br />1Kg. Cocaine<br />in Meta Guaviare<br />$900 USD<br /> 1 kg. Cocaine in Galapagos<br />$3,500 USD<br />1 kg. Cocaine in Michoacán<br />$7,500 USD <br />1 kg. Cocaine in Laredo<br />$15,500 USD <br />1 USD = .90 USD<br />In Mexico<br />Casas de Cambio<br />Casinos<br />Real State<br />Construction<br />Escrow accounts<br />$18,000 USD<br />1 kg. Cocaine in MIlan wholesale price without dilutions<br />$33,500 USD <br />Mexican DTO’s have the biggest profit share of the market, and are able to determine prices worldwide<br />
Why did Mexicans become the no 1 player in the drug market?<br />Shifts in the supply structure of cocaine, the increased demand of meth and the conflict in Afghanistan, gave the Mexican DTO’s a unique position in the market<br />
“social unrest”, by traffickers<br />Demonstrations against military presence in Monterrey, a very organized civil society…….<br />20% of the population has a neighbor that is involved in drug trafficking, poll conducted by Gabinete de ComunicaciónEstratégica (Nov. 08)<br />
Drug war? Really……<br />Government needs to be very assertive and efficient in order to confront the cartels.<br />Largest cash seizure 200 million USD<br />But, not from a money laundering operation<br />216 airplanes impounded,<br />But, no pilots or traffic operators are in jail<br />Estimated revenue for Mexican Organized Crime<br />$161 billion USD<br /><ul><li>More weapons
Flexible organization</li></ul>Mexican budget to fight crime <br />$3 billion USD<br />Merida Initiative<br />$400 million USD<br />
A violent environment<br />Violence erupted from a boardroom dispute, between shareholders, and shifts in market trends. The new composition of groups is a result of disagreements over routes, production and local markets. <br />
Implications for THE Mexican PRIVATE SECTOR<br />
Implications for the Mexican economy / politics<br />
Violence outlook in Mexico<br /><ul><li>DTO’s prefer to have a quiet atmosphere, because this is good for business.
However violence is tolerated by DTO’s if it increases revenue or protects market share and routes.
But there are limits:</li></ul>Credible risk to life or imprisonment of top members <br />Extradition<br /><ul><li>There is room for more violence……their cost is still low and there is no credible risk of a punishment.
DTO’s are “outsourcing” violence to local criminals and specialized groups to isolate the “business unit” from the “protection unit”.
“Going after the hitman” will not reduce the size or revenue of DTO’s.</li>