The Criminal Economy

The violent disappearance of students attending the Ayotzinapa Normal School, located in the state of Guerrero, highlighted not only the complicity of political power with drug trafficking groups, but also how these organizations have grown from exclusive trading partners to crucial instruments in the execution of state crimes. The growing drug economy is an integral part of capitalism. UNAM economics professor Magdalena Galindo Ledezma has characterized the criminal financial sector and the industrialization of crime as major contributors to the national economy, reaching high levels of concentration and centralization. The economic importance of the drug trade is not limited to the influx of money generated by this activity, but involves the formation of a political subject that, by its historical configuration, is inextricably linked and subordinated to the state.

“Coast Guard Cutter Richard Etheridge offloads contraband in St. Petersburg” by Coast Guard News (flic.kr/p/qt34rc), used under CC BY-NC-ND 2.0 / Desaturated from original.

Here I seek to trace the economic importance of the Mexican drug trade, the complexity of the federal government’s income, and its organization; and, in light of its transformations, to understand its influence on national legislation and its place in the repression and criminalization of social activists who unsettle the state. 

Mexican drug cartels have been calculated to earn as much as $7 billion from the transfer and sale of cocaine to the U.S. market, apart from other drugs, crimes, and illicit transactions. For instance, a kilogram of cocaine hydrochloride base paste requires between 450 and 600 kilos of coca leaf. A Colombian farmer receives on average $1.30 per kilo, meaning each kilo of cocaine base costs between $585 and $780. In the jungle, this is sold for about $700 – $2,000. In the country’s ports, prices rise to the $500 – $7,000 range. In Central America, one kilogram can easily reach a value of around $10,000. On the northern border of Mexico, the price may even go as high as $15,000. Across the border in the United States, the same kilo can be sold wholesale at a staggering $27,000 or more. In 2010, the price of a single gram of refined cocaine peaked at $165 in the U.S. Thus the original kilo, with an average cost of $650, can be sold at retail for $165,000, more than 250 times the original price. Profits are further multiplied when chemical adulteration to lower the purity and increase the volume of marketed drugs is added into the equation.

Nevertheless, it is widely known that the increasing association of cartels with legal firms has caused rampant disregard of a myriad of crimes including extortion, kidnapping, human trafficking, and migrant smuggling, with cartels and legal firms sharing extraordinary profits. In 2006, U.S. authorities estimated $800 million – $13 billion in revenue from Mexican traffickers for selling drugs. In 2009, the United States Department of Justice estimated the annual revenue of the cartels at $39 billion. The SHCP (Secretaría de Hacienda y Crédito Público, the Secretariat of Finance and Public Credit) admitted in 2012 that at least 10 billion criminal dollars entered the domestic financial system.

The economic expansion of the so-called cartels of the drug industry cannot be understood in isolation from their form as economic units, otherwise known as companies. Some of these enterprises have developed a form of vertical integration, linking the production of the raw material to the sale of the final product. Within these units, processes of specialization and outsourcing of labor are also to be noted. It is in these terms that we must understand the appearance and operation of bands/gangs, such as the Guerreros Unidos, La Linea, or Los Artistas Asesinos (operating in Juárez). The Guerreros Unidos appeared in 2011, and its members have been accused of crimes such as drug distribution in the center of the country; killings; kidnapping; extortion; and the theft of public transport, freight, homes, and automobiles.

Therefore, when speaking of “organized crime,” it is imperative to distinguish between levels, since their size and functions are dependent upon the economic, political, and social impact they may have within the shares of each unit. This hypothesis provides a good explanation for differences in the behavior of the cartels. This does not mean that cartels are not violent. In fact, violence is one of the cartels’ inherent features, since they lack the legal contracts that guarantee businesses in capitalism. The action in Ayotzinapa cannot be understood as an isolated phenomenon, but as the carrying out of a direct order. Its purpose may have been as well due to interests of the cartels as to those of the state.

Drug trafficking cannot exist without the consent of the state. The establishment of the Mexican government’s prohibitionist measures on certain goods makes possible the existence of a black market for illicit goods. At the same time, government corruption enables black-market business. If customs officials, the police, the army, and politicians at all levels did not coordinate their activities, the production, trafficking, and sale of drugs (and the rest of the crimes committed by cartels) would not be possible.

Even without the existence of a massive drug trade, the Mexican state can readily be characterized as a mafia in itself. The entrepreneurial perks offered to foreign governments, international agencies, and politicians in exchange for guaranteeing the permanence of the current regime cannot be distinguished from the practices of organized crime. However, while the current pitfalls of the Mexican government’s relationship with the drug trade seem to outweigh the benefit of economic bribes, the deeply intertwined relationship of the federal government and drug cartels is now being configured as a partnership to crush social resistance.

In the case of Ayotzinapa, the abduction of community leaders in Cherán, and the murder of Octavio Atilano—who led the civilian movement against the construction of a dam in Sinaloa—show that the role of the narcotic trade is increasingly not only to act as an instrument of the state to create terror, but also as a means of violence that the state cannot legitimately practice by its own hand.

The drug trade, that diffuse inner enemy, can thus be the perfect pretext to carry out and hide crimes from which the state, transnational corporations, and Mexican elites directly benefit. This makes the action of these enterprises no less brutal, but obliges us to rethink the different arms with which the state implements the discipline required to maintain and expand the plundering to which this country is subjected.

Contributor

Sandy E. Ramirez Gutiérrez

SANDY E. RAMIREZ GUTIÉRREZ is Professor in the Economics Department of UNAM.

ADVERTISEMENTS