- Unity Resources Group

Special Report: The Evolution of Mexico’s Drug Cartels
> Key
Observations
Key Observations
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
> The War on
Drugs and its
Effects
> Kidnapping
and Extortion
> Conclusion
and Outlook
˃ Latin American drug trafficking
opposing territory.
and was listed as the global
has experienced four decades
hotspot for the last three
˃ Despite government attempts
of unremitting growth with
consecutive quarters.
to control drug trafficking, over
criminal organisations evolving
90 percent of the cocaine trade ˃ Foreign kidnap victims are
and adapting despite significant
(estimated to total as much as
primarily migrants, regional
attrition of key leadership.
$30 billion USD annually, and
businesspeople and tourists,
˃ Since 2006, the Mexican
employing roughly half a
although Mexicans – especially
government has been
million people) still travels
wealthy professionals and their
aggressively targeting the drug
through Mexico to reach the
dependants – make up the bulk
trafficking trade and its supply
US.
of the country’s kidnapping
routes throughout the country. ˃ In turn, drug trafficking has
figures.
˃ Paradoxically, this has
incurred costs on local
˃ The social conditions that beset
worsened the security situation
economies due to the
Mexico’s high levels of violence
as preeminent cartels have
consequences of violence and
and the impunity with which
atomized into smaller, less
corruption as well as forced
criminals operate, including
centralized groups that have
migration of families and
weak institutions, public
spent the last decade rapidly
businesses out of drug
corruption, political and
growing their operations in the
trafficking states.
security failures, and economic
absence of effective local
disparity are unlikely to change
˃ Meanwhile, there has been a
security.
in the medium to long term.
20 percent growth in
˃ The Gulf and Sinaloa cartel, in
kidnappings across Mexico,
˃ The ongoing devolution of
particular, witnessed major
according to the country’s
criminal gangs diminishes the
fragmentation through 2010statistics agency, INEGI. Other
ability of local security forces to
2012, resulting in internal
crimes such as robberies,
disrupt their operations,
divisions and newfound
extortion, human smuggling
leading to a prevailing security
alliances between subgroups
and contraband have also risen
risk in Unity’s extreme risk
seeking to expand across
sharply.
areas including the State of
geography to build
Mexico, Tamaulipas and
˃ Mexico continuously ranks as
relationships with groups in
Guerrero.
Unity’s regional kidnap hotspot
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
2
> Key
Observations
The Rise of Mexican
Drug Trafficking
Gulf Cartel
Originated in the 1970s with a base in
Tamaulipas. The Gulf Cartel is also
established in 11 other states but after
the arrest of leader Osiel Cardenas
Guillen in 2003 it lost much of its
monopoly over Mexico’s east coast to
Los Zetas, the cartel’s former enforcers.
Today it is severely fragmented. Besides
drug trafficking, the group also creates
income from charging for safe passage
through their controlled areas.
Juarez Cartel
Formed in the 1980s with a base in
Juarez, Chihuahua, it is led by Vicente
Carrillo Fuentes who was arrested in
2014. The cartel once had a presence in
21 states, but has since diminished to
operating solely in Chihuahua. Juarez is
a key gateway for drugs into the US,
and besides the transport of drugs, the
cartel is also involved in human
trafficking and kidnapping.
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
Since the second half of the 20th
Century the demand for drugs has
grown exponentially, especially in the
US, the world’s primary cocaine
consumer. Correspondingly, the drug
trafficking trade mushroomed in
Mexico with cartels organising
themselves as flexible and agile
businesses dedicated to the
international transport of drugs.
An alliance was formed between
Mexican traffickers and Colombian
cartels in 1984, which opened up
Colombian smuggling routes to the
American south-west. Since then,
Mexico has constituted the region’s
principal corridor for transporting
drugs into the US, with cartel networks
seemingly enmeshing the country’s
political and social structures to
undermine rule of law and prevent
stability. Alongside this development
came unfettered levels of violence,
corruption, erosion of the rule of law,
impunity and human rights violations
that plague Mexico to date.
All of Mexico’s drug trafficking
organisations operating today are
essentially a spin-off of two ‘original’
cartels. The Gulf Cartel, formed in the
1970s and based in Tamaulipas’
Matamoros, and the Guadalajara
Cartel, formed in the 1980s and split
into three groups in the 1990s: the
> The War on
Drugs and its
Effects
Sinaloa Cartel, the Juarez Cartel and
the Tijuana Cartel. Over the years,
these four major drug trafficking
organisations have at times formed
alliances, and at other times fought
violently over regional control. Cartel
infighting has led to the development
of further splinter groups, and in
addition to the above four mentioned,
another five large organisations
emerged over the past decade: Los
Zetas, La Familia Michoacana and the
Knights Templar are outgrowths of the
Gulf Cartel, while the Jalisco New
Generation Cartel (CJNG) and the
> Kidnapping
and Extortion
> Conclusion
and Outlook
Beltran Leyva Organisation (BLO)
branched out from the Sinaloa Cartel.
Hence, we can speak of nine major
cartels currently operating in the
Mexican underworld. In the 1990s,
drug cartels operated in about ten of
Mexico’s 31 states, and they sought
absolute control of key border regions,
especially Tijuana, an important
smuggling route. Today, the nine major
cartels operate in 25 states according
to Mexico’s Attorney General’s Office
(PGR), and disputes are not solely over
territory, but also about establishing
monopolies over local criminal activity
in their spheres of influence.
Operational Dominance of Mexico’s Major Cartels, 2012 and 2015 (Source: NYT)
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
3
> Key
Observations
Mexico’s Cartel
Operations
Sinaloa Cartel
Established in the mid-1980s in
Sinaloa, the cartel is considered
Mexico’s largest drug trafficking
organisation. Despite its sophisticated
criminal structure, the Sinaloa cartel is
better understood as a federation of
separate but cooperative groups. It
has a presence in 17 Mexican states
and its operations extend across the
region all the way from New York City
to Buenos Aires. It is led by Joaquin
Guzman Loera, aka El Chapo, who
infamously escaped from prison twice
and was last re-captured earlier this
year. Since his arrest in February 2014,
the organisation has been mainly in
the hands of Ismael Zambada Garcia,
aka El Mayo. The cartel primarily
smuggles and distributes Colombian
cocaine as well as other drugs
produced in Mexico and South East
Asia including methamphetamine and
heroin.
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
The Sinaloa Cartel and the CJNG are
two cartels that have experienced an
undiminished proliferation, according
to the PGR, while the other seven have
seen a reduction in territorial influence
and control. Nevertheless, all nine
groups remain strong, while smaller
gangs such as the Guerreros Unidos
and Los Rojos in Guerrero have
emerged and are also battling for
space in Mexico’s criminal milieu.
> The War on
Drugs and its
Effects
advantage of operating in mostly
ungoverned areas where their
networks flourished in the absence of
security. While in the mid-noughties,
those were the only enforcers, today
the PGR estimates that nearly 60 such
enforcing groups exist, extorting and
terrorising Mexican citizens.
Hitmen (so-called sicarios), the narcoparamilitaries and corrupt security
forces are paid to take out rivals and
Before 2000, Mexico’s cartels primarily collect extortion money. The
focused on the external drug market,
international trafficking operations are
but with the turn of the century these
groups began looking inwards,
exploiting the local communities to
finance their future operations.
> Kidnapping
and Extortion
> Conclusion
and Outlook
overseen by the higher echelons of the
cartels, and the ground work is
outsourced to local partners. Those
range from criminal gangs and
corrupted law enforcement officers to
a network of ground transporters and
prison gangs handling distribution.
The Sinaloa Cartel, for example, is
better understood as a parent
company with hundreds of subsidiaries
and service providers, local gangs and
specialists, including corrupt security
forces that operate globally.
Demarcation lines were drawn
between conflicting cartel camps and
narco leaders grew increasingly
paranoid of their counterparts and
confederates alike, which led to a
highly weaponised environment
whereby drug trafficking took on the
character and form of a quasi-military
operation.
The result was the setting-up of socalled enforcers. The Gulf Cartel
recruited Los Zetas, Sinaloa enlisted
Gente Nueva, the Juraez Cartel allied
with La Linea and the BLO with the
Negro and Pelones.
All the groups possessed the
Drug trafficking routes across Mexico (Source: STRATFOR)
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
4
> Key
Observations
The War on Drugs
and its Effects
La Familia Michoacana
Emerged in 2006 as a vigilante group,
purportedly countering the violence of
Los Zetas in Michoacán. LFM
expanded in La Tierra Caliente and set
up cells in seven other states. At its
zenith, LFM acted as de-facto state
authority in Michoacán, establishing
loyalties in municipal councils and
police forces. Its activities range from
drug trafficking, particularly
methamphetamine, to kidnapping,
extortion and racketeering. In the midnoughties, 85 percent of Michoacán’s
businesses were thought to make
regular payments to the group with
daily earnings estimated at $1.9
million USD. In 2011 the group split,
one side forming the Knights Templar
who took over much of the illegal
markets from the LFM. At present,
LFM is known to still operate in
Michoacán and Guerrero.
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
The Mexican government’s relative
inertia towards cartel brutality changed
in late 2006 when the newly elected
President Felipe Calderon sent 7,000
soldiers to Michoacán to end the area’s
drug violence. The offensive was
followed by an aggressive military
campaign supported by the US after
the Mexican authorities agreed to
closer cooperation on the drugs war in
return for intelligence and funding.
> The War on
Drugs and its
Effects
extreme violence they consolidated
power while diversifying revenue
streams through kidnapping, extortion,
human trafficking and internal taxation
of the local community. Hence, the
plethora of small, unstable and highly
violent criminal gangs came to affect
the life and property of ordinary
citizens a lot more directly than the
smuggling of drugs.
As a result of the shifting dynamics in
The basis of the military offensive was Mexico’s criminal landscape, levels of
to disrupt the drug operations and
violence increased nationwide.
capture or kill cartel kingpins. By 2008, Government figures show that
the government had made progress
against the two preeminent cartels, the
Gulf and Sinaloa cartels, but it came
with unintended consequences. By
decapitating the leadership, the
government inadvertently created a
power vacuum that many mid-low
ranking members sought to fill with the
formation of new organisations.
Instead of establishing law and order,
the government’s strategy actually
produced around 60 to 80 new gangs,
according to a PGR estimate.
> Kidnapping
and Extortion
> Conclusion
and Outlook
homicides spiked at 120,000 over
Calderon’s six year term, which is
double that of former President
Vicente Fox.
Under current President Enrique Peña
Nieto, homicide rates remain high. For
2015, the Interior Ministry reported
17,013 murders, the fifth-highest
number recorded in nearly 20 years.
This represents a nine percent increase
over 2014, which is the first time the
country’s murder rates have risen in
four years.
The fragmentation of the once
integrated and hierarchical criminal
structures not only meant that new
gang rivalries emerged, but that they
had to find ways to make money via
other criminal enterprises rather than
solely relying on drug trafficking. With
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
5
> Key
Observations
Kidnapping and
Extortion
Jalisco New Generation Cartel
With a presence in ten states, the
Jalisco New Generation Cartel’s
(CJNG) home turf is western Jalisco
where it shares territory with the
Sinaloa Cartel. It has tripled in size
and presence since its emergence in
2011, taking over areas previously
controlled by the Knights Templar
and Los Zetas. Despite the capture
of top leaders, the CJNG continues
to grow and is the most resourced
cartel in Mexico. The CJNG has
demonstrated an ability to generate
revenue through the drug trade with
contacts in Colombia, Peru, Bolivia
and the US. CJNG’s assets are
thought to be worth over $20 billion
USD, and the group possesses highly
sophisticated weaponry. In May
2015 they notoriously shot down a
Mexican military helicopter in
Jalisco.
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
It is to no surprise that the Mexican
states witnessing the most
fragmentation of organised crime
groups permanently count the highest
kidnapping numbers: Tamaulipas,
Guerrero, Veracruz, the State of
Mexico and Michoacán. Similarly,
extortion is most prevalent in areas
where competing gangs seek to stamp
their authority on society, such as
Jalisco and Veracruz, often as a result
of lost income from declining revenues
of drug trafficking.
Official data put the 2015 kidnapping
figures at just over 1,500, whereas the
NGO Alto Al Secuestro suggests the
number to be over 2,500. Meanwhile,
a Mexican statistics agency estimates
Still Captive
9%
Killed
1%
Escaped
14%
> The War on
Drugs and its
Effects
> Conclusion
and Outlook
that only one in every hundred
abductions is reported, which would
make the actual annual kidnapping
figure closer to 140,000. Due to the
widespread corruption of police forces
and public officials, Mexicans are afraid
of retaliation and often do not report
missing persons. This coupled with
statistics’ manipulation by state
authorities means reliable kidnapping
numbers are impossible to come by.
Kidnapping: At a Glance
Extortion is even harder to quantify
than kidnappings. While official
extortion figures for 2015 are just over
5,000, Mexico’s National Citizen
Observatory estimates the number of
annual extortion cases stands at nearly
6 million.
> Tactics: Most victims are
snatched outside their homes or
close to their workplace.
Kidnapping groups will identify
their victims through social
media and then tracking their
travel several days before
perpetrating an attack.
Still
Captive
5%
Escaped
3%
Released
19%
Rescued /
Released
76%
> Kidnapping
and Extortion
Killed
38%
Rescued
35%
> Hotspots: Tamaulipas, Guerrero,
Veracruz, and State of Mexico.
> Targets: 96 percent Mexican
victims: Owners and managers
of well-known businesses,
members of wealthy families, as
well as political figures and
journalists.
> Captivity: Between one to ten
days, rarely exceeding one
month. Cartels are not afraid to
kill a victim if a ransom is not
forthcoming.
> Ransoms: A few thousand to the
mid-tens of thousands of USD
for local victims, and up to midhundreds of thousands USD for
foreign nationals and wealthy
businesspeople.
Kidnapping Outcomes: Foreign (left) and local (right) victims (Unity Statistics)
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
6
> Key
Observations
Kidnapping and
Extortion (cont.)
Tijuana Cartel
Formed in the 1980s with a base in
Baja California and a presence in 15
states. The cartel primarily exports
drugs from Tijuana and is involved in
US street-level trafficking. With all of
the founding Arellano Felix brothers
arrested or killed, the cartel suffers
internal splits while the Sinaloa Cartel
has made inroads into Baja California.
The group is also involved in
kidnapping, human trafficking and
extortion, and it charges ‘piso’ (toll)
for drug shipments through its areas.
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
According to INEGI, Mexico’s National
Institute for Statistics and Geography,
extortion is the country’s second most
frequent crime following robberies and
assaults. The institute’s conservative
estimate thinks the annual economic
losses from extortion are just over $1
billion USD.
Unity’s kidnapping statistics show that
dependants of high value targets are
among the most affected local
demographic in Mexico. They are
followed by businesspeople, wealthy
professionals, as well as members of
the security forces.
> The War on
Drugs and its
Effects
Large cartels tend to target wealthier
individuals while less organised
criminals focus on middle and even low
income victims, including children.
Foreign kidnap victims in Mexico are
primarily Central American migrants en
route to the US, regional business
travellers and tourists. While Unity
recorded the vast majority of foreign
kidnap victims being rescued, a large
number of reported local victims were
killed. This demonstrates the violent
nature of Mexico’s kidnapping gangs
who have tortured and killed their
victims if a ransom is not paid.
Beltran Levya Organisation
Emerged in 2008 after the Beltran
Leyva brothers split from the Sinaloa
Cartel. Formed in Sinaloa, the group
operated in ten other states but has
been weakened by arrests and deaths
of all of the founding brothers. An
alliance with Los Zetas and local gangs
have helped the BLO stay afloat.
Map of Kidnap Victims in Mexico since Jan 2015 (Unity statistics)
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
> Kidnapping
and Extortion
> Conclusion
and Outlook
Extortion: At a Glance
> Hotspots: Pervasive across the
country, particularly in Mexico
City, State of Mexico, Morelos,
Jalisco, Veracruz and Puebla.
> Targets: Affects all sectors and
industries, from SMEs and highnet worth individuals to lowerincome street vendors.
> Tactics: There are three types of
extortion. Virtual extortion is the
most common taking the form of
opportunistic scam calls, which
are also referred to as virtual
kidnappings. Direct extortion
refers to confronting individuals or
businesses to make continuous
payments, while indirect extortion
forces businesses to purchase
items directly from criminal
organisations.
> Extortion Payments: Direct
extortion of a business is usually
calculated upon its estimated
finances, while virtual extortion
payments generally range in the
low thousands of USD. For
example, authorities dismantled a
gang in north-eastern Mexico this
January, revealing that their
annual income from extortion
totalled to $1.7million USD.
7
> Key
Observations
Conclusion and
Outlook
Knights Templar
Emerged in 2011 in Michoacán and
proving even more aggressive than
LFM. Engaged in drug trafficking,
while extortion provides the majority
of the group’s income. In 2013 El
Economista estimated the group
earns $152 million USD annually from
extorting Michoacán’s avocado
industry alone.
Los Zetas
Formed as the Gulf Cartel’s enforcers
in the late 1990s, Los Zetas are
notorious for their violence and rely
more on terror than corruption to
finance their enterprise. They control
a myriad of drug trafficking routes
along the Gulf of Mexico while also
running protection rackets, extortion
and kidnapping activities. With most
leaders arrested or killed, they now
rely more on localised crime than on
international trafficking for income.
> The Rise of
Mexican Drug
Trafficking
> Mexico’s Cartel
Operations
Mexico’s war on drugs is widely
recognised as being misguided and has
only served to create greater volatility
in the balance of power among drug
trafficking organisations. This
fragmentation brought about a
disparate array of criminals groups
which are something more than local
gangs and something less than cartels.
They are diversified and interested in
exploiting Mexico’s local economies,
not just in supplying drugs to foreign
consumers.
> The War on
Drugs and its
Effects
> Kidnapping
and Extortion
> Conclusion
and Outlook
well as economic disparity remain
major obstacles, and as a result the
country’s security situation is unlikely
to improve in the medium to long
term.
Despite a concerted security effort to
reduce the extortion and kidnapping
activities of these groups, corruption in
the judiciary and a failure to prosecute
criminals has allowed the problem to
persist.
What is needed is a strategy to
strengthen the country’s federal
institutions, including building strong
local police forces and capable
independent state prosecutors.
However, without a dedicated budget
and political will those shortcomings
and the country’s culture of corruption
will not be adequately addressed. As
long as police wages fall below the
average salary of public sector
employees, corruption will be here to
stay.
Weak and underfunded institutions as
Special Report: The Evolution of Mexico’s Drug Cartels / May 2016
8
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Special Report: The Evolution of Mexico’s Drug Cartels / May 2016