Several media outlets have recently run articles about the impact the legalization of marijuana has been having on the Mexican cartels. Most (such as those from VICE or DailyKos) have been crowing that the legalization of pot is “crippling” the cartels. But is this a realistic view? Let’s take a look.
Marijuana is legal in Alaska, Washington, Colorado, and Oregon. Washington D.C. just passed a legalization law for recreational use in line with the aforementioned states, but Congress has overturned it. Twenty-eight states have medical-marijuana laws, making it legal to possess small amounts of pot with a prescription.
A couple of interviews (notably the same two referenced in the VICE, Daily Kos, and World.Mic articles) with Sinaloa State marijuana farmers do point to a drop in marijuana prices, and thus an undercutting of cartel business. And it is undeniable that pot has provided substantial income to the cartels, historically. A Mexican Institute of Competitiveness study in 2012 estimated that marijuana accounted for up to 30 percent of the cartels’ income. Legalization will have the same effect on that market as the end of Prohibition had on the Mafia in the U.S. in the 1930s, so it does account for a major income loss.
However, the question remains just how much the marijuana market really is being affected. Four states legalizing recreational use while it is still illegal on a federal level (and there have been several municipalities in the legalization states that have objected and maintained local prohibitions) is unlikely to collapse the Mexican pot market overnight, or even in a matter of a few months. Two interviews with struggling pot farmers and a lot of hope from the legalization camp don’t make it fact. Furthermore, determining actual flow of illegal goods is notoriously difficult; it’s not like the illicit networks have reporting requirements, or an interest in reporting how much of what drug they move.
Furthermore, to get an accurate (or as accurate as possible from open sources) picture of what is going on with the cartels requires an examination of how they really work. In an earlier article about the Missing 43, the author mentioned that simply looking at the cartels as “drug cartels” is misleading. While drugs have played a vital role in the rise of these organized crime networks, to the point of their being called “Narcos,” drugs are not the sole source of their finances.
The founder of the Gulf Cartel, Juan Nepomuceno Guerra, ran contraband liquor into the U.S. during Prohibition. The Gulf Cartel didn’t actually turn to large-scale drug running until the 1970s, instead running gambling, car-theft, and prostitution rings. To this day, the Gulf Cartel relies on protection rackets, extortion, and kidnapping as sources of funding.
This is not unique to the Gulf Cartel. Los Zetas, which was once the military arm of the Gulf Cartel, began with a funding model of 50/50 drug running/other criminal activity. Kidnapping and extortion are big business. But the diversification of the cartels goes even further than that.
In the last several years, theft of oil from Mexico’s state-owned oil conglomerate, PEMEX, has skyrocketed. In 2013, according to one report, PEMEX discovered 2,614 illegal siphons on their pipelines. VICE News covered this in August, riding along with Mexican police to try to catch some of the oil thieves. According to that report, Los Zetas actually made more money from contraband oil than drugs in 2013.
It’s not just oil, either. Illegal mining and logging is bringing in millions of dollars to cartels. Early this year, Mexican authorities seized over 180,000 metric tons of iron ore that the Knights Templar Cartel were attempting to smuggle out of the port of Lazaro Cardenas in Michoacan. This was not a one-off, either; the arrest of a cartel money manager revealed that La Familia Michoacana had sold 1.1 million tons of iron ore to China. (Interestingly, the bulk carrier that was seized in Lazaro Cardenas in May with over 68,000 tons of ore from the Knights Templar was a Chinese freighter.)
Prostitution and human trafficking are also big money-makers for the cartels, as is piracy. According to a report from Grupo Multisistemas de Seguridad Industrial, a growing fraction (up to 65 percent) of media in Mexico is pirated. Other contraband, such as liquor and cigarettes, provide other funding sources.
The cartels are not about drugs. They are about money and power. Drugs have provided an avenue to that money and power, along with just about every other form of crime and violence. Taking one drug off the table will hurt financially, but will not even come close to breaking these organizations.
(Featured image courtesy Huffington Post)