MEXICO: THE STRUGGLE FOR BALANCE

MEXICO: THE STRUGGLE FOR BALANCE

By Scott Stewart

This week's Geopolitical Intelligence Report provided a high-level
assessment of the economic forces that affect how the Mexican people and the
Mexican government view the flow of narcotics through that country.
Certainly at that macro level, there is a lot of money flowing into Mexico
and a lot of people, from bankers and businessmen to political parties and
politicians, are benefiting from the massive influx of cash. The lure of
this lucre shapes how many Mexicans (particularly many of the Mexican elite)
view narcotics trafficking. It is, frankly, a good time to be a banker, a
real estate developer or a Rolex dealer in Mexico.

However, at the tactical level, there are a number of issues also shaping
the opinions of many Mexicans regarding narcotics trafficking, including
violence, corruption and rapidly rising domestic narcotics consumption. At
this level, people are being terrorized by running gunbattles, mass
beheadings and rampant kidnappings -- the types of events that STRATFOR
covers in our Mexico Security Memos.

Mexican elites have the money to buy armored cars and hire private security
guards. But rampant corruption in the security forces means the common
people seemingly have nowhere to turn for help at the local level (not an
uncommon occurrence in the developing world). The violence is also having a
heavy impact on Mexico's tourist sector and on the willingness of foreign
companies to invest in Mexico's manufacturing sector. Many smaller business
owners are being hit from two sides -- they receive extortion demands from
criminals while facing a decrease in revenue due to a drop in tourism
because of the crime and violence. These citizens and businessmen are
demanding help from Mexico City.

These two opposing forces -- the inexorable flow of huge quantities of cash
and the pervasive violence, corruption and fear -- are placing a tremendous
amount of pressure on the Calderon administration. And this pressure will
only increase as Mexico moves closer to the 2012 presidential elections
(President Felipe Calderon was the law-and-order candidate and was elected
in 2006 in large part due to his pledge to end cartel violence). Faced by
these forces, Calderon needs to find a way to strike a delicate balance, one
that will reassert Mexican government authority, quell the violence and
mollify the public while also allowing the river of illicit cash to continue
flowing into Mexico.

An examination of the historical dynamics of the narcotics trade in Mexico
reveals that in order for the violence to stop, there needs to be a balance
among the various drug-trafficking organizations involved in the trade. New
dynamics have begun to shape the narcotics business in Mexico, and they are
causing that balance to be very elusive. For the Calderon administration,
desperate times may have called for desperate measures.

The Balance

The laws of economics dictate that narcotics will continue to flow into the
United States. The mission of the Mexican drug-trafficking organizations and
the larger cartels they form is to attempt to control as much of that flow
as they can. The people who run the Mexican drug-trafficking organizations
are businessmen. Historically, their primary objective is to move their
product (narcotics) without being caught and to make a lot of money in the
process. The Mexican drug lords have traditionally attempted to conduct this
business quietly, efficiently and with the least amount of friction.

When there is a kind of competitive business balance among these various
organizations, a sort of detente prevails and there is relative peace. We
say relative, because there has always been a level of tension and some
level of violence among these organizations, but during times of balance the
violence is kept in check for business reasons.

During times of balance, the territorial boundaries are well-established,
the smuggling corridors are secure, the drugs flow and the people make
money. When that balance is lost and an organization is weakened --
especially an organization that controls one or more valuable smuggling
corridors -- a vicious fight can develop as other organizations move in and
try to exert control over the territory and as the incumbent organization
attempts to fight them off and retain control of its turf. Smuggling
corridors are geographically significant places along the narcotics supply
chain where the product is channeled -- places such as ports, airstrips,
significant highways and border crossings. Control of these significant
channels (often referred to as "plazas" by the drug-trafficking
organizations) is very important to an organization's ability to move
contraband. If it doesn't control a corridor it wants to use, it must pay
the organization that does control it.

(click here to enlarge image)

In past decades, this turbulence was normally short lived. When there was a
fight between the organizations or cartels, there would be a period of
intense violence and then the balance between them would either be restored
to the status quo ante or a new balance between the organizations would be
reached. For example, when the Guadalajara cartel dissolved following the
1989 arrest of Miguel Angel Felix Gallardo, and the Arellano Felix
Organization (AFO) and the Sinaloa cartel emerged from the Guadalajara
cartel to fill the power vacuum, there was a brief period of tension, but
once balance was achieved, the violence ebbed -- and business returned to
normal. However, the old model of cartel conflicts has changed. The current
round of inter- and intra-cartel violence has raged for nearly a decade and
has intensified rather than abated; there appears to be no end in sight. In
fact, death tolls are far higher today than they were five years ago.

This inability of the cartels to reach a state of balance is due to several
factors. First is the change of products. Mexican drug cartels have long
moved marijuana into the United States, but the increase in the amount of
cocaine being moved through Mexico in the 1980s and 1990s changed the
dynamic -- cocaine is far more compact and far more lucrative than
marijuana. Cocaine is also a "strategic narcotic," one that has a
transnational supply chain far longer than drugs like marijuana or
methamphetamine, and that long supply chain is difficult to guard. Because
of this, organizations involved in the cocaine trade tend to be more
aggressive and violent than those that smuggle drugs with a shorter supply
chain like marijuana and Mexican opium.

At first, Mexican cartels like the Guadalajara cartel only smuggled cocaine
through their smuggling routes into the United States on behalf of the more
powerful Colombian cartels, which were seeking alternate routes to replace
the Caribbean smuggling routes that had been largely shut down by American
air and sea interdiction efforts. Over time, however, these Mexican cartels
grew richer and more powerful from the proceeds of the cocaine trade, and
they began to take on an expanded role in cocaine trafficking. The efforts
of the Colombian government to dismantle the large (and violent)
organizations like the Medellin and Cali cartels also allowed the Mexicans
to assume more control over the cocaine supply line. Today, Mexican cartels
control much of the cocaine supply chain, with their influence reaching down
into South America and up into the United States. This expanded control of
the supply chain brought with it a larger slice of the profits for the
Mexican cartels, so they have become even more rich and powerful.

Of course, this large quantity of illicit income also brings risk with it.
The massive profits that can be made by controlling a smuggling corridor
into the United States are a tempting lure to competitors (internal and
external). This means that the cartels require enforcers to protect their
personnel and operations. These enforcers and the escalation of violence
they brought with them are a second factor that has hampered the ability of
the cartels to reach a balance.

Initially, some of the cartel bosses served as their own muscle, but as time
went by and the business need for violence increased, the cartels brought in
hired help to carry out the enforcement function. The first cartel to do
this on a large scale was the AFO (a very aggressive organization), which
used active and current police officers and youth gangs (some of them
actually from the U.S. side of the border) as enforcers. To counter the
AFO's innovation and strength, rival cartels soon hired their own muscle.
The Juarez cartel created its own band of police called La Linea and the
Gulf cartel took things yet another step and hired Los Zetas, a group of
elite anti-drug paratroopers who deserted their federal Special Air Mobile
Force Group in the late 1990s.

The Gulf cartel's private special operations unit raised the bar yet another
notch, and the Sinaloa cartel formed its own paramilitary unit called Los
Negros to counter the strength of Los Zetas. With paramilitary forces comes
military armament, and cartel enforcers graduated from using pistols and
submachine guns to regularly employing fully automatic assault rifles,
rocket-propelled grenades and hand grenades. As we have previously noted,
thugs with such weapons do pose a threat, but when those weapons are in the
hands of highly-trained gunmen with the ability to operate as an integrated
unit, the threat is far greater.

The life of a cartel enforcer can be brutish and short. In order to find
additional personnel to beef up their ranks, the various cartel enforcer
units formed outside alliances. Los Zetas worked with former Guatemalan
special forces commandos called Kaibiles and with the Mara Salvatrucha
street gang (MS-13). La Linea formed a close alliance with the American
Barrio Azteca street gang and with Los Aztecas, the gang's Mexican branch.
Cartels also recruit heavily, and it is now common to see them place "help
wanted" signs in which they offer soldiers and police officers big money if
they will quit their jobs and join a cartel enforcer unit.

In times of intense combat, the warriors in a criminal organization can
begin to eclipse the group's businessmen in terms of importance, and over
the past decade the enforcers within groups like the Gulf and Sinaloa
cartels have become very powerful. In fact, groups like Los Zetas and Los
Negros have become powerful enough to split from their parent organizations
and, essentially, form their own independent drug-trafficking organizations.
This inter-cartel struggle has proved quite deadly as seen in the struggle
between AFO factions in Tijuana over the past year and in the more recent
eruption of violence between the Gulf cartel and Los Zetas in northeastern
Mexico.

This weakening of the traditional cartels was part of the Calderon
administration's publicized plan to reduce the power of the drug traffickers
and to deny any one organization or cartel the ability to become more
powerful than the state. The plan appears to have worked to some extent, and
the powerful Gulf and Sinaloa cartels have splintered, as has the AFO. The
fruit of this policy, however, has been incredible spikes in violence and
the proliferation of aggressive new drug-trafficking organizations that have
made it very difficult for any type of equilibrium to be reached. So the
Mexican government's policies have also been a factor in destabilizing the
balance.

Finding a Fulcrum

The current round of cartel fighting began when the balance of cartel power
was thrown off by the death of Amado Carrillo Fuentes in 1997, which
resulted in the weakening of the once powerful Juarez cartel. Shortly after
the head of the Sinaloa cartel, Joaquin Guzman Loera, aka El Chapo, escaped
from prison in 2001, he began a push to move in on the weakened Juarez
cartel. Guzman initially succeeded and the Juarez cartel became part of the
Sinaloa Federation until the two cartels had a falling out in 2004.

Then when the chief enforcer of the AFO, Ramon Arellano Felix, was killed in
2002, both the Sinaloa and the Gulf cartels attempted to wrest control of
Tijuana from the AFO. Finally, when Gulf cartel kingpin Osiel Cardenas
Guillen was captured in March 2003, the Sinaloa cartel sent Los Negros to
attempt to take control of the Gulf cartel's territory, and this sparked a
series of violent clashes in Nuevo Leon and Tamaulipas. The BLO's top
enforcer, Edgar Valdez Villarreal (La Barbie), led Los Negros into Nuevo
Laredo.

These same basic turf wars are still active, meaning that there is still
ongoing violence in Reynosa, Nuevo Laredo, Ciudad Juarez and Tijuana, but as
noted above, the actors are changing, with organizations like Los Zetas
breaking out of the Gulf cartel and the Beltran Leyva Organization (BLO)
parting ways with the Sinaloa cartel. Indeed, the Gulf and Sinaloa cartels
have joined forces with La Familia Michoacana (LFM) to form a new super
cartel called the New Federation and are now allies in the struggle against
Los Zetas and the BLO, which have teamed up with the Juarez cartel to fight
against the New Federation. One constant in the violence of the past decade
has been the aggressiveness of the Sinaloa cartel as it has sought to take
territory from other cartels and organizations.

In the midst of the current cartel landscape, which has radically shifted
over the past year, it is difficult for any type of balance to be found.
There are also very few levers with which the Calderon government can apply
pressure to help force the shifting pieces into alignment. In the near term,
perhaps the only hope for striking a balance and reducing the violence is
that the New Federation is strong enough to kill off organizations like Los
Zetas, the BLO and the Juarez cartel and assert calm through sheer force.
However, while the massed forces of the New Federation initially made some
significant headway against Los Zetas, the former special operations
personnel appear to have rallied, and Los Zetas' tactical skills and arms
make them unlikely to be defeated easily.

There have been many rumors that the New Federation, in its fight against
Los Zetas, was being helped by the Mexican government. (Some of those rumors
have come from the New Federation itself.) During the New Federation's
offensive against Los Zetas, federation enforcers have been seen driving
around Reynosa and Nuevo Laredo in vehicles openly marked with signs
indicating they belonged to the New Federation. While far from conclusive
proof of government assistance, the well-marked vehicles certainly do seem
to support the cartel's assertion that, at the very least, the government
did not want to interfere with the federation's operation to destroy Los
Zetas.

When pieced together with other observations gathered during the cartel
wars, this also suggests that the Sinaloa cartel may have consistently
benefited from the government's actions. These actions would include taking
out the BLO leadership after the Beltran Leyva brothers turned against
Sinaloa and the government's success against La Linea and Los Aztecas in
Juarez. There are also occasional contraindications, such as the recent
large-scale attacks against military bases in the northeast that appear to
have been conducted by the New Federation.

Despite these contraindications, the cartels fighting the New Federation
believe the government favors the group, and there have long been rumors
that Calderon was somehow tied to El Chapo. The Juarez cartel may have
recently taken some desperate steps to counter what it perceives to be a
dire threat of government and New Federation cooperation. A local Juarez
newspaper, El Diario, recently published an article discussing a Los Aztecas
member who had been detained and interrogated by the Mexican military and
federal police in connection with the murders of three U.S. Consulate
employees in Juarez in March. During the interrogation, according to El
Diario, the Los Aztecas member divulged that a decision was made by leaders
in the Barrio Azteca gang and Juarez cartel to engage U.S. citizens in the
Juarez area in an effort to force the U.S. government to intervene in Mexico
and therefore act as a "neutral referee," thereby helping to counter the
Mexican government's favoritism toward the New Federation.

Of course, it is highly possible that the Sinaloa cartel is just a superior
cartel and is better at using the authorities as a weapon against its
adversaries. On the other hand, perhaps the increasingly desperate
government has decided to use Sinaloa and the New Federation as a fulcrum to
restore balance to the narcotics trade and reduce the violence across
Mexico.

In any case, we will be closely watching the activities of the New
Federation and the Mexican government over the next several months to see if
this hypothesis is correct. Much hangs in the balance for Calderon, the
Mexican people and their American neighbors.


This report may be forwarded or republished on your website with attribution
to www.stratfor.com.

Copyright 2010 Stratfor.

Whew..I'll save this for when I have a LOT of time. Any chance of a "Readers' Digest" version?

I would sugest a seperate topic for this kind of cut & paste articles.

Cut & Paste ... Yes...

But also a good read...

I've heard it said that Mexicos Drug business is fuelled by US demand... true enough...
rather it was true enough... but now that the Cartels have grown in strength, and with US closing up weaknesses in border security, Mexico's problems will grow exponentially as Domestic Sales increase.

I believe that there is a real war coming... and it's going to be ugly.

1. The moderator asked for Cut and Paste vs links.

2. The cut and paste section appears to be gone after this web board was recovered.

3. What difference does it make where it is?

4. Happy to put it anywhere mod wants but not many options. :-)

I don't think it really matters...you can choose to read it or not. I plan on reading it...when time allows...ok ok...I'll go read it now.

kipissippi wrote:I don't think it really matters...you can choose to read it or not. I plan on reading it...when time allows...ok ok...I'll go read it now.

Kip, if you're going to read that now -- we'll be talking with you again sometime next week or so.

Wow. An eye opener. I had always been under the assumption that the Zetas were just hired thugs. Knowing where they come from makes them way scarier. There are so many players ....I wish Calderone luck. I don't see how he can possibly win..no matter what he does. So the only answer seems to be making all of the bad guys "play nice" with each other? Scary shit.

It's more likely that in time the cartels will learn to do business under the radar much like the various ethnic organized crime syndicates have done in the States. This is much like the east coast and Chicago were in the 20's. If you think the descendants of the early organized crime figures aren't still active, your dreaming. They're now operating "legitimately" in Vegas, employee unions, politics, etc. Wasn't Joseph Kennedy a bootlegger? Same thing will eventually happen here.

In essense...the bad guys will learn to play nice with each other.

kipissippi wrote:In essense...the bad guys will learn to play nice with each other.

Exactly

Check out the Narco News Bulletin
http://www.narconews.com/

Ajijic wrote:1. The moderator asked for Cut and Paste vs links.

2. The cut and paste section appears to be gone after this web board was recovered.

3. What difference does it make where it is?

4. Happy to put it anywhere mod wants but not many options. :-)

That was the previous management. I don't care about links. Would actually prefer them over long cut and pastes.

Admin

let's get this straight, as a member of the previous "management",we decided that cut and paste was crap but rather than ban it or the cut and pasters we made a special section for it.
some people don't mind reading those. our purpose was to have personal experiences posted in the main sections.
anybody can spend all day grabbing second hand stough and posting it. i read the newspapers i choose to read on my own.
cutting and pasting and nothing but links to second hand stough ruins personal interaction and experience-don't it?

Well I would hate to see someone contributing nothing but links or cut & pastes however if someone wants to tell about a personal experience, place or thing and add a link about it then go ahead. I can certainly build a "cut & paste" area if thats what people want. Makes no diff to me.

Admin

I think you hit the nail on the head, if someone wnats to post a link OK, then you have the option to open it and read. But to post the hole ,damn thing is a bit to much. This is an info board, not a newspaper.

You are famous for your cut, paste and run articles, which are mostly ignored. You left out how this was going to lower property values at lakeside, your favorite topic. Zoey

Personally, I like that there are people that scan many papers, and point out the interesting shit. Saves me a lot of searching. I would miss a lot of good reading.

Itchy wrote:Personally, I like that there are people that scan many papers, and point out the interesting shit. Saves me a lot of searching. I would miss a lot of good reading.

Itchy, your first post and it was directed to me? What an honor and welcome aboard. Zoey

http://en.wikipedia.org/wiki/Anonymous_Coward

sounds like a failed realtor to me jejejejeej and an asshole

Well it's nice to see everyone is following the "No personal attacks" rule........Geeesh.

Bob

There's news all over the internet, we don't need it repeated here. If someone comes across something they think is SO interesting and are concerned that many of us will miss it, then by all means post a synopsis and a link, but not the whole damned enchilada.

I'm not sure what the bruhaha is. I wouldn't have read this article if it had been a link...I skipped over it at first because of it's length but went back to it after the feed back and read it.

If something is too long to read at the moment..or just not of interest...I can always skip over it..and so can you

David you just can't assume that everyone spends as much time on the internet as some others. People I've forwared this particular article to..had never seen it.

All I'm saying is this: If the OP would have posted a synopsis the we'd know if we wanted to read the whole article. If so we could hit the link, other wise move to the next msg..

Hmmm... I had already moved on to the next message...
;) But , I came back cause I wanted ta read about everyone havin their little hissy fit...